<PAGE> 1
As filed with the Securities and Exchange Commission on November 18, 1998
Registration Statement No. 333-60431
333-60431-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 3 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)
<TABLE>
<S> <C> <C>
FLORIDA 6022
DELAWARE 0000 59-2156002
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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
</TABLE>
---------------------
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. [ ]
---------------------
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.
SUBJECT TO COMPLETION, DATED NOVEMBER 18, 1998
450,000 SHARES
UNITED FINANCIAL HOLDINGS, INC.
(UNITED FINANCIAL LOGO)
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.
All of the 450,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), offered hereby (the "Common Stock Offering") are being issued
and sold by United Financial Holdings, Inc. (the "Company"). See "Underwriting."
It is estimated that the Common Stock will be issued and sold at a price ranging
between $7.00 and $8.00 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)
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 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.
------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSION(1)(3) UFH CAPITAL(2)(3) COMPANY(2)(3)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share of Common Stock............ $ $ -- $
- --------------------------------------------------------------------------------------------------------------------------
Per Preferred Security............... $5.00 $ $5.00 $5.00
- --------------------------------------------------------------------------------------------------------------------------
Total Common Stock(4)................ $ $ -- $
- --------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities(5)........ $6,000,000 $ $6,000,000 --
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(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
67,500 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. LOGO)
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 SmallCap 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 March 31, 1999
(the "Distributions"). Such distributions are considered under current law to be
interest paid by the Company to the holders of Preferred Securities for United
States federal income tax purposes. Interest on the Junior Subordinated
Debentures will accrue at the same rate as distributions accrue on the Preferred
Securities. The Company has the right, so long as no Debenture Event of Default
(as defined herein) has occurred and is continuing, to defer payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not to exceed 20 consecutive quarters with respect to each deferral
period (each, an "Extended Interest Payment Period"); provided that no Extended
Interest Payment Period may extend beyond the Stated Maturity. Upon the
termination of any such Extended Interest Payment Period and the payment of all
amounts then due, the Company may elect to begin a new Extended Interest Payment
Period subject to the requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred, and the Company will not be permitted to
declare or pay any cash distributions with respect to debt securities that rank
pari passu with or junior to the Junior Subordinated Debentures or with respect
to its capital stock. During an Extended Interest Payment Period, interest on
the Junior Subordinated Debentures will continue to accrue (and the amount of
distributions to which holders of the Preferred Securities are entitled will
accumulate) at the rate of ____% per annum, compounded quarterly, and under such
circumstances holders of the Preferred Securities will be required to include
interest income (in the form
ii
<PAGE> 4
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 September 30, 1998, the Company had approximately $2.7
million of Senior Debt (which includes approximately $37,500 of debt of
subsidiary of the Company that is guaranteed by the Company), of which $15,000
is repayable prior to September 30, 1999. Of such $2.7 million of Senior Debt,
$2.6 million is to be repaid from the proceeds of the Offerings. The Company
also had $630 thousand of Subordinated Debt outstanding at September 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
Treatment Event" and "Material Federal Income Tax Considerations-Classification
of the Junior Subordinated Debentures."
iii
<PAGE> 5
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
<PAGE> 6
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 effective July 1, 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 service 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 September 30, 1998, the
Company had consolidated total assets of $158.5 million, net loans of $108.1
million, deposits of $136.6 million and stockholders' equity of $12.0 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 September 30, 1998, EPW had $297.2 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 September 30, 1998, United Trust had $251.5 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
<TABLE>
<S> <C>
COMMON STOCK OFFERING
Common Stock Offered by the Company...................450,000 shares of Common
Stock by 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. The
Company has granted the
Underwriter an option,
exercisable within 30 days
after the date of this
Prospectus, to purchase up
to an additional 67,500
shares of Common Stock on
the same terms and
conditions as the initial
offering, solely to cover
over-allotments, if
Offering Price........................................Between $7 and $8 per
share.
Common Stock to be outstanding
after the Common Stock Offering.......................3,963,858 shares.
Nasdaq Small-Cap Market Symbol........................Application has been made
to have the Common Stock
listed for quotation on
The Nasdaq SmallCap 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
conditions as the initial
Preferred Securities
Offering, solely to cover
over-allotments, if any.
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 March 31, 1999.
See "Description of the
Preferred Securities-
Distributions-Payment
of Distributions."
</TABLE>
3
<PAGE> 9
<TABLE>
<S> <C>
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 o
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 Securitie
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 ma subject to the
foregoing restrictions.
See "Description of the
Preferred
Securities-Distributions-
Extended Interest Payment
Period" and "Description
of the Junior Subordinated
Debentures-Option to
Extend Interest Payment
Period." Should an
Extended Interest Payment
Period occur, holders of
Preferred Securities will
be required to include
deferred interest income
in their gross income for
United States federal
income tax purposes in
advance of receipt
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.
</TABLE>
4
<PAGE> 10
<TABLE>
<S> <C>
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 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."
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 o 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
Senior Debt and
Subordinated Debt of the
Company. See "Description
of the Guarantee."
</TABLE>
5
<PAGE> 11
<TABLE>
<S> <C>
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,
or 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 operatin
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."
</TABLE>
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 net proceeds to the Company from the sale of the Junior
Subordinated Debentures to UFH Capital and the sale of the Common Stock by the
Company (assuming an offering price of $7.25 per share of Common Stock) will be
approximately $8.4 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 $2.6 million on September 30, 1998, bears
interest at an annual rate of 8.25% 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 $600,000 cost of establishing a
new branch. The remaining $4 to $5 million of proceeds will be used for general
corporate purposes, including working capital, with the anticipation that the
Company wil 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."
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."
6
<PAGE> 12
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 nine months ended
September 30, 1998 and September 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 cas 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 nine
months ended September 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)
Statement of Operations and Other Data
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------ ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income $ 9,325 $ 7,904 $ 10,792 $ 9,595 $ 9,124 $ 6,941 $ 5,665
Interest expense 3,934 2,971 4,101 3,420 3,212 2,113 2,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 5,391 4,933 6,691 6,175 5,912 4,828 3,665
Provision for loan loss 340 90 90 150 180 140 365
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision
for loan losses 5,051 4,843 6,601 6,025 5,732 4,688 3,300
Other noninterest income 3,089 2,253 3,240 2,572 1,237 1,359 1,196
General and administrative
("G&A") expenses 5,926 5,216 7,112 6,115 4,500 3,793 3,200
Other noninterest expense -- 393 393 -- -- -- --
Amortization of goodwill 52 48 66 111 121 116 116
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before taxes 2,162 1,439 2,270 2,371 2,348 2,138 1,180
Income tax expense 787 555 860 891 871 774 421
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 1,375 $ 884 $ 1,410 $ 1,480 $ 1,477 $ 1,364 $ 759
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Earnings per share, basic $ 0.39 $ 0.25 $ 0.41 $ 0.47 $ 0.64 $ 0.78 $ 0.45
Weighted average shares
outstanding, basic 3,492,702 3,430,942 3,432,768 3,026,619 2,163,117 1,578,471 1,419,393
Earnings per share, diluted $ 0.36 $ 0.24 $ 0.38 $ 0.40 $ 0.43 $ 0.38 $ 0.23
Weighted average shares
outstanding, diluted 3,845,944 3,795,861 3,785,712 3,761,406 3,442,245 3,603,549 3,477,555
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
Nine Months
Ended September 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 ................... $ 158,496 $ 138,846 $ 147,319 $ 122,733 $ 106,594 $ 104,051 $ 81,178
Investment securities .......... 28,998 24,811 21,569 18,706 17,957 18,508 19,982
Loans, net of unearned
income ........................ 108,129 87,590 96,469 80,872 75,534 65,097 52,326
Allowance for loan losses ...... 1,826 1,633 1,647 1,610 1,527 1,335 875
Intangible assets .............. 1,378 1,392 1,336 1,440 919 604 719
Deposits ....................... 136,611 124,964 130,219 108,145 93,252 94,103 72,659
Stockholders' equity ........... 12,012 10,045 10,491 9,492 8,487 6,385 4,902
SELECTED FINANCIAL RATIOS
(annualized)
Return on average assets ....... 1.15% 0.92% 1.08% 1.32% 1.45% 1.56% 1.00%
Return on average equity ....... 16.09% 12.10% 14.25% 16.55% 20.84% 23.71% 16.29%
Equity to Assets ............... 7.18% 7.63% 7.56% 7.96% 6.95% 6.57% 6.15%
Dividend Payout ................ 28.31% 40.65% 33.65% 28.81% 25.69% 17.22% 21.97%
Net interest spread ............ 4.77% 5.30% 5.27% 5.58% 5.60% 5.64% 5.01%
Net interest margin ............ 5.28% 5.99% 5.95% 6.27% 6.38% 6.10% 5.53%
G&A expense to average assets .. 4.98% 5.45% 5.44% 5.44% 4.42% 4.34% 4.22%
G&A efficiency ratio ........... 69.88% 72.59% 71.61% 69.90% 62.95% 61.31% 65.82%
Non-accrual loans to total
loans (at period end) ......... 2.71% 0.60% 0.41% 0.46% 0.02% -- .05%
Nonperforming assets to
total assets .................. 2.15% 0.39% 0.27% 0.30% 0.02% 0.02% 0.41%
Loan loss allowance to
total loans .................... 1.65% 1.82% 1.70% 1.98% 2.02% 2.04% 1.61%
Loan loss allowance to
nonperforming loans ........... 60.91% 304.66% 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 .......... 82 85 89 74 63 47 43
</TABLE>
8
<PAGE> 14
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 September 30, 1998, 6.6% of the Company's loans were
secured by one-to-four family residential real estate, 57.9% were secured by
commercial real estate and multifamily residential, 2.9% 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 2.15% at
September 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
9
<PAGE> 15
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 $8.4 million, of which
approximately $5.8 million, or 69.0% of the net proceeds, is not being used to
repay debt. Approximately $1 to $2 million of the estimated $5.8 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 September 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."
10
<PAGE> 16
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 a 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 SHAREHOLDERS
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 51.4% of the outstanding Common Stock (or
approximately 50.7% 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 shareholder 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."
ANTI-TAKEOVER CONSIDERATIONS
The Company's articles of incorporation and bylaws and Florida law
contain certain provisions that may discourage or make more difficult any
attempt by a person or group to obtain control of the Company. In addition, the
board of directors of the Company is empowered to issue from time to time one or
more series of Undesignated Preferred Stock without shareholder approval, the
terms of which could have the effect of delaying or preventing a change in
control of the Company. See "Description of Capital Stock."
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 ar 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
11
<PAGE> 17
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."
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 SmallCap 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 SmallCap 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
12
<PAGE> 18
consecutive quarters with respect to each deferral period, the Company will not
be permitted to (i) declare or pay any cash 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 Subordinate 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 th 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 $271,300 in annual interest on indebtedness which
will rank senior to, or pari passu with, the Junior Subordinated Debentures
($220,900 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 September 30, 1998, the Bank was a well-capitalized
institution for purposes of the Federal Reserve's capital regulations and had
$3.3 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 September 30, 1998, the Company had $2.7 million of Senior
Debt outstanding ($2.6 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 a creditor of a subsidiary, the claims of the
Company would be subject to any prior security interest in the
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<PAGE> 19
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 September 30, 1998, the Bank had
liabilities of $143.5 million (including $137.4 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 redemptio 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."
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
14
<PAGE> 20
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."
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
15
<PAGE> 21
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 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
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<PAGE> 22
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 Preferre 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 SmallCap 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.
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 SmallCap 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 SmallCap 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
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<PAGE> 23
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> 24
USE OF PROCEEDS
It is anticipated that there will be $8.4 million (assuming an offering
price of $7.25 per share of Common Stock) of net proceeds from the Offerings
($9.8 million if the Underwriter's over-allotment option is exercised in full),
from which the Company will use approximately $2.6 million to repay debt and
contribute $1 to $2 million immediately to the capital of the Bank. That will
leave approximately $4 to $5 million of net proceeds at the Company level
(assuming $1 to $2 million are initially contributed to the Capital of the
Bank). It is currently anticipated that approximately $600,000 of the net
proceeds from the Offerings will likely be used by the Bank and/or the Company
to fund the cost of acquiring a currently vacant bank branch building and
establishing a new branch for the Bank.
The Company currently anticipates using the remaining approximately $4 to
$5 million of net proceeds in principally two different ways. First, the Company
will make capital contributions to the Bank from time to time to support further
internal growth and to finance opening new branches, whether by acquisition or
establishment of de novo branches. Other than the aforereferenced branch that
the Bank anticipates spending $600,000 to establish, the Company currently does
not have any agreements in place or definitive plans to open additional
branches. However, the Company has in the past and will continue in the future
to evaluate additional branch locations in Pinellas County, Florida. The
Company's five year business plan contemplates the Bank opening approximately
one new branch each year. However, there can be no assurance that such goal will
be met or not be changed in the future.
The second use of the remaining proceeds from the Offerings will be to
acquire, make investments in or establish various ancillary businesses. The
Company continuously evaluates opportunities to add to the Company's noninterest
income. In the past, that led to the establishment of United Trust, the
Company's trust business, as well as the acquisition of EPW, the Company's
investment advisory business. The Company currently has no agreements or
definitive plans to expand into any particular ancillary business. However, the
Company recently retained the services of a consultant to explore the
possibility of the Company making a minority investment either in an existing
business or in a new business that would engage in the property casualty
underwriting insurance business in Florida. The consultant's work is ongoing and
it recently recommended to the Company that it consider making a minority
investment in a newly established entity to engage in such a business and seek
third party investor to complete the financing of such business venture. The
consultant suggested that such entity should have at least $6 million of
capital. The Company does not yet know if any such third party investors will be
interested in any such opportunity, or whether the Company will ultimately
determine to pursue such opportunity. The consultant's efforts will be on going.
Other than such consultant, the Company has not retained anyone to engage in any
other exploratory evaluations on behalf of the Company. Th Company's efforts to
pursue additional various potential additional sources of non-interest income
will continue into the future. However, the Company currently has no agreements
or definitive plans to expand into any particular ancillary business. If the
Company decides to pursue a specific opportunity, the proceeds from the
offerings will be available to finance such efforts.
In evaluating whether to go public, the Company considered a variety of
factors, including the costs associated with undertaking and completing a public
offering, the potential need for additional capital in the future for further
branch and other Bank expansion, the number of holders of the Preferred
Securities and Common Stock that are needed to list the securities on NASDAQ's
SmallCap Market and the Company's underwriter's recommendation of the minimum
outstanding amount of Preferred Securities and Common Stock needed to provide
some liquidity for the secondary market. To address those issues, the Company
determined it was appropriate to pursue the specific type and size securities
offerings set forth in herein, rather than pursue separate offerings from time
to time in the future when there may be a specific pressing need for capital. As
the amount of capital that will need to be contributed to the Bank over time or
be available to invest in ancillary businesses is not currently known, nor th
timing of the needs for such capital, the Company has determined that it will
leave the remaining net proceeds at the Company level. This will permit the
Company in the future to contribute capital to the Bank from time to time as
needed or invest in existing or future ancillary businesses. Such net proceeds
will initially be invested by the Company in short-term obligations.
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<PAGE> 25
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 SmallCap 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 SmallCap 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. Starting in the first
quarter of 1997, such dividends were paid at the rate of $0.03 1/3 per share of
Common Stock until the third quarter of 1998, when a dividend of $0.04 per share
was declared. The ability of the Company to continue paying dividends on the
outstanding Common Stock, including the Common Stock offered 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.
20
<PAGE> 26
CAPITALIZATION
The following table sets forth the actual and as adjusted consolidated
capitalization of the Company at September 30, 1998 (dollars in thousands). The
as adjusted capitalization gives effect to the Offerings, assumes an offering
price for the Common Stock of $7.25 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>
September 30, 1998
----------------------
As
Actual Adjusted
-------- ----------
<S> <C> <C>
Company-obligated mandatorily redeemable capital securities of subsidiary trust
holding solely junior sbordinated debentures Company(1) .............................................. $ -- $ 6,000
Stockholder Equity:
7% convertible preferred stock $10 par value: 150,000 shares
authorized; 20,850 shares issued and outstanding at September 30, 1998;........................ 209 209
Common Stock, $.01 par value; 20,000,000 shares authorized;
3,513,858 shares and 3,963,858 shares issued and outstanding at
September 30, 1998 Actual and As Adjusted, respectively........................................ 35 40
Paid-in Capital..................................................................................... 6,214 8,636
Net unrealized gain on securities available for sale, net........................................... 193 193
Retained Earnings................................................................................... 5,361 5,361
-------- -------
Total stockholders' equity.......................................................................... 12,012 14,439
-------- -------
Total Capitalization.................................................................................. $ 12,012 $20,439
======== =======
</TABLE>
- -------------------------------
(1) Represents beneficial interests in an aggregate amount of $6.0 million of
Junior Subordinated Debentures of the Company.
21
<PAGE> 27
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........................... 450,000 3,262,500 7.25
---------- ---------- ------
Total.............................. $3,943,423
==========
</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) 718,000 shares of Common Stock reserved
for issuance under the Company's existing stock option plans; (ii) up to 225,000
shares of Common Stock originally 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 and EPW, and the 5,013
shares of Common Stock that have been issued to date pursuant thereto; (iii)
40,500 shares of Common Stock reserved for issuance upon exercise of other
outstanding options granted to certain officers of the Company; (iv) up to
90,000 shares of Common Stock originally reserved for possible issuance upon the
achievement of certain revenue-based criteria of United Trust and EPW under
certain stock incentive plans, and the 9,000 shares of Common Stock that have
been issued pursuant thereto; and (v) 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.
As of September 30, 1998, the following were outstanding: (i) options
granted under the above referenced stock option plans to acquire an aggregate of
508,500 shares of Common Stock at a weighted average exercise price of $7.88 per
share, (ii) 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 (ii) 8% debentures convertible into an aggregate of 152,913 shares of
Common Stock at a conversion price of $4.12 per share.
22
<PAGE> 28
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.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
COMPARISON OF BALANCE SHEETS AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
Overview
At September 30, 1998, total assets of the Company were $158.5 million as
compared to $147.3 million at December 31, 1997, an increase of $11.2 million or
7.6%. This growth was primarily due to increases in NOW and Money Market
accounts as well as increases in Securities Sold under Repurchase Agreements.
Earning assets increased by a similar amount, with loans and securities growing
by a combined $20.7 million and Fed Funds Sold decreasing by $7.2 million.
Investment Securities
Investment securities, consisting of U.S. Treasury, federal agency,
obligations of state and political subdivisions, mortgage-backed, and corporate
debt securities, were $28.8 million at September 30, 1998, compared to $21.6
million at December 31, 1997, an increase of $7.2 million or 33.3%. Included in
investment securities at September 30, 1998, were $16.1 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 $110.6 million at September 30, 1998, compared to $97.0
million at December 31, 1997, an increase of $13.6 million or 14.0%. Real estate
mortgage loans increased $10.6 million or 16.5%, commercial loans increased $3.0
million or 9.5%, and all other loans, including consumer loans, were virtually
unchanged. Loans net of allowance for loan losses were $108.1 million at
September 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 September 30,
1998 or 1.63% of loans, compared to $1.6 million at December 31, 1997 or 1.71%
of loans. During the nine months ended September 30, 1998, $169 thousand in
loans were charged off, $340 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 $3.4 million at September 30, 1998, compared to
$0.7 million at December 31, 1997. Nonperforming assets at September 30, 1998
consisted of nonperforming loans of $3.1 million and other real estate owned of
$0.3 million. A nonperforming loan of $1.1 million is in foreclosure and
management believes that the underlying collateral will be sufficient to repay
most 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 that is equal to its current market
value.
23
<PAGE> 29
Bank Premises and Equipment
Bank premises and equipment totaled $9.2 million at September 30, 1998,
compared to $9.5 million at December 31, 1997, a decrease of $0.3 million. This
decrease was primarily due to depreciation of buildings and equipment and
amortization of leasehold improvements.
Deposits
Total deposits were $ 136.6 million at September 30, 1998, compared to
$130.2 million at December 31, 1997, an increase of $6.4 million or 4.9%. From
December 31, 1997 to September 30, 1998, demand deposits decreased $2.8 million,
NOW and money market deposits increased $13.9 million, savings deposits
decreased $0.8 million, time deposits of $100 thousand or greater decreased $0.9
million, and other time deposits decreased $3.1 million.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding was $2.7 million at September 30, 1998,
virtually unchanged from December 31, 1997.
Stockholders' Equity
Stockholders' equity was $12.0 million at September 30, 1998, or 7.57% 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 $1.4 million, the issuance of $0.4 million of Common Stock and an
increase of $0.1 million in other comprehensive income, partially offset by $0.4
million of dividend payments on Preferred and Common Stock. At September 30,
1998, the Bank's Tier I (core) Capital ratio was 7.14%, its Tier I Risk-based
Capital ratio was 9.00%, and its Total Risk-based Capital ratio was 10.25%. 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 NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
Overview
Net income for the nine months ended September 30, 1998 was $1.4 million
or $0.36 per share, diluted, compared to $0.9 million or $0.24 per share,
diluted, for the same period in 1997. The increase of $0.5 million 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.
24
<PAGE> 30
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 nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine Months Ended September 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.......................... 9,253 $123 $ 0 $9,376 $ 7,902 $ 0 $ 0 $7,902
Interest expense......................... 3,793 0 3 3,796 2,885 0 4 2,889
------ ---- ------ ------ ------- ---- ------ ------
Net interest income...................... 5,460 123 (3) 5,580 5,017 0 (4) 5,013
Loan loss provision...................... 340 0 0 340 90 0 0 90
------ ---- ------ ------ ------- ----- ------ ------
Net interest income after loan
loss provision........................ 5,120 123 (3) 5,240 4,927 0 (4) 4,923
Noninterest income....................... 1,255 689 1,102 3,046 879 505 905 2,289
General and administrative
("G&A") expenses...................... 4,273 700 956 5,929 3,739 651 798 5,188
Other noninterest expense................ 0 0 0 0 393 0 0 393
Amortization of goodwill................. 11 17 0 28 11 13 0 24
------ ---- ------ ------ ------- ----- ------ ------
Total noninterest expense................ 4,284 717 956 5,957 4,143 664 798 5,605
------ ---- ------ ------ ------- ----- ------ ------
Net income before taxes.................. $2,091 $ 95 $ 143 2,329 $ 1,663 $(159) $ 103 1,607
====== ==== ====== ======= ===== ====== ======
Net corporate overhead expense........... 167 168
Income tax expense....................... 787 555
------ -----
Net income............................... $1,375 $ 884
====== =====
</TABLE>
Commercial Banking Activities. Net interest income from commercial
banking activities was $5.5 million for the nine months ended September 30,
1998, compared to $5.0 million for the same period in 1997, a $0.5 million or
10.0% increase. The loan loss provision was $340 thousand for the nine months
ended September 30, 1998, compared to $90 thousand for the same period of 1997,
a $250 thousand or 277.8% increase. The increase in the provision was made to
increase the Bank's allowance for loan losses. The allowance was increased due
to growth in the loan portfolio of approximately $20 million and to an increase
in non-performing assets at September 30, 1998. See "Business-Asset Quality."
The Company believes that the allowance was adequate at September 30, 1998.
Non-interest income for the nine months ended September 30, 1998 was $1.3
million, compared to $0.9 million for the same period of 1997, a $0.4 million or
44.4% increase. Total non-interest expense was $4.3 million for the nine months
ended September 30, 1998, compared to $4.1 million for the same period in 1997,
a decrease of $0.2 million or 4.9%. Net income before taxes was $2.1 million for
the nine months ended September 30, 1998, compared to $1.7 million for the same
period in 1997, a $0.4 million or 23.5% increase.
Trust Activities. United Trust reported net income before taxes of $95
thousand for the nine months ended September 30, 1998, compared to a loss of
$159 thousand for the same period in 1997, an improvement of $254 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 $143
thousand for the nine months ended September 30, 1998, compared to $103 thousand
for the same period in 1997, an increase of $40 thousand or
25
<PAGE> 31
38.8%. 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 nine months ended September 30, 1998 was $5.4
million as compared to $4.9 million for the same period in 1997, a $0.5 million
or 10.2% increase. Interest income was $9.3 million for the nine months ended
September 30, 1998, compared to $7.9 million for the same period in 1997, a $1.4
million or 17.7% increase. Interest expense was $3.9 million for the nine months
ended September 30, 1998, compared to $3.0 million for the same period in 1997,
a $0.9 million or 30.0% increase.
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities for the nine months ended September 30, 1998 and 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------
1998 1997
------------------------------------ -----------------------------------
Summary of average rates/interest Average Average Average Average
earning assets: Balance Interest Rate Balance Interest Rate
------- -------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net(1) ........................ $ 98,441 $ 7,553 10.23% $ 81,088 $6,524 10.73%
Securities:
Investment securities - taxable ...... 26,152 1,282 6.53 22,825 1,133 6.61
Investment securities - non-taxable .. 447 19 8.99 502 21 8.85
Federal funds sold ................... 11,408 471 5.50 5,609 226 5.39
-------- -------- ------ -------- ------ -----
Total earning assets ................. 136,448 9,325 9.12% 110,024 7,904 9.59%
Non-earning assets ................... 22,305 17,659
-------- --------
Total average assets ................. $158,753 $127,683
======== ========
Interest bearing liabilities:
NOW & money market ................... $ 48,488 1,146 3.15% $ 29,693 570 2.56%
Savings .............................. 4,804 73 2.03 4,725 72 2.03
Time, $100,000 & over ................ 9,776 401 5.47 7,040 293 5.55
Time other ........................... 50,314 2,045 5.42 46,535 1,882 5.39
Convertible subordinated debentures .. 630 38 8.00 630 38 8.00
Long-term debt ....................... 2,492 155 8.29 712 48 8.99
Other borrowings ..................... 3,995 76 2.54 2,865 68 3.16
-------- -------- ------ ------- ----- ----
Total interest bearing liabilities ... 120,499 3,934 4.35% 92,200 2,971 4.30%
Non-interest bearing liabilities:
Deposits ............................. 25,134 24,559
Other ................................ 1,726 1,186
Stockholders' equity ................. 11,394 9,738
-------- --------
Total liabilities and stockholders'
equity .............................. $158,753 $127,683
======== ========
Net interest income & net interest
spread ............................... $ 5,391 4.77% $4,933 5.30%
======== ==== ====== ====
Net interest margin .................... 5.28% 5.99%
==== ====
</TABLE>
- --------------------------
(1) Includes non-accrual loans. See "Business-Asset Quality."
26
<PAGE> 32
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
nine month period ended September 30, 1998:
<TABLE>
<CAPTION>
Increase
(Decrease)
---------------------------------------------------
Changes in net interest income Combination
(dollars in thousands) Volume Rate Rate/Volume Total
-------- ------ -------------- -------
<S> <C> <C> <C> <C>
Interest earning assets:
Loans, net ................................ $ 1,396 $(303) $ (65) $ 1,028
Securities:
Investment securities - taxable ........... 165 (12) (2) 151
Investment securities - non-taxable ....... (4) 1 1 (2)
Federal funds sold ........................ 235 5 5 245
------- ----- ----- -------
Total change in interest income ........... 1,792 (309) (61) 1,422
------- ----- ----- -------
Interest-bearing liabilities:
NOW & money market ........................ 361 132 83 576
Savings ................................... 1 (0) (0) 1
Time, $100,000 & over ..................... 114 (4) (2) 108
Time other ................................ 153 9 1 163
Convertible subordinated debentures ....... -- -- -- --
Long-term debt ............................ 120 (4) (9) 107
Other borrowings .......................... 27 (13) (5) 9
------- ----- ----- -------
Total change in interest expense ............ 776 120 68 964
------- ----- ----- -------
Increase (decrease) in net interest income .. $ 1,016 $(429) $(129) $ 458
======= ===== ===== =======
</TABLE>
Noninterest Income
Noninterest income for the nine months ended September 30, 1998 was $3.0
million, compared to $2.3 million for the same period in 1997, an increase of
$0.7 million or 30.4%. The increase was primarily due to increased income from
EPW and United Trust whose combined revenue increased $381 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 nine months ended September 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
Increase/
1998 1997 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Service charges on deposit Accounts............ $ 529 $ 490 $ 39
Trust and investment management income......... 1,755 1,323 432
Loan servicing fees............................ 109 133 (24)
Gain on sale of SBA loans...................... 191 135 56
Gain on sale of securities..................... 79 -- 79
Net trading account profit..................... 79 -- 79
Other service charges, fees, and income........ 347 173 174
------ ------ ----
Total noninterest income..................... $3,089 $2,254 $835
====== ====== ====
</TABLE>
27
<PAGE> 33
Noninterest Expense
Total noninterest expense for the nine months ended September 30, 1998
was $6.0 million, compared to $5.7 million for the same period in 1997, an
increase of $0.3 million.
The following table reflects the components of noninterest expense for
the nine months ended September 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
Increase/
1998 1997 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Salaries and employee benefits............ $3,430 $2,960 $ 470
Occupancy expense......................... 419 372 47
Furniture and equipment expense........... 382 339 43
Data processing expense................... 331 313 18
Legal and professional fees............... 124 95 29
Amortization of intangible assets......... 52 48 4
Advertising............................... 260 205 55
Relocation expense........................ -- 138 (138)
Stationery and Supplies................... 103 112 (9)
Directors fees............................ 126 150 (24)
Securities write-down..................... -- 255 (255)
Other operating expenses.................. 752 670 82
------ ------ ------
Total noninterest expense............... $5,979 $5,657 $ 322
====== ====== ======
</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.
28
<PAGE> 34
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.
29
<PAGE> 35
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).
<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.
30
<PAGE> 36
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.
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 stockholders'
equity ......................... $130,780 $112,335
======== ========
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."
31
<PAGE> 37
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)
-------------------------------------------------------
Combination
Changes in net interest income (dollars in thousands) 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>
32
<PAGE> 38
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 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.
33
<PAGE> 39
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 the
$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 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.
34
<PAGE> 40
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
liabilities 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."
35
<PAGE> 41
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
Other service charges, fees, and income 209 183 26
------ ------ ------
Total noninterest income .............. $2,572 $1,237 $1,335
====== ====== ======
</TABLE>
36
<PAGE> 42
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.
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
37
<PAGE> 43
borrowings from all sources, in determining the amount of credit to extend to an
institution. As of September 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
September 30, 1998, the Bank had liquidity of approximately $26.6 million or
approximately 18.7% 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 September 30, 1998, the Company had commitments to originate
loans totaling $19.4 million. Scheduled maturities of certificates of deposit
during the 12 months following September 30, 1998 total $45.2 million as of
September 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.
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.
38
<PAGE> 44
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 September 30, 1998 was a negative $28.2
million or a negative 17.8% (expressed as a percentage of total assets). The
exclusion of approximately $3.1 million of non-accrual loans increased the
negative gap by nearly 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 September 30, 1998 was appropriate, and currently anticipates that a
similar negative gap position will continue in the subsequent one year time
period.
The following table presents the maturities or repricing of
interest-earning assets and interest-bearing liabilities at September 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.
39
<PAGE> 45
INTEREST SENSITIVITY ANALYSIS
(dollars in thousands)
<TABLE>
<CAPTION>
Non-Rate
Sensitive
0 to 3 4 to 6 7 to 12 13 to 60 60+ Assets/
Months Months Months Months Months Liabilities Total
------ ------ ------ ------ ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal funds sold ........... $ 245 $ 0 $ 0 $ 0 $ 0 N/A $ 245
Securities ................... 2,594 4,662 2,724 9,035 10,573 N/A 29,588
Loans:(1)
Fixed ...................... 5,029 4,651 5,197 15,539 4,313 N/A 34,729
Variable ................... 36,247 2,214 3,159 29,705 1,593 N/A 72,918
-------- -------- -------- ------- ------- -------- --------
Total rate sensitive assets .... $ 44,115 $ 11,527 $ 11,080 $54,279 $16,479 N/A $137,480
======== ======== ======== ======= ======= ======== ========
LIABILITIES:
Interest demand .............. $ 38,096 $ 0 $ 0 $ 0 $ 0 $ 11,850 $ 49,946
Savings ...................... 4,417 0 0 0 0 0 4,417
Time deposits ................ 18,076 11,472 15,674 11,381 0 0 56,603
Other borrowings ............. 4,554 0 0 0 0 0 4,554
Long term debt ............... 2,639 4 8 26 630 0 3,307
-------- -------- -------- ------- ------- -------- --------
Total rate sensitive liabilities $ 67,782 $ 11,476 $ 15,682 $11,407 $ 630 $ 11,850 $118,827
======== ======== ======== ======= ======= ======== ========
Dollar gap ..................... $(23,667) $ 51 $ (4,602) $42,872 $15,849 $(11,850) $ 18,653
======== ======== ======== ======= ======= ======== ========
Cumulative Dollar gap .......... $(23,667) $(23,616) $(28,218) $14,654 $30,503 $ 18,653 $ 18,653
======== ======== ======== ======= ======= ======== ========
Cumulative gap/total assets(2) . (14.93)% (14.90)% (17.80)% 9.25% 19.25% 11.77% 11.77%
======== ======== ======== ======= ======= ======== ========
</TABLE>
- ----------
(1) Excludes nonaccrual loans of approximately $3.0 million.
(2) Calculated based on total assets of $158,496.
40
<PAGE> 46
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. If the Company is unable for any reason to
timely complete such a contingency plan and problems associated with the Year
2000 issue arise and are not addressed as expected by the Company, as each of
the Company's business segments is very dependent upon computer systems to
effectively conduct most of their business operations and fulfill most of their
obligations to third parties, the Company's business operations could be
significantly disrupted and the Company's financial condition and results of
operations could be significantly adversely affected. 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 costs, including the updating of software and
hardware systems to ensure Year
41
<PAGE> 47
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-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.
42
<PAGE> 48
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 September 30, 1998, the Company had consolidated
total assets of $158.5 million, net loans of $108.1 million, deposits of $136.6
million and stockholders' equity of $12.0 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 September 30, 1998,
EPW had $297.2 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 September 30,
1998, United Trust had $251.5 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
43
<PAGE> 49
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 provide 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
$600,000 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
44
<PAGE> 50
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 use short-term borrowings to compensate for
reductions in sources of funds normally available, while longer term
45
<PAGE> 51
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 September 30, 1998, the scheduled maturities of deposits of
$100,000 or more were as follows (dollars in thousands):
<TABLE>
<S> <C>
Three months or less.......................................................... $3,357
Over three through six months................................................. 1,927
Six through twelve months..................................................... 2,358
Over twelve months............................................................ 1,117
------
$8,759
======
</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 principal types of deposit accounts offered and the
aggregate amounts of such accounts at September 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Weighted Percent
Average of Total
Interest Rate Amount Deposits
------------- -------- --------
<S> <C> <C> <C>
Non-interest bearing ..................... 0.00% $ 25,644 18.8%
NOW and Money Market accounts ............ 3.15 49,946 36.6
Savings .................................. 2.03 4,417 3.2
Time deposits with original maturities of:
One year or less 5.27 45,222 33.1
Over 1 year through 5 years ........... 5.84 11,382 8.3
---- -------- -----
Total time deposits ................. 5.38 56,604 41.4
---- -------- -----
Total deposits ...................... 3.45% $136,611 100.0%
==== ======== =====
</TABLE>
At September 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 ................ $45,222 79.9%
2000-2001 ........... 6,760 11.9
2002-2006 ........... 4,622 8.2
------- -----
Total time deposits $56,604 100.0 %
======= =====
</TABLE>
46
<PAGE> 52
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, 1997 and 1998 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 September 30, 1997,
December 31, 1997, and September 30, 1998 was $33 thousand, $78 thousand, and
$125 thousand, respectively. Amortization expense relating to such servicing
assets of $2 thousand and $9 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 $29 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.
47
<PAGE> 53
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):
<TABLE>
<CAPTION>
At
September 30, At December 31,
------------- ------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate ..................... $ 52,961 $44,547 $38,074 $38,439
One-to-four family residential ............. 7,255 7,482 6,716 7,371
Multifamily residential .................... 7,662 5,485 2,898 2,230
Construction and land development .......... 3,196 3,071 1,795 1,456
-------- ------- ------- -------
Total real estate mortgage loans ......... 71,074 60,585 49,483 49,496
Commercial loans ............................. 33,545 30,536 25,239 19,711
Consumer loans ............................... 4,094 3,998 3,831 3,199
Other Loans .................................. 1,861 1,871 2,661 3,409
-------- ------- ------- -------
Gross loans ................................ 110,574 96,990 81,214 75,815
Allowances for loan losses ................... (1,826) (1,648) (1,610) (1,527)
Unearned Fees ................................ (619) (521) (341) (281)
-------- ------- ------- -------
Total loans net of allowance and unearned fees $108,129 $94,821 $79,263 $74,007
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
At
September 30, At December 31,
------------- ------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate....................................... 47.9% 45.9% 46.9% 50.7%
One-to-four family residential............................... 6.6 7.7 8.2 9.7
Multifamily residential...................................... 6.9 5.7 3.6 3.0
Construction and land development............................ 2.9 3.2 2.2 1.9
----- ---- ---- ----
Total real estate mortgage loans........................... 64.3% 62.5 60.9 65.3
Commercial loans............................................... 30.3% 31.5 31.1 26.0
Consumer loans................................................. 3.7 4.1 4.7 4.2
Other Loans.................................................... 1.7 1.9 3.3 4.5
----- ---- ---- ----
Gross loans.................................................. 100.0% 100% 100% 100%
===== === === ===
</TABLE>
The following table sets forth the contractual amortization of real
estate and commercial loans at September 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>
At
September 30, 1998 December 31, 1997
------------------ ---------------------
Real Real
Estate Commercial Estate Commercial
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Amounts due:
One year or less ............................... $29,155 $23,699 $29,645 $22,250
After one through five years ................... 36,079 8,952 30,409 7,518
More than five years ........................... 5,840 894 531 768
------- ------- ------- -------
Total ..................................... $71,074 $33,545 $60,585 $30,536
======= ======= ======= =======
Interest rate terms on amounts due after one year:
Adjustable ..................................... $26,970 $ 3,485 $20,774 $ 3,489
Fixed .......................................... 14,949 6,361 10,166 4,797
------- ------- ------- -------
Total ..................................... $41,919 $ 9,846 $30,940 $ 8,286
======= ======= ======= =======
</TABLE>
48
<PAGE> 54
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
49
<PAGE> 55
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 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 September 30, At December 31,
----------------------------------------------
1998 1997 1996 1995
----------------------------------------------
<S> <C> <C> <C> <C>
Allowance at beginning of period ...................... $1,647 $1,610 $1,527 $ 1,335
Charge-offs:
Real estate loans ................................... -- -- -- --
Commercial loans .................................... 153 52 38 --
Consumer loans ...................................... 16 39 31 1
------ ------ ------ -------
Total charge-offs .............................. 169 91 69 1
Recoveries:
Real estate loans ................................... -- -- -- 3
Commercial loans .................................... 8 38 1 9
Consumer loans ...................................... -- -- 1 1
------ ------ ------ -------
Total recoveries ............................... 8 38 2 13
Net charge-offs ....................................... 161 53 67 (12)
Provision for loan losses ............................. 340 90 150 180
------ ------ ------ -------
Allowance at end of period ............................ $1,826 $1,647 $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>
September 30, 1998 December 31, 1997 December 31, 1996
---------------------- ----------------------- ---------------------
Percentage of Percentage of Percentage of
Loan Loan Loan
Allowance Allocation Amount Portfolio Amount Portfolio Amount Portfolio
- -------------------- ------ --------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Performing/not classified:
Commercial Loans ....................... $ 420 28% $ 368 31% $ 324 30%
Real Estate Loans ...................... 526 56 459 53 406 55
Consumer Loans ......................... 105 8 92 9 81 10
------ --- ------ --- ------ ---
Subtotal ............................... 1,051 92 919 93 811 95
Non-performing/ classified:
Marginal ............................... 115 2 2 5 -- 0
Substandard ............................ 628 6 483 2 221 5
Doubtful ............................... 32 0 -- 0 -- 0
Loss ................................... -- 0 -- 0 -- 0
------ --- ------ --- ------ ---
Subtotal ............................... 775 8 485 7 221 5
Unallocated ............................ -- 0 243 0 578 0
------ --- ------ --- ------ ---
Total .................................. $1,826 100% $1,647 100% $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
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<PAGE> 56
in lieu of foreclosure). All delinquent loans are reviewed on a regular basis
and are placed on non-accrual status when, in the opinion of management, the
possibility of collecting additional interest is deemed insufficient to warrant
further accrual. As a matter of policy, interest is not accrued on loans past
due 90 days or more unless the loan is both well secured and in process of
collection. When a loan is placed in non-accrual status, interest accruals cease
and uncollected accrued interest is reversed and charged against current income.
Additional interest income on such loans is recognized only when received.
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,
September, 30 ---------------------------------
1998 1997 1996 1995
------------- ----- ---- ---
<S> <C> <C> <C> <C>
Real estate loans ...................... $1,974 $374 $330 $15
Commercial loans ....................... 1,024 26 42 --
Consumer loans ......................... -- -- -- --
------ ---- ---- ---
Total non-accrual loans(1) .......... 2,998 400 372 15
Other Real Estate ...................... 283 -- -- --
Accruing Loans 90 days past due ........ 133 251 -- 6
------ ---- ---- ---
Total nonperforming assets .......... $3,414 $651 $372 $21
====== ==== ==== ===
</TABLE>
- ------------------
(1) $1,261 of the non-accrual loans as of September 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 to
51
<PAGE> 57
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 September 30, 1998, the Company had 78 full-time and 7 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
shareholders.
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 wit 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 bank in a state in
the Southeast and thereafter consolidate all of its bank subsidiaries into a
single bank with interstate branches.
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<PAGE> 58
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, administrativ 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,
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
53
<PAGE> 59
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 SAI 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.
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.
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<PAGE> 60
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.
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 Leverage
ratio of 7% during the period of time that such investment limitations are
exceeded. If the Bank's Tier 1 Leverage 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 September 30, 1998, the Bank's Tier 1 Leverage ratio
was 7.03%.
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<PAGE> 61
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 depositor 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 September 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 no 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 September 30, 1998, the Bank's net liquid
assets exceeded the minimum amount required under the applicable Florida
regulations.
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 suc
policies on the future business and earnings of the Bank cannot be predicted.
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<PAGE> 62
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. There is no assurance that
any legislation will 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. Th 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.
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 September 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.
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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 January 1999 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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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 and CEO Chairman and CEO of the Bank
Harold J. Winner................................ 49 Director President of the Bank
Ward J. Curtis, Jr.............................. 52 Director, Executive Vice President Chairman, CEO and 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 Vice President Chairman and Chief Executive Officer
of EPW
OTHER EXECUTIVE OFFICERS
Cynthia A. Stokes............................... 49 Senior Vice President Executive Vice President of the Bank
C. Peter Bardin................................. 40 Senior Vice President and Chief Senior Vice President and Chief
Financial Officer Financial Officer of the Bank
Susan L. Blackburn.............................. 40 Senior Vice President of the Bank
P. Dennis Barletta.............................. 46 Vice President Vice President of the Bank
John Pieper..................................... 54 President of EPW
</TABLE>
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<PAGE> 65
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.
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.
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<PAGE> 66
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 $10,000 per year for
services rendered as Vice Chairman of the Bank. Additionally, non-employee
directors are eligible for a bonus based on the profitability of the Company. No
other directors receive separate compensation for services rendered as a
director.
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<PAGE> 67
EXECUTIVE COMPENSATION
The following table summarizes the compensation during the fiscal years
ended December 31, 1997, 1996 and 1995, the Company's Chief Executive Officer
and the four highest paid executive officers of the Company (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- -----------------------
Awards Payouts
---------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Compensation Award(s) Options/SARs Payouts Compensation
Principal Position Year Salary($) Bonus($) ($)(1) ($) (#) ($) ($)(2)
- ------------------ ---- --------- -------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Neil W. Savage 1997 $136,000 $ 73,600 $ 6,445 0 102,000 0 $26,077
Chief 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 4,736 0 0 0 8,983
Chairman, Chief Executive 1996 128,466 0 6,477 0 0 0 6,439
Officer and President of 1995 72,917 0 3,327 0 0 0 0
United Trust(3)
William A. Eickhoff 1997 115,000 9,000 3,301 0 0 0 14,522
Chairman and Chief 1996 106,767 0 2,627 0 0 0 11,369
Executive Officer of EPW(4) 1995 n/a n/a n/a 0 0 0 n/a
Harold J. Winner 1997 94,100 66,030 27,583 0 57,000 0 35,998
President of the Bank 1996 90,000 86,313 4,547 0 24,000 0 11,670
1995 82,441 81,225 259 0 0 0 12,354
Cynthia A. Stokes 1997 65,823 51,120 0 0 37,500 0 7,294
Executive Vice President 1996 64,218 67,550 0 0 0 0 7,390
of the Bank 1995 61,748 64,125 0 0 0 0 10,323
</TABLE>
(1) Includes board fees and the difference between the price paid by the Named
Executive Officer upon the exercise of certain of his options to purchase
Common Stock and the fair market value of the underlying Common Stock on
the date of exercise (each, if applicable). Also perquisites and other
personal benefits, including personal usage of Company leased auto and
personal usage of club membership.
(2) Represents the Bank's match of officer's 401(k) contribution, Company
contribution to the ESOP and accrual for a prior salary continuation plan.
The amount of such contribution and accruals during fiscal 1997 were as
follows: Mr. Savage-$4,100 (401(k)), $5,967 (ESOP) and $16,010 (ESOP); Mr.
Curtis-$4,100 (401(k)) and $4,883 (ESOP); Mr. Eickhoff-$4,100 (401(k)) and
$4,625 (ESOP); Mr. Winner-$4,091 (401(k)), $5,967 (ESOP) and $25,939 (prior
salary continuation plan); and Ms. Stokes-$2,933 (401(k)) and $4,361
(ESOP). Additionally, the Company paid premiums on certain life insurance
policies for the benefit of Mr. Eickhoff totaling $5,797 during fiscal
1997.
(3) Mr. Curtis' employment began on June 1, 1995. Compensation figures for Mr.
Curtis exclude 2,082 shares of Common Stock issued to Mr. Curtis in 1998
under a certain stock incentive plan for the acquisition of his interest in
FSC that were based on certain earnings of the Company in 1997 and which
had an estimated fair market value of $8.25 per share on December 31, 1997.
(4) Mr. Eickhoff's employment began on February 1, 1996. Compensation figures
for Mr. Eickhoff exclude 585 shares of Common Stock issued to Mr. Eickhoff
in 1998 under a certain stock incentive programs entered into in connection
with the acquisition of his interest in EPW that were based on certain
earnings of the Company in 1997 and which had an estimated fair market
value of $8.25 per share on December 31, 1997.
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<PAGE> 68
The following table contains information about stock option grants to
Named Executive Officers during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of
Securities % of Total Options
Underlying Granted to Exercise or
Options Employees Base Price Expiration
Name Granted in Fiscal Year ($/share) Date
- ---- ----------- ------------------ ----------- -------------
<S> <C> <C> <C> <C>
Neil Savage.................................... 102,000 32.7% $7.94 12/18/07
Ward J. Curtis(1).............................. -0- 0% -- --
William A. Eickhoff(2)......................... -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>
- -------------------
(1) Excludes 2,082 shares of Common Stock issued to Mr. Curtis in 1998 under a
certain stock incentive plan as additional consideration for the
acquisition of his interest in FSC that were based on certain earnings of
the Company in 1997.
(2) Excludes 585 shares of Common Stock issued to Mr. Eickhoff in 1998 under a
certain stock incentive program entered into in connection with the
acquisition of his interest in EPW that were based on certain earnings of
the Company in 1997.
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
Options at Options at
FY-Ended FY-End(1)
------------- --------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ---- ----------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Neil Savage.................................... -0- -0- 102,000/0 $ 31,620/0
Ward J. Curtis(2).............................. -0- -0- -- --
William A. Eickhoff(3)......................... -0- -0- -- --
Harold Winner.................................. 6,000 $26,160 69,000/6,000 $ 36,750/0
Cynthia A. Stokes.............................. -0- -0- 37,500/0 $ 11,625/0
</TABLE>
(1) For purposes of determining the values of the options held by the Named
Executive Officers, the Company has used $8.25 per share as the estimated
fair market value for the Common Stock on December 31, 1997. 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.
(2) Excludes 2,082 shares of Common Stock issued to Mr. Curtis in 1998 under a
certain stock incentive plan as additional consideration for the
acquisition of his interest in FSC that were based on certain earnings of
the Company in 1997.
(3) Excludes 585 shares of Common Stock issued to Mr. Eickhoff in 1998 under a
certain stock incentive program entered into in connection with the
acquisition of his interest in EPW that were based on certain earnings of
the Company in 1997.
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<PAGE> 69
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 us 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 maintaine 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
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<PAGE> 70
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 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 an 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> 71
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 to the
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<PAGE> 72
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"), constitut "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.
STOCK INCENTIVE PLAN
General. The United Financial Holdings, Inc. 1998 Stock Option Plan (the
"1998 Plan") was adopted by the Company's Board of Directors on September 15,
1998. The 1998 Plan provides for incentives in the form of grants of options to
purchase shares of the Company's Common Stock to key employees who contribute
materially to the success and profitability of the Company.
Administration. The 1998 Plan is to be administered by a committee
appointed by the Board (or, if the Board does not appoint a committee, the Board
shall constitute the committee) consisting solely of two or more directors of
the Company who are "non-employee directors" within the meaning of Rule 16b-3
promulgated under Section 16(b) of the Exchange Act and who are "outside
directors" within the meaning of Section 162(m) of the Code and the regulations
promulgated under Section 162(m) of the Code (the "Committee"). The Committee
has full and exclusive authority to select the individuals to whom options will
be granted, determine the type, size and terms and conditions of the options,
construe and interpret, and make all other determinations necessary or advisable
under the 1998 Plan. The Company's Board of Directors may appoint a different
committee for the purpose of approving the grant of stock options to persons who
are not subject to the requirements of Section 16(b) of the Exchange Act and
Section 16(m) of the Code.
Shares. The maximum number of shares of Common Stock that may be subject
to options granted under the 1998 Plan is 250,000. In the event of any change in
capitalization of the Company, however, the Committee shall equitably adjust the
number and class of shares with respect to which options may be granted, the
number and class of shares which are subject to outstanding options previously
granted and the price per share payable upon exercise of each option under the
1998 Plan. In addition, if any options expire or terminate without having been
exercised, the unpurchased shares of Common Stock subject to such options shall
again become available for grant under the 1998 Plan. Finally, to the extent
deemed equitable and appropriate by the Board of Directors and subject to any
required action by shareholders, any options will pertain to the securities and
other property to which a holder of the number of shares of Common Stock covered
by the options would have been entitled to receive in connection with any
merger, consolidation, reorganization, liquidation or dissolution.
Eligibility. The Committee may grant stock options to any employee,
director, officer, consultant, or independent contractor, and any person who
performs services relating to the Company as an employee or independent
contractor of a corporation or other entity that provides services for the
Company. Only "employees" (persons employed on an hourly or salaried basis by
the Company), however, are eligible to receive stock options that satisfy the
requirements of Section 422 of the Code.
Stock Options
The Committee, at its sole discretion, is authorized to grant to eligible
persons options to purchase a specified number of shares of Common Stock at a
stated price per share. During any calendar year, the Committee shall not grant
to any eligible person options to purchase more than 25,000 shares of Common
Stock. An option may be intended to qualify as an "incentive stock option"
("ISO") pursuant to the Code, or may be intended to be a nonqualified option
("NSO"). The term of an ISO cannot exceed 10 years, and the exercise price of
any ISO must be equal to or greater than the fair market value of the shares of
Common Stock on the date of the grant. Any ISO granted to a holder of 10% or
more of the
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<PAGE> 73
combined voting power of the capital stock of the Company must have an exercise
price equal to or greater than 110% of the fair market value of the Common Stock
on the date of grant and may not have a term exceeding five years from the grant
date. The aggregate fair market value, determined on the date of grant, of
Common Stock with respect to which any ISO under the 1998 Plan and all other
plans of the Company become exercisable by any individual for the first time in
any calendar year may not exceed $100,000. The exercise price of a NSO shall be
determined by the Committee on the date that the NSO is granted.
Each option granted to a recipient is required to be evidenced by a
written option agreement containing such terms and conditions consistent with
the 1998 Plan as shall be established by the Committee. The Committee shall
specify, in the option agreement, the vesting schedule applicable to each
option. The Committee, in its sole discretion, may accelerate the vesting of any
option at any time. An option is exercisable only to the extent it is vested
according to the terms of the option agreement Furthermore, an option is
exercisable only if the issuance of Common Stock upon exercise would comply with
applicable securities laws and would satisfy any additional conditions specified
by the Committee in the option agreement.
Each ISO shall expire on the earlier of 10 years from the date of grant
or the date set by the Committee on the date of grant (the "ISO Expiration
Date"), while each NSO shall expire on a date set by the Committee on the "date
of grant" (as defined in the 1998 Plan), or, if no such date is set, 10 years
from the date of grant (the "NSO Expiration Date" and with the "ISO Expiration
Date", collectively the "Expiration Date"). Upon termination of a recipient's
employment with the Company or service a a member of the Board of Directors for
any reason other than death, "disability" (as defined in the 1998 Plan),
retirement, involuntary termination, or for "cause" (as defined in the 1998
Plan), an option granted to the recipient will expire 30 days following the last
day of the recipient's employment with the Company or service as a member of the
Board of Directors, or, if earlier, the Expiration Date, unless the Committee
sets an earlier or later expiration date on the date of grant or a later
expiratio date subsequent to the date of grant but prior to the 30th day
following the recipient's last day of employment or service as a member of the
Board of Directors.
If a recipient dies or terminates his employment with the Company because
of his disability, an ISO granted to the recipient shall expire on the one-year
anniversary of the recipient's death or last day employment, respectively, or if
earlier, the ISO Expiration Date, unless the Committee sets an earlier
expiration date on the date of grant. If a recipient dies or terminates his
employment with the Company or ceases to serve as a member of the Board of
Directors because of his disability, a NSO granted to the recipient will expire
on the one-year anniversary of the recipient's last day of employment or service
as a member of the Board of Directors, or, if earlier, the NSO Expiration Date,
unless the Committee sets an earlier expiration date or a later expiration date
subsequent to the date of grant, but prior to the one-year anniversary of the
recipient's last day of employment or service as a member of the Board of
Directors.
If a recipient retires, or if the Company terminates the recipient's
employment other than for cause, an ISO granted to the recipient shall expire 90
days following the last day of the recipient's employment, or, if earlier, the
ISO Expiration Date, unless the Committee sets an earlier expiration date on the
date of grant. If a recipient terminates his employment or ceases to serve as a
member of the Board of Directors as a result of his retirement, or if the
Company terminates the recipient's employment or service as a member of the
Board of Directors other than for Cause, a NSO granted to the recipient will
expire 90 days following the last day of the recipient's employment or service
as a member of the Board of Directors, or, if earlier, the NSO Expiration Date,
unless the Committee sets an earlier or later expiration date on the date of
grant, or a later expiration date subsequent to the date of grant, but prior to
90 days following the recipient's last day of employment or service as a member
of the Board of Directors. If the Company terminates the recipient's employment
or removes the recipient from the Board of Directors for cause, any unexercised
portion(s) of the recipient's options shall terminate upon the earlier of the
occurrence of the event that constitutes cause or the last day the recipient is
employed by the Company or serves as a member of the Board of Directors.
Payment for shares of Common Stock purchased upon exercise of an option
must be made in full at the time of purchase. Payment may be made in cash, by
certified check, in the form of Common Stock having a fair market value equal to
the exercise price (if permitted by the Committee), or by delivery of a notice
instructing the Company to deliver the shares of Common Stock to a broker
subject to the broker's delivery of cash to the Company equal to the exercise
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<PAGE> 74
price. Additionally, the Committee may, in its discretion and subject to the
requirements of applicable law, recommend to the Company that it lend the
recipient the funds needed by the recipient to exercise an option.
The Board of Directors may alter, amend, or terminate the 1998 Plan
without approval of the shareholders of the Company. Options may be granted
under the 1998 Plan during the 10 year period beginning September 16, 1998. The
Company will bear the expenses of administering the 1998 Plan.
OTHER STOCK INCENTIVE PLANS
In connection with the acquisitions of FSC and EPW, the Company agreed to
certain additional stock issuance programs. Pursuant to such programs, the
Company has reserved 225,000 shares of Common Stock for issuance based on
certain earnings-based criteria of United Trust and EPW. If such earnings
criteria are met, such shares of common stock are issuable for no additional
consideration. If all 225,000 of such shares of Common Stock are earned, then
additional options to purchase Common Stock with an exercise price equal to $.01
per option share may be earned through 2000 by participants under the plans
based on achieving certain earnings. As of September 30, 1998, a total of 5,013
shares of Common Stock have been issued and no options have been granted
pursuant to such incentive stock plans. Generally, if a "change of control" of
the Company occurs as defined in such programs, 92,778 of the 225,000 shares,
less the number of such shares previously issued, that could be issued under
such programs will be deemed earned and vest over a period of time ending in
2000. In addition, up to 90,000 shares of Common Stock have been reserved for
issuance under such incentive stock plans based on consolidated revenues
generated by United Trust and EPW. If such revenue criteria are met, such shares
are issued by the Company to the participants for no additional consideration.
As of September 30, 1998, 9,000 of such 90,000 shares of Common Stock have been
issued. Generally, if a "change of control" of the Company occurs as defined in
the 90,000 share program, the remaining shares under such program will be deemed
earned and vest immediately.
On June 25, 1996, the Bank's Board of Directors adopted resolutions
authorizing the grant of options to purchase shares of the Company's Common
Stock to the following three employees: Harold J. Winner, Susan L. Blackburn and
Larry Fasan. Pursuant to such grants, Mr. Winner, Ms. Blackburn and Mr. Fasan
received options to purchase 24,000, 15,000 and 15,000 shares of the Company's
Common Stock, respectively. One-quarter of such options shall become available
for exercise on January 1 of each year, beginning January 1, 1996 and ending
January 1, 1999. Such options expire two years after the date on which they
become available for exercise. For example, on January 1, 1999, the final 6,000
of the original 24,000 options granted to Mr. Winner will be available for
exercise and such options must be exercised by Mr. Winner on or before December
31, 2000. The option prices vary by the year in which such options become
available for exercise. For example, the exercise price of those options which
became available on January 1, 1997 totaled $5.08 per share, while the exercise
price for those options that became available on January 1, 1998 totaled $8.25
per share. The exercise price for options becoming available on January 1, 1999
is to be equal to the ESOP appraisal on January 1, of such year. Mr. Winner, Ms.
Blackburn and Mr. Fasan each exercised their options to purchase 6,000, 3,750
and 3,750 shares, respectively, for an exercise price of $3.89 per share, which
were made available on January 1, 1996. Therefore, options to purchase 40,500
shares remained unexercised or unexerciseable as of September 30, 1998. In
addition to the foregoing, the Board of Directors approved the grant of options
to purchase 9,000 shares of Common Stock to Mr. Winner on September 25, 1989,
which were exercised by Mr. Winner at a price of $1.88 per share in December
1996.
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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 September 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 September 30, 1998, the following
loans in excess of $60,000 to the Company's directors, executive officers and
principal shareholders were outstanding: Mr. Clampitt, $302,553; Mr. Eickhoff,
$76,308; Mr. Irwin and affiliated entities, $1,537,170; Dr. MaCris, $115,149;
Mr. Norrie and affiliated entities, $799,622; and Mr. Wier and affiliated
entities, $828,141. 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.
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<PAGE> 76
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of September 30, 1998, and as adjusted
to reflect the sale of 450,000 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 and (iv) all directors and officers as a group.
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 --------------------------
BENEFICIALLY PRIOR TO THE AFTER THE
NAME OF DIRECTORS AND EXECUTIVE OFFICERS OWNED OFFERINGS OFFERINGS
- ---------------------------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Ronald E. Clampitt(1).................................................... 174,503 4.8% 4.3%
David K. Davis, M.D.(2).................................................. 107,073 3.0% 2.7%
Henry Esteva(3).......................................................... 46,218 1.3% 1.2%
Edward D. Foreman(4)..................................................... 58,377 1.7% 1.5%
Charles O. Lowe(5)....................................................... 63,462 1.8% 1.6%
Jack A. MaCris, M.D.(6).................................................. 100,167 2.8% 2.5%
John B. Norrie(7)........................................................ 129,390 3.7% 3.2%
William Eickhoff(8)...................................................... 93,793 2.6% 2.3%
Ronald R. Petrini(9)..................................................... 10,776 * *
John B. Wier, Jr.(10).................................................... 299,367 8.5% 7.5%
Ward J. Curtis, Jr.(11).................................................. 137,667 3.9% 3.5%
Neil W. Savage(12)....................................................... 220,047 6.1% 5.4%
Harold J. Winner(13)..................................................... 92,295 2.6% 2.3%
Claude C. Focardi(14).................................................... 421,826 12.0% 10.6%
Ian F. Irwin(15)......................................................... 271,758 7.7% 6.8%
Cynthia A. Stokes(16).................................................... 53,274 1.5% 1.3%
All directors and principal officers as a group (19 persons)(17)......... 2,337,215 57.1% 51.4%
</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, 91,514 shares that may be acquired upon
conversion of the Company's 7% Preferred Stock and 51,015 shares held
in a trust for which trust Mr. Clampitt serves as trustee.
(2) Includes 21,435 shares that may be acquired by exercise of options
exercisable within 60 days and 85,638 shares held in Dr. Davis'
individual retirement account.
(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 49,998 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 92,158 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 is 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 and 195,165 shares held in a trust for which
trust Mr. Wier serves as trustee.
(11) Includes 70,011 shares held in Mr. Curtis' individual retirement
account.
(12) Includes 102,000 shares that may be acquired by exercise of options
exercisable within 60 days, 51 shares held in Mr. Savage's individual
retirement account and 117,996 shares held in a trust for which trust
Mr. Savage serves as trustee.
(13) Includes 69,000 shares that may be acquired by exercise of options
exercisable within 60 days and 8,115 shares held in Mr. Winner's
individual retirement account.
(14) Includes 3,456 shares that may be acquired by exercise of options
exercisable within 60 days and 411,528 shares held in a trust for which
trust Mr. Focardi serves as trustee.
(15) Includes 22,818 shares that may be acquired by exercise of options
exercisable within 60 days, 630 shares held by a partnership for which
Mr. Irwin serves as general partner and 109,566 shares held by a
company for which Mr. Irwin is an officer and director and all of the
stock of which is owned by a son of Mr. Irwin. Does not include 62,706
shares held by a corporation for which Mr. Irwin is a director, officer
and a twenty-five percent shareholder, the remaining equity interests
of which are owned by his adult siblings and parents; 16,017 shares
held in his wife's trust for which Mr. Irwin does not serve as trustee;
and 19,464 shares held in trusts for the benefit of his children for
which Mr. Irwin does not serve as trustee.
(16) Includes 37,500 shares that may be acquired by exercise of options
exercisable within 60 days and 3,600 shares held in a trust for which
trust Ms. Stokes serves as trustee.
(17) Includes an aggregate of 130,605 shares held in the director or
principal officer's individual retirement account, an aggregate of
779,304 shares held in a trust for which trust the director, principal
officer or principal shareholder serves as trustee, an aggregate of
393,036 shares that may be acquired by exercise of options exercisable
within 60 days, an aggregate of 98,221 shares that may be acquired upon
conversion of the Company's 8% convertible subordinated debentures
issued in conjunction with the acquisition of EPW, 92,158 of which are
held by a partnership for which Mr. Eickhoff and Mr. Pieper serve as
partners, and shares owned by Ms. Blackburn as Custodian under the
Florida Gift to Minors Act for Andrea Michele Vest (2,322 shares) and
Roger Wayne Vest, Jr. (2,322 shares).
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DESCRIPTION OF CAPITAL STOCK
GENERAL
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 70,000 shares of preferred stock, par value $10.00 per
share, bearing a dividend commitment of 6% per annum (the "6% Preferred Stock").
As of September 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 $1.19 per share of Common Stock. All of the 6% Preferred Stock was
converted in 1995 and 1996.
Additionally, pursuant to the Company's Articles as they are expected
to be in effect prior to consummation of the Offerings (the "Articles"), which
will be effective upon completion of the Offerings, the Company is authorized to
issue up to 10,000,000 shares of preferred stock having a par value of $.01 per
share (the "Undesignated Preferred Stock" and with the 6% Preferred Stock and
the 7% Preferred Stock, collectively, the "Preferred Stock"), of which no shares
will be issued and outstanding.
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 shareholders, 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
authority to issue additional shares of the Company's Common and Preferred Stock
provides the Company with the flexibility necessary to meet its future needs
without the delay resulting from seeking shareholder 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.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share
owned of record on all matters presented to the shareholders. Unless otherwise
required by law or the Company's Articles, holders of Common Stock vote together
as a single class on all matters presented to the Company's shareholders.
Shareholders do not have the right to cumulate their votes in elections of
directors. Accordingly, holders of a majority of the issued and outstanding
Common Stock will have the right to elect all the Company's directors and
otherwise control the affairs of the company, subject to any voting rights of
the then outstanding Preferred Stock. In addition, the Articles do not provide
any preemptive rights. Furthermore, with respect to the holders of the 8%
convertible debentures (or any other holders of outstanding debentures), at any
time an arrearage in interest payments shall have existed for at least 30 days
and be continuing, the number of directors constituting the Board of Directors
shall be increased by two and the holders of the 8% convertible debentures (or
any other holders of outstanding debentures) shall have the exclusive right,
voting as a class, to elect two directors of the Company to fill such newly
created directorships for the term and subject to the conditions specified in
the Articles.
Holders of Common Stock are entitled to dividends on a pro rata basis
if, as and when declared by the Board of Directors, at its discretion, out of
funds legally available therefore, subject to the dividend and liquidation
rights of any Preferred Stock that may be issued and outstanding and subject to
any applicable contractual or legal restrictions. No dividends or other
distributions (including redemptions or repurchases of shares of capital stock)
may be made if after giving effect to any such dividends or distributions, the
Company would not be able to pay its debts as they become due in the usual
course of business or the Company's total assets would be less than the sum of
its total liabilities plus the amount that would be needed at the time of a
liquidation to satisfy the preferential rights of any holders of Preferred
Stock. Upon the 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.
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<PAGE> 78
UNDESIGNATED PREFERRED STOCK
The Board of Directors of the Company is authorized, pursuant to the
Articles which will become effective upon completion of the Offerings, without
further shareholder action, to designate and issue from time to time one or more
series of Undesignated Preferred Stock. The board of directors is authorized to
designate the series and fix the number of shares in each series, as well as the
relative rights, preferences, and limitations of each series. Among such rights,
preferences and limitations are (i) the dividend rate; (ii) redeemable features,
if any; (iii) rights upon liquidation; (iv) whether or not the shares of such
series shall be subject to purchase, retirement, or sinking fund provisions; (v)
whether or not the shares of such series shall be convertible into or
exchangeable for shares of any other class and, if so, the rate of conversion or
exchange; (vi) restrictions, if any, upon the payment of dividends on common
stock; (vii) restrictions, if any, upon the creation of indebtedness; (viii)
voting powers, if any, of the shares of each series; and (ix) such other rights,
preferences, and limitations as shall no be inconsistent with applicable laws.
Because the Board of Directors has the power to establish the preferences and
rights of each series of Undesignated Preferred Stock, it may afford the holders
of any series of Undesignated Preferred Stock preferences and rights, voting or
otherwise, senior to the rights of holders of Common Stock.
The issuance of Preferred Stock, for example, in connection with a
shareholder rights plan, could have the effect of making it more difficult for a
third party to acquire, or discouraging a third party from acquiring, a majority
of the outstanding existing stock of the Company. See "Risk Factors-Risk Factors
Relating to the Company-Control by Existing Shareholders," and "-Anti-Takeover
Considerations." The Board of Directors currently has no plans to issue any
shares of Undesignated Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
The Company's Articles provide that special meetings of shareholders
may be called only by: (i) the Board of Directors; (ii) the Chairman of the
Board of Directors (if one is appointed); (iii) the President; or (iv) by
holders of not less than 50% of all the votes entitled to be cast at the
meeting. Additionally, the Articles provide that any action required or
permitted to be taken at any annual or special meeting of the shareholders of
the Company may be taken only upon the vote of shareholders at a duly convened
meeting of shareholders in accordance with the Articles and the Bylaws and may
not be taken by written consent of the shareholders.
The Articles provide for a classified Board of Directors. The directors
are divided into three classes, as nearly equal in number as possible. The
directors are elected for three-year terms, which are staggered so that the
terms of one-third of the directors expire each year. The Articles permit
removal of directors, with or without cause, by the shareholders of the Company
at a meeting by the affirmative vote of at least two-thirds of the outstanding
shares of Common Stock.
The Articles establish an advance notice procedure for the nomination
of candidates for election as directors, as well as proposals to be considered
at annual shareholders' meetings. Nominations may be made at shareholders'
meetings by or at the direction of the Board of Directors, by any nominating
committee or person appointed by the Board or by any shareholder entitled to
vote for the election of directors. Notice of shareholder proposals to be acted
upon at annual meetings and nominations of directors by shareholders must be
given timely in writing to the Secretary of the Company. Such notice, to be
timely, must be received at the principal executive offices of the Company not
less than 60 days before the date of the meeting at which the director(s) are to
be elected or the date on which the annual meeting is scheduled, regardless of
any postponements, deferrals, or adjournments of that meeting to a later date;
however, if less than 70 days' notice or prior public disclosure of the date of
the scheduled meeting is given or made, notice by the shareholder, to be timely,
must be so delivered or received not later than the close of business on the
tenth day following the earlier of the day on which notice was given or such
public disclosure was made.
Notice to the Company from a shareholder who intends to present a
proposal at an annual meeting or to nominate a person for election as a director
at a meeting must contain certain information about the shareholder giving such
notice, and, in the case of director nominations, all information that would be
required to be included in a proxy statement soliciting proxies for the election
of the proposed nominee. Additionally, in the case of shareholder proposals, the
shareholder must provide, in the notice, a brief description of the proposal
desired to be brought before the annual meeting
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<PAGE> 79
and the reasons for conducting such business at the annual meeting. If the
presiding officer of the meeting determines that a shareholder's proposal or
nomination is not made in accordance with the procedures set forth in the
Articles, such proposal or nomination, at the direction of such presiding
officer, may be disregarded.
Under the Articles, a two-thirds vote of the shareholders is required
to approve any amendment to the Articles, a plan of merger (unless the Company
will be the surviving corporation and the shareholders of the Company would not
otherwise be entitled to vote on the merger under the Florida Business
Corporation Act (the "FBCA")) or share exchange, or sale of substantially all of
the assets of the Company; provided, however, that if a majority of the
"continuing directors" (as defined in the Articles) of the Company approves such
item, only a majority vote of shareholders is required.
In addition, the Articles provide that the number of directors of the
Company can be increased only by either (i) the affirmative vote of the holders
of at least two-thirds of the outstanding shares of capital stock of the Company
entitled to vote, or (ii) by the approval of a majority of the "continuing
directors." Finally, pursuant to the Bylaws, the chairperson of the
shareholders' meeting can adjourn any annual or special shareholders' meeting,
whether or not a quorum is present, and notice need not be given of any such
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Company may
transact any business which might have been transacted at the original meeting.
The provisions of the Articles summarized in the preceding six
paragraphs and the provisions of the FBCA described under "Certain Provisions of
Florida Law" may have certain anti-takeover effects. Such provisions,
individually or in combination and in addition to the possible issuance of
Undesignated Preferred Stock discussed above, may discourage, or make it more
difficult, without the approval of the Company's Board of Directors, for other
persons to make a tender offer or acquisitions of substantial amounts of the
Common Stock or from launching other takeover attempts that a shareholder might
consider to be in such shareholder's best interests, including attempts that
might result in the payment of a premium over the market price for the Common
Stock held by such shareholder. See "Risk Factors-Risk Factors Relating to the
Company-Anti-Takeover Considerations."
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under
florida law that apply to a public corporation organized under Florida law,
unless the corporation has elected to opt out of those provisions in its
articles of incorporation or Bylaws. The Company has not elected to opt out of
those provisions. The FBCA prohibits the voting of shares in a publicly-held
Florida corporation that are acquired in a "control share acquisition" unless
the holders of a majority of the corporation's voting shares (exclusive of
shares held by officers of the corporation, inside directors, or the acquiring
party) approve the granting of voting rights as to the share acquired in the
control share acquisition. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors within each of the following ranges of voting power:
(i) one-fifth or more but less than one-third of such voting power; (ii)
one-third or more but less than a majority of such voting power; and (iii) a
majority or more of such voting power.
The FBCA also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder;
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years; (iii) the corporation has not
had more than 300 shareholders of record at any time during the 3 years
preceding the announcement date; (iv) the interested shareholder is the
beneficial owner of at least 90 percent of the outstanding voting shares of the
corporation, exclusive of shares acquired directly from the corporation in a
transaction not approved by a majority of the disinterested directors; or (v)
the transaction is approved by the holders of two-thirds of the corporation's
voting shares other than those beneficially owned by the interested shareholder.
An interested shareholder is defined as a person who together with affiliates
and associates beneficially owns more than 10% of the corporation's outstanding
voting shares.
TRANSFER AGENT AND REGISTRAR
The Company has selected Reliance Trust Company, Atlanta, Georgia, as
the transfer agent and registrar for the Common Stock.
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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 March 31, 1999. 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."
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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
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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.
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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.
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
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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 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
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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 $5 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
(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
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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.
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
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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 SmallCap
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 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,
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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 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.
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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, 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.
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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.
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
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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 March 31, 1999, 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 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.
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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 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
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required to give notice of the record date, or the date such Distributions are
payable, to The Nasdaq SmallCap 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 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
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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 SmallCap Market or such stock exchanges, if any, on which the Preferred
Securities are then listed. There can be no assurance as to the market price of
any Junior Subordinated Debentures that may be distributed to the holders of
Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default,
(ii) the Company is in default with respect to its obligations under the
Guarantee, or (iii) the Company has given notice of its election of an Extended
Interest Payment Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and has not rescinded such notice, or such Extended
Interest Payment Period, or any extension thereof, is continuing, the Company
will not (1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's Common Stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's Common Stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(2) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Debt and Subordinated
Debt of the Company. Upon any payment or distribution of assets to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceedings of the Company, the holders of Senior Debt and
Subordinated Debt of the Company will first be entitled to receive payment in
full of principal of (and premium, if any) and interest, if any, on such Senior
Debt and Subordinated
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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 Senior Debt and Subordinated Debt. As of September 30, 1998, the
Company had aggregate Senior Debt and Subordinated Debt of $3.3 million. Because
the Company is a holding company, the Junior Subordinated Debentures
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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.
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
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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 Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Junior Subordinated Debentures.
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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.
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.
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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 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.
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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.
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.
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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.
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
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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.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Holland & Knight LLP ("Holland & Knight"), counsel to
the Company and UFH Capital, the following summary accurately describes the
material United States federal income tax considerations relevant to the
purchase, ownership and disposition of Preferred Securities by a person that
purchases Preferred Securities on their original issue at their original
offering price. 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
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<PAGE> 103
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.
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.
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<PAGE> 104
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.
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 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
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<PAGE> 105
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."
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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<PAGE> 106
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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<PAGE> 107
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 67,500
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
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<PAGE> 108
Capital Junior Subordinated Debentures in an aggregate principal amount equal to
the total aggregate Liquidation Amount of the additional Preferred Securities
being purchased pursuant to the option and the additional Common Securities.
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 SmallCap 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 September 30, 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 (4.3% after giving effect to the Common Stock
Offering).
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<PAGE> 109
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.
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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.
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<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 September 30, 1998 (unaudited),
December 31, 1997 and 1996 F-3
Consolidated Statements of Earnings for the nine months ended September 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 nine months ended
September 30, 1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995 F-6
Consolidated Statement of Stockholders' Equity for the nine months ended
September 30, 1998 (unaudited) and for the years ended December 31, 1997,
1996 and 1995 F-7
Consolidated Statements of Cash Flows for the nine months ended September 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>
September 30, December 31,
------------- --------------------------------
ASSETS 1998 1997 1996
------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 4,684,056 $ 7,336,809 $ 7,902,388
Federal funds sold 245,000 7,441,000 7,061,000
Trading securities 148,834
Securities held to maturity, market value of $13,104,635,
$10,212,426 and $9,007,905, respectively 12,795,890 10,097,258 9,195,963
Securities available for sale, at market 16,052,927 11,472,052 9,510,205
Loans, net 108,129,130 94,821,324 79,262,508
Premises and equipment, net 9,209,266 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 924,066 950,042 778,555
Intangible assets, less accumulated amortization of $1,668,459,
$1,570,288 and $1,506,977, respectively 1,377,559 1,336,494 1,440,141
Other assets 4,336,560 3,803,254 1,122,554
------------ ------------ ------------
Total assets $158,495,588 $147,318,684 $122,733,292
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 25,643,974 $ 28,384,616 $ 26,646,609
NOW and money market 49,946,392 36,031,184 27,571,149
Savings 4,417,211 5,245,222 4,688,430
Time, $100,000 and over 8,759,017 9,692,130 4,734,628
Other time 47,844,481 50,865,952 44,504,101
------------ ------------ ------------
Total deposits 136,611,075 130,219,104 108,144,917
Securities sold under agreements to repurchase 4,553,651 1,080,745 1,768,859
Accrued interest payable 380,149 396,184 336,785
Convertible subordinated debentures 630,000 630,000 630,000
Long-term debt 2,676,902 2,678,152 813,950
Other liabilities 1,632,075 1,823,337 1,547,126
------------ ------------ ------------
Total liabilities 146,483,852 136,827,522 113,241,637
COMMITMENTS AND CONTINGENCIES -- -- --
STOCKHOLDERS' EQUITY
7% convertible preferred stock, $10 par value; 150,000 shares
authorized; 20,850 shares issued and outstanding at
September 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 September 30, 1998;
3,444,318 and 3,431,004 shares issued and outstanding at
December 31, 1997 and 1996, respectively 35,139 34,443 34,308
Paid-in Capital 6,213,978 5,789,932 5,737,567
Accumulated other comprehensive income 192,685 57,499 45,872
Retained earnings 5,361,434 4,375,788 3,440,408
------------ ------------ ------------
Total stockholders' equity 12,011,736 10,491,162 9,491,655
------------ ------------ ------------
Total liabilities and stockholders' equity $158,495,588 $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>
Nine Months Ended
September 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 $ 7,552,770 $ 6,524,052 $ 8,960,703 $ 8,121,249 $ 7,590,367
Securities
U.S. Treasury 427,051 440,025 598,549 316,369 288,782
Obligations of other U.S. Government
agencies and corporations 669,900 569,536 746,786 702,235 662,531
Obligations of states and political
subdivisions 68,645 30,060 39,570 54,670 86,868
Other 136,241 114,051 151,612 180,517 219,489
Federal funds sold and securities
purchased under reverse repurchase
agreements 470,579 226,268 295,297 220,028 276,165
----------- ----------- ----------- ----------- -----------
Total interest income 9,325,186 7,903,992 10,792,517 9,595,068 9,124,202
Interest expense
NOW and money market 1,145,671 570,040 794,997 541,882 665,270
Savings 73,404 71,512 96,656 107,523 121,262
Time deposits, $100,000 and over 401,090 293,364 419,007 241,685 210,474
Other time 2,044,533 1,882,352 2,603,631 2,314,600 1,941,403
Long-term debt 193,521 85,448 130,547 124,544 86,331
Federal funds purchased and securities
sold under agreements to repurchase 75,852 68,071 56,248 89,338 187,509
----------- ----------- ----------- ----------- -----------
Total interest expense 3,934,071 2,970,787 4,101,086 3,419,572 3,212,249
----------- ----------- ----------- ----------- -----------
Net interest income 5,391,115 4,933,205 6,691,431 6,175,496 5,911,953
Provision for loan losses 340,000 90,000 90,000 150,000 180,000
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 5,051,115 4,843,205 6,601,431 6,025,496 5,731,953
Other income
Service charges on deposit accounts 528,808 489,877 674,637 555,747 576,656
Trust and investment management
income 1,754,975 1,323,007 1,886,534 1,229,136 57,869
Net trading account profit 78,834 -- -- -- --
Other service charges, fees and income 726,746 440,902 679,081 787,210 602,695
----------- ----------- ----------- ----------- -----------
Total other income 3,089,363 2,253,786 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>
Nine Months Ended
September 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 $ 3,430,414 $ 2,959,841 $ 4,047,859 $ 3,723,903 $ 2,593,728
Occupancy expense 418,522 371,661 514,374 387,256 280,286
Furniture and equipment expense 382,388 338,879 494,360 423,224 279,596
Data processing expense 331,281 313,062 417,522 375,339 315,553
Legal and professional fees 123,932 94,601 176,778 152,766 122,426
Amortization of intangible assets 52,275 47,866 66,802 111,208 121,048
Other operating expenses 1,240,114 1,531,223 1,854,300 1,052,426 908,754
----------- ----------- ----------- ----------- -----------
5,978,926 5,657,133 7,571,995 6,226,122 4,621,391
----------- ----------- ----------- ----------- -----------
Earnings before income taxes 2,161,552 1,439,858 2,269,688 2,371,467 2,347,782
Income tax expense (benefit)
Current 891,187 628,907 957,932 952,448 981,272
Deferred (104,559) (73,490) (97,986) (61,000) (110,000)
----------- ----------- ----------- ----------- -----------
786,628 555,417 859,946 891,448 871,272
----------- ----------- ----------- ----------- -----------
NET EARNINGS $ 1,374,924 $ 884,441 $ 1,409,742 $ 1,480,019 $ 1,476,510
=========== =========== =========== =========== ===========
Earnings Per Share:
Basic $ .39 $ .25 $ .41 $ .47 $ .64
Diluted $ .36 $ .24 $ .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>
Nine Months Ended
September 30, Year Ended December 31,
----------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net earnings $ 1,374,924 $ 884,441 $ 1,409,742 $ 1,480,019 $ 1,476,510
Other comprehensive
income
Unrealized holding gains
(losses) 204,827 21,618 18,642 (103,639) 277,398
Income tax (expense)
benefit related to items of
other comprehensive
income (69,641) (7,350) (7,015) 38,999 (104,385)
----------- ----------- ----------- ----------- -----------
Comprehensive
income $ 1,510,110 $ 898,709 $ 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) -- 24,770
------------ ------------ ------------ ------------
Balance at September 30, 1998 $ 35,138 $ 208,500 $ -- $ 6,213,978
============ ============ ============ ============
<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) -- 1,374,924 1,374,924
Dividends on Common Stock (unaudited) -- (373,808) (373,808)
Dividends on Preferred Stock (unaudited) -- (15,470) (15,470)
Accumulated other comprehensive income (unaudited) 135,186 -- 135,186
Issuance of Common Stock (unaudited) -- -- 399,761
Conversion of 7% Preferred to Common Stock (unaudited) -- -- (20)
------------ ------------ ------------
Balance at September 30, 1998 $ 192,685 $ 5,361,434 $ 12,011,735
============ ============ ============
</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>
Nine Months Ended
September 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 $ 1,374,924 $ 884,441 $ 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 340,000 90,000 90,000 150,000 180,000
Provision for depreciation and amortization 492,253 403,044 566,344 500,994 370,421
Gain on sale of equipment -- -- -- -- (2,703)
Unrealized gain on trading securities (78,498) --
Writedown of investment security -- 255,000 255,000 -- --
Write-off of leasehold improvements -- 130,065 130,065 -- --
Accretion of securities discount (50,671) (33,626) (44,317) (35,062) (46,438)
Accretion of unearned loan fees (45,661) (48,706) (64,941) (104,663) (193,969)
Amortization of securities premiums 18,912 30,012 38,874 58,804 57,168
Gain on sales of loans (290,689) (196,267) (289,720) (424,611) (339,153)
Decrease (increase) in interest receivable 25,976 (26,902) (171,487) (25,317) (35,428)
(Decrease) increase in interest payable (16,036) 16,822 59,399 37,793 66,784
Increase in other assets (628,149) (277,240) (2,641,922) (118,290) (445,845)
(Decrease) increase in other liabilities (191,261) (596,047) 276,211 211,633 98,494
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities 951,100 630,596 (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 7,196,000 (464,000) (380,000) (4,665,000) 10,234,000
Principal repayments of held to maturity
securities 256,912 395,157 388,715 678,419 1,395,107
Principal repayments of available for sale
securities 790,578 299,614 494,729 1,106,893 1,775,590
Proceeds from maturities of available for sale
sale securities 2,001,185 2,500,000 4,491,876 1,199,781 --
Proceeds from maturities of held to maturity
securities 3,026,223 2,988,594 4,987,969 2,840,219 975,000
Purchases of available for sale securities (6,103,888) (6,526,491) (6,937,869) (3,518,560) (1,902,396)
Purchases of held to maturity securities (7,153,908) (5,480,390) (6,526,492) (3,588,175) (1,369,698)
Proceeds from sales of loans 2,426,849 1,883,782 3,969,174 5,598,856 4,426,770
Net increase in loans (15,738,305) (10,056,573) (19,263,329) (10,384,509) (14,319,006)
Capital expenditures (105,940) (3,761,813) (4,185,913) (2,836,673) (2,168,104)
Proceeds from sales of fixed assets -- -- -- -- 5,406
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (13,477,944) (18,268,220) (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>
Nine Month Ended
September 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 share -
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 10,346,555 8,671,815 10,754,834 12,994,380 (13,631,078)
Net decrease (increase) in certificates
of deposit (3,954,583) 8,147,546 11,319,353 2,316,607 12,780,217
Net increase (decrease) in securities sold
under agreements to repurchase 3,472,906 (544,865) (688,114) (995,537) 1,178,218
Increase in borrowings -- -- 2,004,202 75,000 --
Repayment of long-term debt (1,250) (136,250) (140,000) (136,250) (52,000)
Issuance of common stock 399,742 14,585 52,500 16,962 382,500
Dividend paid on preferred stock (15,470) (16,345) (16,345) (43,435) (102,529)
Dividend paid on common stock (373,809) (343,180) (458,017) (383,018) (276,809)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities 9,874,091 15,793,306 22,828,413 13,781,279 239,391
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (2,652,753) (1,844,318) (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 $ 4,684,056 $ 6,058,070 $ 7,336,809 $ 7,902,388 $ 5,972,058
============ ============ ============ ============ ============
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash paid during the year for:
Interest $ 3,950,106 $ 2,953,965 $ 4,041,687 $ 3,381,780 $ 3,174,457
Income taxes $ 736,051 $ 629,400 $ 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>
Nine Month Ended
September 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 September 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 and corporate securities
held principally for resale in the near term are classified as trading
securities and recorded at their fair values. The Company had one trading
security for the nine months ended September 30, 1998 with an unrealized
gain of $78,834 and no trading securities for the nine months ended
September 30, 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 1998, 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 nine-months ended September 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 September 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
September 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>
December 31,
September 30, -----------------------------------------------------
1998 1997 1996 1995
----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Balance Sheets
Cash and cash equivalents $ 22,025 $ 203,278 $ 245,940 $ 356,494
Trading securities 148,834 - - -
Due from subsidiaries 86,349 197,014 144,886 151,409
Investment in Bank 11,887,506 10,428,370 9,881,984 8,911,085
Investment in EPW 173,221 102,723 70,360 -
Investment in United Trust 2,501,544 2,360,985 - -
Goodwill 537,794 561,063 631,886 -
Other assets 227,815 125,291 83,676 87,474
----------- ----------- ----------- ----------
$15,585,088 $13,978,724 $11,058,732 $9,506,462
=========== =========== =========== ==========
Note payable $ 2,639,402 $ 2,629,402 $ 750,200 $ 875,200
Convertible subordinated
debentures 630,000 630,000 630,000 -
Other liabilities 303,950 228,160 186,877 144,380
Stockholders' equity 12,011,736 10,491,162 9,491,655 8,486,882
----------- ----------- ----------- ----------
$15,585,088 $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>
Nine Months Ended
September 30, Year Ended December 31,
------------------------- -------------------------------------------
1998 1997 1997 1996 1995
----------- --------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Earnings
Equity in earnings of Bank $ 1,343,593 $ 923,133 $ 1,492,207 $ 1,535,539 $ 1,528,574
Equity in earnings of EPW 85,497 61,941 107,363 65,553 -
Equity in earnings of
United Trust 48,472 - - - -
Unrealized gain on trading 78,837 - - - -
Other income 73,687 17,634 26,611 1,470 4,837
Interest expense (190,689) (81,540) (125,699) (119,407) (86,331)
Other expense (130,056) (103,960) (156,235) (34,991) (1,613)
----------- --------- ----------- ----------- -----------
Earnings before income
taxes 1,309,341 817,208 1,344,247 1,448,164 1,445,467
Income tax benefit 65,583 67,233 65,495 31,855 31,043
----------- --------- ----------- ----------- -----------
Net earnings $ 1,374,924 $ 884,441 $ 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 September 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
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1998 (unaudited)
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 7,475,646 $ 272,950 $ (7,969) $ 7,740,627
Obligations of State and political
subdivisions 1,080,366 14,380 (10,823) 1,083,923
Mortgage-backed securities 2,637,714 34,667 (316) 2,672,065
Corporate obligations 1,502,164 5,856 - 1,508,020
Other 100,000 - - 100,000
----------- ---------- ---------- ------------
Total $12,795,890 $ 327,853 $ (19,108) $ 13,104,635
=========== ========== ========== ============
<CAPTION>
Historical Gross Gross Carrying
Amortized Unrealized Unrealized Value
Cost Gains Losses (Market Value)
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities available for sale: (unaudited)
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,941,996 $ 199,586 $ - $ 10,141,582
Obligations of State and political
subdivisions 1,444,839 71,736 - 1,516,575
Mortgage-backed securities 3,288,004 34,219 (1,093) 3,321,130
Equity securities 1,086,140 - (12,500) 1,073,640
----------- ---------- ---------- ------------
Total $15,760,979 $ 305,541 $ (13,593) $ 16,052,927
=========== ========== ========== ============
</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
=========== ========== ========== ============
<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
(Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market 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
=========== ========== ========== ============
<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 nine
months ended September 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 September
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 $ 829,558 $ 832,527 5.78% $ 2,490,693 $ 2,518,595 6.61%
Due after one
year through
five years 3,834,632 3,943,663 6.40% 5,454,437 5,594,550 6.74%
Due after five
years through
ten years 3,968,032 4,141,252 6.32% 3,441,704 3,545,012 6.45%
Due after ten
years 2,176,969 2,175,357 6.92% 2,022,607 2,043,912 6.55%
Mortgage-
backed
securities 1,986,699 2,011,836 6.82% 1,265,398 1,277,218 7.18%
Equity securities - - - 1,086,140 1,073,640 -
----------- ----------- ----------- -----------
Total $12,795,890 $13,104,635 $15,760,979 $16,052,927
=========== =========== =========== ===========
</TABLE>
Investment securities with a carrying value (which approximates market value) of
approximately $6,224,000, $2,809,000 and $4,226,000 at September 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>
September 30, December 31,
------------- -------------------------------------
1998 1997 1996
------------ ----------- -----------
(unaudited)
<S> <C> <C> <C>
Real estate mortgage $ 71,074,000 $60,583,746 $49,483,289
Commercial 33,544,990 30,536,261 25,239,534
Installment and other 5,954,986 5,869,534 6,490,909
------------ ----------- -----------
110,573,976 96,989,541 81,213,732
Less: Allowance for loan losses 1,826,342 1,647,355 1,609,785
Unearned fees 618,504 520,862 341,439
------------ ----------- -----------
Loans, net $108,129,130 $94,821,324 $79,262,508
============ =========== ===========
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 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 340,000 90,000 90,000 150,000 180,000
Recoveries on loans previously
charged off 8,456 21,598 38,510 1,600 13,001
Loans charged off (169,469) (88,639) (90,940) (68,510) (1,460)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 1,826,342 $ 1,632,744 $ 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 143,303 195,794 244,364 166,896 168,202
Points recognized in income (45,661) (119,608) (64,941) (104,663) (193,968)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 618,504 $ 417,625 $ 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>
September 30, December 31,
------------- -----------------------
1998 1997 1996
----------- -------- --------
(unaudited)
<S> <C> <C> <C>
Balance at end of period $2,998,605 $400,049 $372,352
Average balance during period 2,745,154 440,927 224,119
Total related allowance for losses 374,000 13,000 -
Interest income recognized on impaired loans 53,054 - -
</TABLE>
Loans converted to ORE through foreclosure proceedings totaled approximately
$283,000, $408,000 and $541,000 for the nine months ended September 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 nine months
ended September 30, 1998 and the years ended December 31, 1997 and 1996,
respectively.
The only loans sold by the Bank during 1996, 1997 and 1998 were SBA loans. In
accordance with SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, a servicing asset is
recorded when the Bank sells the SBA loans. The book value of such assets, which
the Bank believes approximates the fair value of such assets at September 30,
1998, December 31, 1997 and 1996 was $125,000, $78,000 and $83,000,
respectively. Amortization expense relating to such servicing assets of $9,000
and $2,000 was recorded for 1998 and 1997, respectively. The Company
periodically reviews these assets for impairment. No valuation for impairment of
these assets was deemed necessary for the periods presented.
F-24
<PAGE> 135
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - PREMISES AND EQUIPMENT
Major classifications of premises and equipment are as follows:
<TABLE>
<CAPTION>
September 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 113,998 113,998 359,839
Building and building improvements 7,404,878 7,392,139 1,573,206
Furniture, fixtures and equipment 2,470,605 2,460,523 1,942,550
Construction in progress - 1,294 2,351,755
----------- ----------- ----------
11,445,933 11,424,406 7,667,295
Less accumulated depreciation and amortization 2,236,667 1,882,605 1,679,867
----------- ----------- ----------
$ 9,209,266 $ 9,541,801 $5,987,428
=========== =========== ==========
</TABLE>
Depreciation of premises and equipment and amortization of leaseholds was
$438,476 and $355,250 for the nine-months ended September 30, 1998 and 1997, and
$501,475, $390,680 and $249,373 for the years ended December 31, 1997, 1996 and
1995, respectively.
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>
September 30, December 31,
------------ -------------------------------
1998 1997 1996
----------- ----------- ----------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets
Allowance for loan losses $ 620,000 $ 543,000 $ 527,000
Deferred loan fees 158,000 120,000 85,000
Deferred compensation 107,000 75,000 59,000
Net operating loss carryforward (1) 42,000 59,000 36,000
----------- ----------- ----------
927,000 797,000 707,000
Deferred tax liabilities
Fixed assets 155,000 36,000 79,000
Securities available for sale 98,000 30,000 24,000
----------- ----------- ----------
253,000 66,000 103,000
----------- ----------- ----------
Net deferred tax asset, included with other assets $ 674,000 $ 731,000 $ 604,000
=========== =========== ==========
</TABLE>
F-25
<PAGE> 136
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - INCOME TAXES - Continued
(1) Relates to 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. Such operating loss carryforwards at September
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 September 30, 1998, December 31, 1997 and
1996.
The Company's effective tax rate varies from the statutory rate of 34%. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, For the Years Ended December 31,
------------------------ ----------------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Computed "expected" tax
provision $734,900 $489,600 $771,700 $806,300 $798,200
Tax exempt interest income (9,900) (7,300) (7,500) (9,300) (9,100)
Goodwill amortization 17,600 16,300 22,100 23,100 6,900
State taxes net of federal
benefit 63,000 52,000 58,600 60,100 68,100
Other, net (18,972) 4,817 15,046 11,248 7,172
-------- -------- -------- -------- --------
Total $786,628 $555,417 $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>
F-26
<PAGE> 137
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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>
Nine Months Ended
September 30, Year Ended December 31,
-------------------------- -----------------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Average balance $3,429,539 $2,223,764 $2,029,453 $3,291,662 $6,451,536
Average interest rate 3.59% 2.47% 2.49% 2.62% 2.80%
Maximum month-end balance $6,629,464 $2,775,819 $2,860,141 $6,977,300 $6,977,300
</TABLE>
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 September 30, --------------------------
1998 1997 1996
---------------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Carrying value $4,579,000 $2,809,000 $4,226,000
Estimated fair value $4,579,000 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,
September 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. $ 37,500 $ 48,750 $ 63,750
</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>
September 30, December 31,
------------- ------------------------
1998 1997 1996
------------ ---------- ----------
(unaudited)
<S> <C> <C> <C>
Note payable to an unrelated bank providing for monthly interest
payments at prime (8.25% at September 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. 2,639,402 2,629,402 750,200
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>
2001 103%
2002 102%
2003 101%
2004 and thereafter 100% 630,000 630,000 630,000
---------- ---------- ----------
$3,306,902 $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>
F-28
<PAGE> 139
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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 September 30, 1998, the Bank's Tier One Leverage Ratio was 7.03%,
above the minimum agreed to by the Department.
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 September 30, 1998, that the
Bank meets all capital adequacy requirements to which it is subject.
As of September 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 September 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 $ 11,888 7.65%
Intangible assets (407)
---------
Tangible capital and ratio
to adjusted total assets $ 11,481 7.25% $ 2,375 1.5%
========= ========
Tier I (core) capital and
ratio to adjusted total
assets $ 11,296 7.14% $ 4,750 3.0% $ 7,915 5.0%
========= ======== ========
Tier I capital and ratio to
risk-weighted assets $ 11,296 9.00% $ 3,767 3.0% $ 7,533 6.0%
======= ========
Tier II capital - allowance
for loan and lease losses 1,573
---------
Total risk-based capital and
ratio to risk-weighted
assets $ 12,869 10.25% $10,045 8.0% $12,556 10.0%
========= ======= =======
Total assets $ 155,412
=========
Adjusted total assets $ 158,301
=========
Risk-weighted assets $ 125,564
=========
</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 September 30, 1998 and December 31, 1997, less than
3% of the Company's loans are unsecured.
At September 30, 1998, the Company held deposits for a customer equal to
approximately 13.4% 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,
September 30, ----------------------------
1998 1997 1996
------------ ----------- -----------
(unaudited)
<S> <C> <C> <C>
Commitments to extend credit $19,434,997 $16,644,892 $14,939,490
Standby letters of credit and financial guarantees
written $1,207,732 $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>
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 $119,396, $151,515, $189,096, $232,325 and
$143,891 for the nine months ended September 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 $20,600,000, $18,300,000, and $17,300,000 at September 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>
For the Years Ended
Nine Months Ended ---------------------------------------------------
Financial Instruments September 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 $ 4,684 $ 4,684 $7,337 $7,337 $7,902 $7,902
Federal funds sold 245 245 7,441 7,441 7,061 7,061
Trading securities 149 149 - - - -
Securities held to maturity 12,796 13,105 10,097 10,212 9,196 9,196
Securities available for sale 16,053 16,053 11,472 11,472 9,759 9,759
Loans 108,129 108,188 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 25,644 25,644 28,385 28,385 26,647 26,647
NOW and money market 49,946 49,946 36,031 36,031 27,990 27,990
Savings 4,417 4,417 5,245 5,245 4,688 4,688
Time, $100,000 and over 8,759 8,813 9,692 9,752 4,735 4,771
Other time 47,844 48,039 50,866 51,074 44,504 44,731
Securities sold under
agreements to repurchase 4,554 4,554 1,081 1,081 1,769 1,769
Long-term debt 3,307 3,307 3,308 3,308 1,444 1,444
Off balance sheet items - 206 - 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 $5,253,000 at September 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 September 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 $82,500 and $75,000 during the nine months
ended September 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 $139,045 and $131,295 for the
nine months ended September 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 $73,616 and $69,249 for
the nine months ended September 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 September 30, 1998 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 Nine Months Ended September 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 $1,359,454 3,492,702 $.39 $868,096 3,430,942 $.25
Effective of dilutive securities
Incremental shares from
assumed exercise or
conversion of:
Convertible debt 23,576 152,789 23,576 152,789
Preferred Stock 15,470 188,759 16,345 196,947
Stock options -- 11,694 -- 15,183
---------- --------- -------- ---------
Diluted EPS
Net earnings available to
common stockholders and
assumed conversions $1,398,500 3,845,944 $.39 $908,017 3,795,861 $.24
========== ========= ==== ======== ========= ====
</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 nine
months ended September 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>
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 September 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 September 30, 1998, December 31, 1997, 1996 and 1995 was 168 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 September 30, 1998 and 1997, and December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Nine Months Ended
September 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 $1,308,210 $884,441 $1,402,329 $1,480,019 $1,476,510
========== ======== ========== ========== ==========
Pro forma basic earnings per
share $ .37 $ .25 $ .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, 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............................. 20
Accounting Treatment.................. 20
Capitalization........................ 21
Dilution.............................. 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 43
Management............................ 59
Certain Relationships and Related
Transactions........................ 70
Principal Stockholders................ 71
Description of Capital Stock.......... 72
Description of the Preferred
Securities.......................... 75
Description of the Junior Subordinated
Debentures.......................... 86
Description of the Guarantee.......... 94
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 96
Material Federal Income Tax
Considerations...................... 97
ERISA Considerations.................. 101
Underwriting.......................... 102
Legal Matters......................... 104
Experts............................... 104
Available Information................. 105
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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(UNITED FINANCIAL LOGO)
---------------------
450,000 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. LOGO)
, 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........................................................................... 2,030.00
NASDAQ Small-Cap Market Listing Fee....................................................... 10,000.00
Legal Fees and Expenses................................................................... 200,000.00
Trustee Fees and Expenses................................................................. 17,500.00
Accounting Fees and Expenses.............................................................. 100,000.00
Printing and Mailing Expenses............................................................. 40,000.00
Blue Sky Fees and Expenses................................................................ 20,000.00
Miscellaneous Expenses.................................................................... 5,708.00
------------------------
Total Fees and Expenses................................................................ $ 400,000.00
========================
</TABLE>
The Company is paying all of the foregoing expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The securities issued or sold by the Company from September 1995 through
September 1998, which were not registered under the Securities Act, are listed
below:
(i) The issuance of 150,000 shares to the shareholders of FSC, which
include Mr. Curtis, Mr. Lowe, and Susan S. Mittermayr, pursuant to the
acquisition of FSC on September 30, 1995;
(ii) The distribution of 51,483 shares of Common Stock representing a
2% stock dividend to shareholders on December 31, 1995;
(iii) The conversion of previously issued 6% Preferred Stock for
99,588 shares of Common Stock on March 31, 1996;
II-1
<PAGE> 154
(iv) The conversion of previously issued 7% Preferred Stock for
598,662 shares of Common Stock on July 31, 1996;
(v) The conversion of previously issued 7% Preferred Stock for 20,670
shares of Common Stock on October 31, 1996;
(vi) The distribution of 67,086 shares of Common Stock representing a
2% stock dividend to shareholders on December 31, 1996;
(vii) The issuance of 9,000 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $16,961.80 on
December 31, 1996;
(viii) The issuance of 3,750 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $14,583.75 on
July 3, 1997;
(ix) The issuance of 6,000 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $23,333.33 on
December 29, 1997;
(x) The issuance of 3,750 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $14,583.75 on
December 29, 1997;
(xi) The issuance of 34,443 shares of Common Stock to the ESOP trust
for total cash consideration of $264,154.75 on January 31, 1998;
(xii) The issuance of 5,013 shares of Common Stock to participants
under the Trust Plan and the EPW Plan on January 31, 1998;
(xiii) The issuance of 9,000 shares of Common Stock to participants
under the Trust Plan and the EPW Plan on April 30, 1998; and
(xiv) The conversion of previously issued 7% Preferred Stock for
21,084 shares of Common Stock on June 17, 1998.
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 (included in Exhibit 4.1)*
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*
4.9 Specimen of Common Stock to be registered hereunder
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
10.1 UFH Stock Option and Incentive Compensation Plan*
10.2 Trust Department Stock Option Plan*
10.3 Eickhoff, Pieper & Willoughby Stock Option Plan*
10.4 Modification Agreement*
10.5 Property Management Agreement between Imaginative Investments, Inc. and the Southeast
Companies of Tampa Bay, Inc.*
10.6 Employment Agreement of Charles O. Lowe*
10.7 Employment Agreement of Ward J. Curtis, Jr.*
10.8 Employment Agreement of Harold J. Winner*
10.9 Employment Agreement of Cynthia A. Stokes*
10.10 Employment Agreement of Neil W. Savage*
10.11 Employment Agreement of William A. Eickhoff*
10.12 Salary Continuation Agreement of Harold J. Winner*
10.13 Salary Continuation Agreement of Neil W. Savage*
10.14 Salary Continuation Agreement of Cynthia A. Stokes*
10.15 Pinellas Bancshares Corporation 8% Convertible Debentures held by Eickhoff & Pieper, a
Florida General Partnership*
10.16 Loan Agreement between AmSouth f/k/a AmSouth Bank of Florida and UFH f/k/a Pinellas
Bancshares Corporation*
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*
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
_____% Junior Subordinated Debentures of the Company
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
____% Cumulative Trust Preferred Securities of UFH Capital Trust I
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
Company's Guarantee with respect to the ____% Cumulative Trust Preferred Securities
27.1 Financial Data Schedule (FDS use only)*
27.2 Financial Data Schedule (FDS use only)
</TABLE>
- -----------------------
* Previously filed.
II-3
<PAGE> 156
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 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.
II-4
<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. 3
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of St. Petersburg, State of Florida on November 17, 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.
3 to the Registration Statement to be signed on its behalf by the undersigned,
in the City of St. Petersburg, State of Florida on November 17, 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. 3 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 November 17, 1998 Chief Executive Officer, President and
- -------------------------------------------- Director (principal executive officer)
Neil W. Savage
/s/ C. Peter Bardin November 17, 1998 Chief Financial Officer (principal financial
- -------------------------------------------- and accounting officer)
C. Peter Bardin
* November 17, 1998 Director
- --------------------------------------------
Ronald E. Clampitt
* November 17, 1998 Director
- --------------------------------------------
David K. Davis, M.D.
* November 17, 1998 Director
- --------------------------------------------
Edward D. Foreman
Director
- --------------------------------------------
Charles O. Lowe
* November 17, 1998 Director
- --------------------------------------------
John B. Norrie
</TABLE>
<PAGE> 158
<TABLE>
<S> <C> <C>
Director
- --------------------------------------------
Harold J. Winner
* November 17, 1998 Director
- --------------------------------------------
Ward J. Curtis, Jr.
Director
- --------------------------------------------
Jack A. MaCris, M.D.
* November 17, 1998 Director
- --------------------------------------------
Ronald R. Petrini
* November 17, 1998 Director
- --------------------------------------------
John B. Wier, Jr.
Director
- --------------------------------------------
Henry Esteva
* November 17, 1998 Director
- --------------------------------------------
Ian F. Irwin
Director
- --------------------------------------------
William A. Eickhoff
*By: /s/ Neil W. Savage
--------------------------------------
Neil W. Savage
Attorney-in-Fact
</TABLE>
<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 (included in Exhibit 4.1)*
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*
4.9 Specimen of Common Stock to be registered hereunder
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
10.1 UFH Stock Option and Incentive Compensation Plan*
10.2 Trust Department Stock Option Plan*
10.3 Eickhoff, Pieper & Willoughby Stock Option Plan*
10.4 Modification Agreement*
10.5 Property Management Agreement between Imaginative Investments, Inc. and the Southeast
Companies of Tampa Bay, Inc.*
10.6 Employment Agreement of Charles O. Lowe*
10.7 Employment Agreement of Ward J. Curtis, Jr.*
10.8 Employment Agreement of Harold J. Winner*
10.9 Employment Agreement of Cynthia A. Stokes*
10.10 Employment Agreement of Neil W. Savage*
10.11 Employment Agreement of William A. Eickhoff*
10.12 Salary Continuation Agreement of Harold J. Winner*
10.13 Salary Continuation Agreement of Neil W. Savage*
10.14 Salary Continuation Agreement of Cynthia A. Stokes*
10.15 Pinellas Bancshares Corporation 8% Convertible Debentures held by Eickhoff & Pieper, a
Florida General Partnership*
10.16 Loan Agreement between AmSouth f/k/a AmSouth Bank of Florida and UFH f/k/a Pinellas
Bancshares Corporation*
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*
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
_____% Junior Subordinated Debentures of the Company
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
____% Cumulative Trust Preferred Securities of UFH Capital Trust I
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee for the
Company's Guarantee with respect to the
____% Cumulative Trust Preferred Securities
27.1 Financial Data Schedule (FDS use only)*
27.2 Financial Data Schedule (FDS use only)
</TABLE>
- -----------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1
DRAFT OF OCTOBER 7, 1998
UFH CAPITAL TRUST I
(A DELAWARE BUSINESS TRUST)
___________ PREFERRED SECURITIES
_____% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $____ PER PREFERRED SECURITY)
AND
UNITED FINANCIAL HOLDINGS, INC.
___________ SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1998
William R. Hough & Co.
100 Second Avenue South
Suite 800
St. Petersburg, Florida 33701
Ladies and Gentlemen:
UFH Capital Trust I (the "Trust"), a statutory business organized
under the Business Trust Act (the "Delaware Act") of the State of Delaware
(Chapter 38, Title 12, of the Delaware Business Code, 12 Del. C. Section 3801
et seq.), and United Financial Holdings, Inc., a Florida corporation (the
"Company") as depositor of the Trust and as guarantor (hereafter the Trust and
the Company are referred to collectively as the "Offerors"), hereby confirm
their agreement (the "Agreement") with William R. Hough & Co. (the
"Underwriter"), with respect to the issue and sale by the Trust and the
purchase by the Underwriter of:
(a) ___________ (the "Initial Trust Securities") of the Trust's _____%
Cumulative Trust Preferred Securities (the "Preferred Securities"); and
(b) __________ shares (the "Initial Company Shares") of the Common
Stock, par value $.01 per share, of the Company ("Common Stock") issued by the
Company.
<PAGE> 2
The Initial Trust Preferred Securities and the Initial Company Shares
are collectively referred to as the "Initial Securities." The Trust and the
Company also propose to issue and sell to the Underwriter, at the Underwriter's
option, up to an additional _________ Preferred Securities (the "Trust Option
Securities") and up to an additional ________ shares of Common Stock (the
"Company Option Securities" and collectively with the Trust Option Securities,
the "Option Securities") as set forth herein. The term "Preferred Securities"
as used herein, unless indicated otherwise, shall mean the Initial Trust
Preferred Securities and the Trust Option Securities. The term "Company Shares"
as used herein, unless indicated otherwise, shall mean the Initial Company
Shares and the Company Option Securities.
The Preferred Securities and the Trust Common Securities (as defined
herein) are to be issued pursuant to the terms of an Amended and Restated Trust
Agreement dated as of _________, 1998 (the "Trust Agreement"), among the
Company, as depositor, and Wilmington Trust Company ("Trust Company"), a
Delaware banking corporation, as property trustee ("Property Trustee") and as
Delaware trustee ("Delaware Trustee") and _________________, _________________
and _________________ (the "Administrative Trustees" and together with the
Property Trustee and the Delaware Trustee, the "Trustees") and the holders from
time to time of undivided interests in the assets of the Trust. The Preferred
Securities will be guaranteed by the Company, on a subordinated basis and
subject to certain limitations, with respect to distributions and payments upon
liquidation, redemption or otherwise (the "Guarantee") pursuant to the
Preferred Securities Guarantee Agreement dated as of _________, 1998 (the
"Guarantee Agreement") between the Company and the Trust Company, as guarantee
trustee (the "Guarantee Trustee"). The assets of the Trust will consist of
_____% junior subordinated debentures due ________, 2027 (the "Junior
Subordinated Debentures") of the Company which will be issued under the
Indenture dated as of _________, 1998 (the "Indenture"), between the Company
and the Trust Company, as trustee (the "Indenture Trustee"). The Company has
agreed to pay all costs, expenses and liabilities of the Trust payable to third
parties, with certain exceptions, pursuant to the Agreement as to Expenses and
Liabilities, dated as of _________, 1998 between the Company and the Trust (the
"Expense Agreement"). Under certain circumstances, the Junior Subordinated
Debentures will be distributable to the holders of undivided beneficial
interests in the assets of the Trust. The entire proceeds from the sale of the
Preferred Securities will be combined with the entire proceeds from the sale by
the Trust to the Company of the Trust Common Securities (the "Trust Common
Securities"), and will be used by the Trust to purchase an equivalent amount of
the Junior Subordinated Debentures.
The initial public offering price for the Company Shares and the
Preferred Securities, the purchase price to be paid by the Underwriter for the
Company Shares and the Preferred Securities, the commission per Company Share
and Preferred Security, to be paid by the Company to the Underwriter and the
rate of interest to be paid on the Preferred Securities shall be agreed upon by
the Company and the Underwriter, and such agreement shall be set forth in a
separate written instrument substantially in the form of Exhibit A hereto (the
"Price Determination Agreement"). The Price Determination Agreement may take
the form of an exchange of any standard form of written telecommunication
between the Company and the Underwriter and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Company
Shares and
2
<PAGE> 3
the Preferred Securities will be governed by this Agreement as supplemented by
the Price Determination Agreement. From and after the date of the execution and
delivery of the Price Determination Agreement this Agreement shall be deemed to
incorporate, and all references herein to "this Agreement" shall be deemed to
include, the Price Determination Agreement.
The Offerors have prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2 (File Nos.
_________ and ___________) covering the registration of the Company Shares, the
Preferred Securities, the Guarantee and the Junior Subordinated Debentures
under the Securities Act of 1933, as amended (the "1933 Act"), including the
related preliminary prospectus or prospectuses, and, if such registration
statement has not become effective, the Company will prepare and file, prior to
the effective date of such registration statement, an amendment to such
registration statement, including a final prospectus. Each prospectus used
before the time such registration statement becomes effective is herein called
a "preliminary prospectus." Such registration statement, including the exhibits
thereto and the documents incorporated by reference therein at the time it
becomes effective, is herein called the "Registration Statement," and the
prospectus, including the documents incorporated by reference therein pursuant
to Form SB-2 under the 1933 Act, included in the Registration Statement at the
time it becomes effective is herein called the "Prospectus," except that if any
revised prospectus provided to the Underwriter by the Company for use in
connection with the offering of the Company Shares and the Preferred Securities
differs from the prospectus included in the Registration Statement at the time
it becomes effective (whether or not such prospectus is required to be filed
pursuant to Rule 424(b)), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first furnished to the Underwriter for
such use.
The Company understands that the Underwriter propose to make a public
offering of the Company Stock and the Preferred Securities (the "Offering") as
soon as possible after the Registration Statement becomes effective. The
Underwriter may assemble and manage a selling group of broker-dealers that are
members of the National Association of Securities Dealers, Inc. ("NASD") to
participate in the solicitation of purchase orders for the Company Stock and
the Preferred Securities under a selected dealer agreement, the form of which
is set forth as Exhibit B to this Agreement.
Section 1. Representations and Warranties.
(a) The Offerors jointly and severally represent and warrant to and
agree with the Underwriter that:
(i) The Company meets the requirements for use of Form SB-2
under the 1933 Act and when the Registration Statement on such form
shall become effective and at all times subsequent thereto up to the
Closing Time referred to below and with respect to Option Securities,
up to the Date of Delivery referred to below, (A) the Registration
Statement and any amendments and supplements thereto will comply in
all material respects with the requirements of the 1933 Act and the
rules and regulations of the Commission under
3
<PAGE> 4
the 1933 Act (the "1933 Act Regulations"); (B) neither the
Registration Statement nor any amendment or supplement thereto will
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and (C) neither the Prospectus nor any
amendment or supplement thereto will include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that this representation
and warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Offerors by the Underwriter expressly for use in the
Registration Statement or the Prospectus, or any information
contained in any Form T-1, which is an exhibit to the Registration
Statement. The statements contained under the caption "Underwriting"
in the Prospectus constitute the only information furnished to the
Offerors in writing by the Underwriter expressly for use in the
Registration Statement or the Prospectus. The Commission has not
issued any order preventing or suspending the use of any preliminary
prospectus or Prospectus.
(ii) The Prospectus complies in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules and regulations of the Commission
thereunder (the "1934 Act Regulations") and, at the time the
Registration Statement becomes effective and at all times subsequent
thereto up to the Closing Time, will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, in each case after excluding any statement that does
not constitute a part of the Registration Statement or the Prospectus
pursuant to Rule 412 of the 1933 Act Regulations.
(iii) Grant Thornton LLP, who are reporting upon the audited
financial statements included or incorporated by reference in the
Registration Statement, are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) This Agreement has been duly authorized, executed and
delivered by the Offerors and, when duly executed by the Underwriter,
will constitute the valid and binding agreement of the Offerors
enforceable against the Offerors in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, or
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles. The Guarantee Agreement, the Junior Subordinated
Debentures, the Trust Agreement, the Expense Agreement and the
Indenture have each been duly authorized and when validly executed and
delivered by the Company and, in the case of the Guarantee, by the
Guarantee Trustee, in the case of the Trust Agreement, by the
Trustees, and in the case of the Indenture, by the Indenture Trustee,
will constitute valid and legally binding obligations of the Company
enforceable in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, or
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights
4
<PAGE> 5
generally or general equitable principles; the Junior Subordinated
Debentures are entitled to the benefits of the Indenture; and the
Guarantee Agreement, the Junior Subordinated Debentures, the Trust
Agreement, the Expense Agreement and the Indenture conform in all
material respects to the descriptions thereof in the Prospectus. The
Trust Agreement, the Guarantee Agreement and the Indenture have been
duly qualified under the Trust Indenture Act.
(v) The consolidated financial statements, audited and
unaudited (including the notes thereto), included or incorporated by
reference in the Registration Statement present fairly the
consolidated financial position of the Company and its subsidiaries as
of the dates indicated and the consolidated results of operations and
cash flows of the Company and its subsidiaries for the periods
specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as otherwise stated
therein. The financial statement schedules, if any, included in the
Registration Statement present fairly the information required to be
stated therein. The selected financial, pro forma and statistical data
included in the Prospectus are accurate in all material respects and
present fairly the information shown therein and have been compiled on
a basis consistent with that of the audited and unaudited consolidated
financial statements included or incorporated by reference in the
Registration Statement.
(vi) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectus. Each subsidiary of the Company is an entity duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization with corporate power and
authority under such laws to own, lease and operate its properties and
conduct its business. The Company and each of its subsidiaries is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(vii) The Company is duly registered under the Bank Holding
Company Act of 1956, as amended; each subsidiary of the Company that
conducts business as a bank is duly authorized to conduct such
business in each jurisdiction in which such business is currently
conducted; and the deposit accounts of United Bank and Trust Company
(the "Bank") are insured by either the Savings Association Insurance
Fund or the Bank Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC"), up to the maximum allowable limits thereof. The
Offerors have all such power, authority, authorization, approvals and
orders as
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<PAGE> 6
may be required to enter into this Agreement, to carry out the
provisions and conditions hereof and to issue and sell the Preferred
Securities.
(viii) The Bank is a Florida commercial bank duly organized,
validly existing and in good standing under the laws of the State of
Florida with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business; the Bank is
duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type that would make
such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise. All of the outstanding
shares of capital stock of the Bank have been duly authorized and
validly issued and are fully paid and non-assessable and are owned by
the Company directly, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind. All of the
outstanding shares of capital stock of the Company's subsidiaries have
been duly authorized and validly issued and are fully paid and
non-assessable and are owned by either the Company or the Bank
directly, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind.
(ix) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the date stated therein; all outstanding shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in
violation of any preemptive right or other rights to purchase such
shares, and the capital stock of the Company conforms in all material
respects to the statements in relation thereto contained in the
Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); and the
Company Shares have been duly authorized for issuance and sale to the
Underwriter pursuant to this Agreement and, when issued and delivered
by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
nonassessable and no person has any preemptive or other rights to
purchase any of the shares of Common Stock. No further approval or
authorization of any shareholder, the Board of Directors or others is
required for the issuance and sale of the Company Shares to the
several Underwriter, except as may be required under the 1933 Act or
under state or other securities or Blue Sky laws.
(x) The Preferred Securities have been duly and validly
authorized by the Trust for issuance and sale to the Underwriter
pursuant to this Agreement and, when executed and authenticated in
accordance with the Terms of the Trust Agreement and delivered by the
Trust to the Underwriter pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued and fully
paid and non-assessable and will constitute valid and legally binding
obligations of the Trust enforceable in accordance with their terms
and entitled to the benefits provided by the Trust Agreement. The
Trust Agreement has been
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<PAGE> 7
duly authorized and, when executed by the Property Trustee, the
Delaware Trustee and the Administrative Trustees of the Trust and
delivered by the Trust, will have been duly executed and delivered by
the Trust and will constitute the valid and legally binding
instrument of the Trust, enforceable in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws relating to or affecting enforcement of
creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at law). The Preferred Securities conform, in all material
respects, to the statements relating thereto contained in the
Prospectus and such description conforms, in all material respects,
to the rights set forth in the instruments defining the same; the
holders of the Preferred Securities (the "Securityholders") will 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; and the issuance of
the Preferred Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(xi) The Trust Common Securities have been duly and validly
authorized by the Trust and upon delivery by the Trust to the Company
against payment therefor as described in the Prospectus, will be duly
and validly issued and fully paid undivided beneficial interests in
the assets of the Trust and will conform, in all material respects, to
the description thereof contained in the Prospectus; the issuance of
the Trust Common Securities is not subject to preemptive or other
similar rights; and at the Closing Time, all of the issued and
outstanding Trust Common Securities of the Trust will be directly
owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
(xii) The Trust has been duly created and is validly existing
as a statutory business trust in good standing under the Delaware Act
with the power and authority to own, lease and operate its properties
and conduct its business as described in the Prospectus, and the Trust
has conducted no business to date, and it will conduct no business in
the future that would be inconsistent with the description of the
Trust set forth in the Prospectus; the Trust is not a party to or
bound by any agreement or instrument other than this Agreement, the
Trust Agreement and the agreements and instruments contemplated by the
Trust Agreement or described in the Prospectus; the Trust has no
liabilities or obligations other than those arising out of the
transactions contemplated by this Agreement and the Trust Agreement
and described in the Prospectus; and the Trust is not a party to or
subject to any action, suit or proceeding of any nature.
(xiii) The issuance and sale of the Preferred Securities and
the Trust Common Securities by the Trust, the compliance by the Trust
with all of the provisions of this Agreement, the purchase of the
Junior Subordinated Debentures by the Trust, and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, loan agreement, mortgage, deed of trust
or other agreement or instrument to which the Trust is a party or by
which the Trust is bound or to which any of the property or assets of
the Trust is
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<PAGE> 8
subject, nor will such action result in any violation of the
provisions of the Trust Agreement or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Trust or any of its properties, except in any
case for such conflicts, breaches, defaults or violations that would
not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs, assets or business prospects
of the Company and its subsidiaries, considered as one enterprise;
and no consent, approval, authorization, order, license, certificate,
permit, registration or qualification of or with any such court or
other governmental agency or body is required to be obtained by the
Trust for the issue and sale of the Preferred Securities and the
Trust Common Securities by the Trust, the purchase of the Junior
Subordinated Debentures by the Trust or the consummation by the Trust
of the transactions contemplated by this Agreement and the Trust
Agreement, except for such consents, approvals, authorizations,
licenses, certificates, permits, registrations or qualifications as
have already been obtained, or as may be required under the 1933 Act
or the 1933 Act Regulations, 1934 Act or 1934 Act Regulations, state
securities laws or under the Trust Indenture Act of 1939, as amended
("TIA").
The issuance by the Company of the Company Shares, the
Guarantee and the Junior Subordinated Debentures, the compliance by
the Company with all of the provisions of this Agreement, the
execution, delivery and performance by the Company of the Trust
Agreement, the Junior Subordinated Debentures, the Guarantee
Agreement, the Expense Agreement and the Indenture, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
loan agreement, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Articles of Incorporation or by-laws of the
Company or any of its subsidiaries or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company, any of its subsidiaries or any of their
respective properties; and no consent, approval, authorization, order,
license, certificate, permit, registration or qualification of or with
any such court or other governmental agency or body is required for
the issue of the Company Shares, the Guarantee and the Junior
Subordinated Debentures or the consummation by the Company of the
other transactions contemplated by this Agreement, except for such
consents, approvals, authorizations, licenses, certificates, permits,
registrations or qualifications as have already been obtained, or as
may be required under the 1933 Act or the 1933 Act Regulations, 1934
Act or 1934 Act Regulations, state securities laws or under the TIA.
(xiv) The Trust is not, and after giving effect to the
offering and sale of the Preferred Securities will not be, an
"investment company," or an entity "controlled" by an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
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<PAGE> 9
(xv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not been (A) any material adverse
change in the business, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries taken as a whole, (B) any transaction that is material to
the Company and its subsidiaries taken as a whole except transactions
in the ordinary course of business, (C) any obligation that is
material to the Company and its subsidiaries taken as a whole, direct
or contingent, incurred by the Company or its subsidiaries, except
obligations incurred in the ordinary course of business, (D) any
change that is material to the Company and its subsidiaries taken as a
whole in the capital stock or outstanding indebtedness of the Company,
or (E) any dividend or distribution of any kind declared, paid, or
made on the capital stock of the Company.
(xvi) Neither the Company, the Bank nor any other subsidiary
is in violation of any provision of its articles of incorporation,
charter or by-laws or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it may be
bound or to which any of its properties may be subject, except for
such defaults that would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise.
(xvii) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against the Company, the Bank or
any other subsidiary that is required to be disclosed in the
Prospectus or that could reasonably be expected to result in any
material adverse change in the condition (financial or otherwise),
earnings, business affairs, assets or business prospects of the
Company and its subsidiaries, considered as one enterprise, or that
could reasonably be expected to materially and adversely affect the
properties or assets of the Company and its subsidiaries, considered
as one enterprise, or that could reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated
in this Agreement; all pending legal or governmental proceedings to
which the Company, the Bank or any other subsidiary is a party that
are not described in the Prospectus, including ordinary routine
litigation incidental to its business, if decided in a manner adverse
to the Company, would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise.
(xviii) There are no material contracts or documents of a
character required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration
Statement that are not described and filed as required.
(xix) The Company and its subsidiaries, including the Bank,
each has good and marketable title to all properties and assets
described in the Prospectus as owned by it, free
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<PAGE> 10
and clear of all liens, charges, encumbrances or restrictions, except
such as (A) are described in the Prospectus or (B) are neither
material in amount nor materially significant in relation to the
business of the Company and its subsidiaries, considered as one
enterprise; all of the leases and subleases material to the business
of the Company and its subsidiaries, considered as one enterprise,
and under which the Company, the Bank or any other subsidiary holds
properties described in the Prospectus, are in full force and effect,
and neither the Company, the Bank nor any other subsidiary has any
notice of any material claim that has been asserted by anyone adverse
to the rights of the Company, the Bank or any other subsidiary under
any of the leases or subleases mentioned above, or affecting or
questioning the rights of such corporation to the continued
possession of the leased or subleased premises under any such lease
or sublease; the respective agreements to which the Company and its
subsidiaries is a party described in the Prospectus are valid and
enforceable in accordance with their terms by the Company and such
subsidiaries, except as enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors'
rights and rules of law governing specific performance, injunctive
relief and other equitable remedies and, to the Company's knowledge,
the other contracting party or parties thereto are not in breach or
default under any of such agreements, except for breaches or defaults
which would not, singly or in the aggregate, have a material adverse
effect on the business, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and
its subsidiaries taken as a whole.
(xx) Each of the Company and its subsidiaries, including the
Bank, owns, possesses or has obtained all governmental licenses,
permits, certificates, consents, orders, approvals and other
authorizations necessary to own or lease, as the case may be, and to
operate its properties and to carry on its business as presently
conducted, and as described in the Prospectus and neither the Company,
the Bank nor any other subsidiary has received any notice of any
restriction upon, or any notice of proceedings relating to revocation
or modification of, any such licenses, permits, certificates,
consents, orders, approvals or authorizations, and all such licenses,
permits, certificates, consents, orders, approvals and authorizations
are valid and in full force and effect. Each of the Company and its
subsidiaries is conducting its business in compliance with all the
laws, rules and regulations of each jurisdiction in which it conducts
its business.
(xxi) The Company has filed all necessary federal and state
income and franchise tax returns and has paid all taxes as due, and
there is no tax deficiency that has been or might be asserted against
the Company that would materially and adversely affect its business,
properties, assets, rights, operations, condition (financial or
otherwise) or prospects; all tax liabilities are adequately provided
for on the books of the Company.
(xxii) The Company maintains insurance of the types and in
the amounts required by law and reasonably necessary to operate its
business including, but not limited to, insurance covering real and
personal property owned or leased by the Company against theft,
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<PAGE> 11
damage, destruction, acts of vandalism, liability and malpractice and
all other risks customarily insured against, all of which insurance is
in full force and effect.
(xxiii) United Trust Company is a Florida trust company duly
organized, validly existing and in good standing under the laws of the
State of Florida with corporate power and authority under such laws to
own, lease and operate its properties and conduct its business; and
Eickhoff, Pieper, and Willoughby _____, is an investment advisor duly
registered under applicable federal and state law, organized, validly
existing and in good standing under the laws of the State of Florida
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business.
(xxiv) No labor problem exists with the employees of the
Company or with employees of the Bank or any other subsidiary or to
the best knowledge of the Company, is imminent that could materially
adversely affect the Company and its subsidiaries, considered as one
enterprise, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its, the Bank's or any
other subsidiary's principal suppliers, contractors or customers that
could reasonably be expected to materially adversely affect the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise.
(xxv) Except as disclosed in the Prospectus, there are no
persons with registration or other similar rights to have any
securities of the Company registered pursuant to the Registration
Statement.
(xxvi) Except as disclosed in the Prospectus, the Company and
its subsidiaries, including the Bank, own or possess all patents,
patent rights, licenses, inventions. copyrights, know-how (including
trade secrets or other unpatented and/or unpatentable proprietary or
confidential information systems or procedures), trademarks,
servicemarks and tradenames (collectively "patent and proprietary
right") currently employed by them in connection with the business now
operated by them except where the failure to so own, possess or
acquire such patent and proprietary rights would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries considered as one enterprise, and neither the Company,
the Bank nor any other subsidiary has received any notice nor is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any patent or proprietary rights, and
which infringement or conflict (if the subject of any unfavorable
decision, rule and refinement, singly or in the aggregate) could
reasonably be expected to result in any material adverse change in the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise.
(xxvii) The Company and each subsidiary of the Company have
filed all Federal, state and local income, franchise or other tax
returns required to be filed and have made
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<PAGE> 12
timely payments of all taxes due and payable in respect of such
returns and no material deficiency has been asserted with respect
thereto by any taxing authority.
(xxviii) The Company has filed with the NASD all documents
and notices required by the NASD of companies that have issued
securities that are traded in the over-the-counter market and
quotations for which are reported by the National Market of The Nasdaq
Stock Market, Inc. (the "Nasdaq Stock Market").
(xxix) Neither the Trust, the Company nor any subsidiary has
taken or will take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation, under
the Exchange Act or otherwise, of the price of the Preferred
Securities.
(xxx) Neither the Company, the Bank nor any other subsidiary
is or has been (by virtue of any action, omission to act, contract to
which it is a party or by which it is bound, or any occurrence or
state of facts whatsoever) in violation of any applicable Federal,
state, municipal, or local statutes, laws, ordinances, rules,
regulations and/or orders issued pursuant to foreign, federal, state,
municipal, or local statutes, laws, ordinances, rules, or regulations
(including those relating to any aspect of banking, bank holding
companies, environmental protection, occupational safety and health,
and equal employment practices) heretofore or currently in effect,
except such violation that has been fully cured or satisfied without
recourse or that is not reasonably likely to have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries considered as one enterprise.
(xxxi) Neither the Company, the Bank nor any other subsidiary
has any agreement or understanding with any entity concerning the
future acquisition by the Company or the Bank of a controlling
interest in any entity that is required by the 1933 Act or the 1933
Act Regulations to be disclosed by the Company that is not disclosed
in the Prospectus; neither the Company, the Bank nor any other
subsidiary has any agreement or understanding with any entity
concerning the future acquisition of a controlling interest in the
Company, the Bank or any other subsidiary by any entity that is
required by the 1933 Act or the 1933 Act Regulations to be disclosed
by the Company that is not disclosed in the Prospectus.
(xxxii) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and with the
regulations of the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, the Florida Department of
Banking and Finance, and the Securities and Exchange Commission, and
applicable state securities commissions, and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific
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<PAGE> 13
authorizations; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxxiii) The Company has prepared and filed with the
Commission a registration statement for the Common Stock pursuant to
Section 12(g) of the 1934 Act. Such registration statement either has
been declared effective by the Commission under the 1934 Act or will
be declared effective by the Commission prior to or concurrently with
the commencement of the public offering of the Common Stock and the
Preferred Securities.
(xxxiv) Neither the Company nor any affiliate of the Company
does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075 of the
Florida Statutes, and the Company agrees to comply with such section
if, prior to the completion of the distribution of the Common Stock
and the Preferred Securities, the Company, or any affiliate of the
Company, commences doing such business.
(xxxv) All offers and sales of the securities of the Company
prior to the date hereof were made in compliance with the 1933 Act and
all other applicable state and federal laws or regulations. Except
pursuant to this Agreement, the Company knows of no outstanding claims
for finder's, origination, or underwriting fees with respect to prior
offers and sales of the securities of the Company.
(xxxvi) The Company has obtained for the benefit of the
Underwriter the agreement, enforceable by the Underwriter, of each of
the officers and directors of the Company and each holder of 5% of
shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock, that for a
period of 180 days after the date of the Prospectus, such persons will
not, without the prior written consent of the Underwriter, directly or
indirectly, offer, sell, transfer, or pledge, contract to sell,
transfer or pledge, or cause or in any way permit to be sold,
transferred, pledged, or otherwise disposed of, any: (A) shares of
Common Stock; (B) rights to purchase shares of Common Stock (including
without limitation, shares of Common Stock that may be deemed to be
beneficially owned by any such shareholder in accordance with the
applicable regulations of the Commission and shares of Common Stock
that may be issued upon the exercise of a stock option, warrant or
other convertible security); or (C) securities that are convertible or
exchangeable into shares of Common Stock.
(xxxvii) Neither the Company nor any of its subsidiaries nor,
to the best of the Company's knowledge, any of its employees or agents
has at any time during the last five years (A) made any unlawful
contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (B) made any
payment to any foreign, federal or state governmental officer or
official or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the
United States or any jurisdiction thereof.
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(b) Any certificate signed by any authorized officer of the
Company or the Bank and delivered to the Underwriter or to counsel for the
Underwriter pursuant to this Agreement shall be deemed a representation and
warranty by the Company to the Underwriter as to the matters covered thereby.
Section 2. Sale and Delivery to the Underwriter, Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Trust
agrees to sell to the Underwriter, the Initial Trust Securities and the Company
agrees to sell to the Underwriter the Initial Company Shares, the foregoing
Initial Securities shall be purchased by the Underwriter at the purchase price
and terms set forth herein and in the Price Determination Agreement.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Trust
hereby grants an option to the Underwriter to purchase up to an additional
_________ Preferred Securities and the Company hereby grants an option to the
Underwriter to purchase up to an additional ___________ Company Shares, such
purchase by the Underwriter from the Trust and the Company to be in accordance
with the terms set forth herein and in the Price Determination Agreement. The
option hereby granted will expire at 5:00 p.m. on the 30th day after the date
the Registration Statement is declared effective by the Commission (or at 5:00
p.m. on the next business day if such 30th day is not a business day) and may be
exercised, on one occasion only, solely for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Underwriter to the
Company setting forth the number of Option Securities as to which the
Underwriter is exercising the option and the time, date and place of payment and
delivery for the Option Securities. The time and date of delivery of the Option
Securities (the "Option Closing Date") shall be determined by the Underwriter
but shall not be later than five full business days after the exercise of said
option, nor in any event prior to Closing Time, as hereinafter defined, nor
earlier than the second business day after the date on which the notice of the
exercise of the option shall have been given.
(b) Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the offices of Holland & Knight
LLP, 200 Central Avenue, Suite 1600, St. Petersburg, Florida or at such other
place as shall be agreed upon by the Company and the Underwriter, at 9:30 a.m.
on the third full business day after the effective date of the Registration
Statement, or at such other time not earlier than three nor more than ten full
business days thereafter as the Underwriter and the Company shall determine
(such date and time of payment and delivery being herein called the "Closing
Time"). In addition, in the event that any or all of the Option Securities are
purchased by the Underwriter, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the
above-mentioned office of Holland & Knight LLP, or at such other place as shall
be agreed upon by the Company and the Underwriter, on the Option Closing Date
as specified in the notice from the Underwriter to the Company. Payment for the
Initial Securities and the Option Securities, if any, shall be made to the
Company by wire
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<PAGE> 15
transfer of immediately available funds, against delivery to the Underwriter
for the account of the Underwriter of Preferred Securities and Company Shares
to be purchased by each.
(c) The Initial Securities shall be issued in the form of one or more
fully registered global securities (the "Global Securities") in book-entry form
in such denominations and registered in the name of the nominee of The
Depository Trust Company (the "DTC") or in such names as the Underwriter may
request in writing at least one business day before the Closing Date or the
Option Closing Date, as the case may be. The Global Securities representing the
Initial Securities or the Option Securities to be purchased will be made
available for examination by the Underwriter and counsel to the Underwriter not
later than 10:00 A.M. on the business day prior to the Closing Time or the
Option Closing Date, as the case may be.
Section 3. Certain Covenants of the Offerors. Each of the Offerors
covenants jointly and severally with the Underwriter as follows:
(a) The Offerors will use their best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing, (i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, shall have become
effective, or any supplement to the Prospectus or any amended Prospectus shall
have been filed, (ii) of the receipt of any comments from the Commission, (iii)
of any request of the Commission to amend the Registration Statement or amend
or supplement the Prospectus or for additional information and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of the
Preferred Securities or capital stock, for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for any
of such purposes. The Offerors will use every reasonable effort to prevent the
issuance of any such stop order or of any order preventing or suspending such
use and, if any such order is issued, to obtain the lifting thereof at the
earliest possible moment.
(b) The Offerors will not at any time file or make any amendment to
the Registration Statement, or any amendment or supplement if the Offerors have
elected to rely upon Rule 430A, to the Prospectus (including documents
incorporated by reference into such prospectus or to the Prospectus) of which
the Underwriter shall not have previously been advised and have previously been
furnished a copy, or to which the Underwriter or counsel for the Underwriter
shall reasonably object.
(c) The Offerors have furnished or will furnish to the Underwriter as
many signed and conformed copies of the Registration Statement as originally
filed and of each amendment thereto, whether filed before or after the
Registration Statement becomes effective, copies of all exhibits and documents
filed therewith (including documents incorporated by reference into the
Prospectus pursuant to Item 12 of Form S-2 under the 1933 Act) and signed
copies of all consents and certificates of experts as the Underwriter may
reasonably request.
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(d) The Offerors will deliver or cause to be delivered to the
Underwriter, without charge, from time to time until the effective date of the
Registration Statement, as many copies of each preliminary prospectus as the
Underwriter may reasonably request, and the Offerors hereby consent to the use
of such copies for purposes permitted by the 1933 Act. The Offerors will
deliver or cause to be delivered to the Underwriter, without charge, as soon as
the Registration Statement shall have become effective (or, if the Offerors
have elected to rely upon Rule 430A, as soon as practicable after the Price
Determination Agreement has been executed and delivered) and thereafter from
time to time as requested during the period when the Prospectus is required to
be delivered under the 1933 Act, such number of copies of the Prospectus (as
supplemented or amended) as the Underwriter may reasonably request.
(e) The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations, and the 1934 Act and the 1934 Act
Regulations, so as to permit the completion of the distribution of the
Preferred Securities as contemplated in this Agreement and in the Prospectus.
If, at any time when a prospectus is required by the 1933 Act to be delivered
in connection with sales of the Preferred Securities, any event shall occur or
condition exist as a result of which it is necessary, in the reasonable opinion
of counsel for the Underwriter or counsel for the Offerors, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the reasonable
opinion of either such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement or the Prospectus comply with
such requirements.
(f) The Offerors will use their best efforts, in cooperation with the
Underwriter, to qualify the Company Shares, Preferred Securities and the Junior
Subordinated Debentures, for offering and sale under the applicable securities
laws of such states and other jurisdictions as the Underwriter may designate
and to maintain such qualifications in effect for a period of not less than one
year from the effective date of the Registration Statement; provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. The Company will file such statements and reports as may
be required by the laws of each jurisdiction in which the Company Shares and
Preferred Securities have been qualified as above provided.
(g) The Company will make generally available (within the meaning of
Rule 158) to its securityholders, the Underwriter and the Securityholders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement of the Company and its subsidiaries (in
form complying with the provisions of Rule 158 of the 1933 Act Regulations)
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<PAGE> 17
covering a period of at least 12 months beginning after the effective date of
the Registration Statement but not later than the first day of the Company's
fiscal quarter next following such effective date.
(h) The Trust shall apply the proceeds from its sale of the Preferred
Securities, combined with the entire proceeds from the issuance by the Trust to
the Company of the Trust's Trust Common Securities, to purchase an equivalent
amount of Junior Subordinated Debentures. The Company and the Bank will use the
net proceeds received by them from the sale of the Junior Subordinated
Debentures in the mariner specified in the Prospectus under the caption "Use of
Proceeds."
(i) The Offerors, during the period when the Prospectus is required to
be delivered under the 1933 Act, will file promptly all documents required to
be filed with the Commission pursuant to Section 13 or 14 of the 1934 Act
subsequent to the time the Registration Statement becomes effective.
(j) For a period of five years after the Closing Time, the Company
will furnish to the Underwriter copies of all annual reports, quarterly reports
and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the Commission, such other
documents, reports, Proxy Statements and information as shall be furnished by
the Company to its stockholders generally, every material press release in
respect to the Company or its affairs which was released or prepared by the
Company, and any additional information of a public nature concerning the
Company or its business that the Underwriter may reasonably request.
(k) The Offerors will file with The Nasdaq Stock Market all documents
and notices required by The Nasdaq Stock Market of companies that have issued
securities that are traded in the over-the-counter market and quotations for
which are reported by The Nasdaq Stock Market.
(l) The Company shall pay the legal fees and related filing fees of
counsel to the Company to prepare one or more "blue sky" surveys (each, a "Blue
Sky Survey") for use in connection with the offering of the Company Shares and
the Preferred Securities as contemplated by the Prospectus and a copy of such
Blue Sky Survey or surveys shall be delivered to each of the Company and the
Underwriter.
(m) If, at the time the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A of the
1933 Act Regulations, then the Offerors will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A and Rule 424(b),
copies of an amended Prospectus, or, if required by such Rule 430A, a
post-effective amendment to the Registration Statement (including an amended
Prospectus), containing all information so omitted.
(n) The Company will, at its expense, subsequent to the issuance of
the Company Shares and the Preferred Securities, prepare and distribute to the
Underwriter and counsel to the Underwriter, copies of the documents used in
connection with the issuance of such Securities.
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<PAGE> 18
(o) The Offerors will not, prior to the Option Closing Date or thirty
(30) days after the date of this Agreement, whichever occurs first, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, except as
contemplated by the Prospectus.
(p) During a period of 180 days from the date of the Prospectus,
neither the Trust nor the Company will, without the prior written consent of
the Underwriter, directly or indirectly, offer, sell, offer to sell, or
otherwise dispose of any Common Stock or Preferred Securities, any other
beneficial interests in the assets of the Trust or any preferred securities or
other securities of the Trust or the Company that are substantially similar to
the Preferred Securities or the Common Stock, including any guarantee of such
securities, or sell or grant options, rights, or warrants with respect to any
shares of Common Stock (other than the grant of options pursuant to option
plans or agreements existing on the date hereof). The foregoing sentence shall
not apply to any of the Company Shares or Preferred Securities to be sold
hereunder.
(q) The Company will maintain a transfer agent and, if required by law
or the rules of The Nasdaq Stock Market or any national securities exchange on
which the Common Stock and the Preferred Securities are listed, a registrar
(which, if permitted by applicable laws and rules, may be the same entity as
the transfer agent) for its Common Stock and Preferred Securities,
(r) The Company shall deliver the requisite notice of issuance to the
NASD and shall take all necessary and appropriate action within its power to
cause or permit trading and listing of the Common Stock and the Preferred
Securities on the OTC Bulletin Board for a period of at least 36 months after
the date of this Agreement, except during such period(s) in which the Company's
Common Stock and/or Preferred Securities shall be listed for trading on any of
the: (A) Nasdaq Small Market; (B) The Nasdaq National Market System; (C) the
American Stock Exchange; or (D) the New York Stock Exchange; or with the prior
written consent of the Underwriter.
(s) The Company shall promptly prepare and file with the Commission,
from time to time, such reports as may be required to be filed by the Company
under the 1933 Act, the 1934 Act, the 1933 Act Regulations, and the 1934 Act
Regulations.
(t) The Company will apply the net proceeds from the sale of the
Common Stock and the Junior Subordinated Debentures to be sold by it for the
purposes set forth in the Prospectus.
Section 4. Payment of Expenses and Independent Underwriter Fee.
The Company covenants and agrees with the Underwriter that the Company
will pay or cause to be paid (directly or by reimbursement) all of the
obligations of the Company and the Trust under this Agreement, including (a)
the preparation, printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
preliminary prospectuses and the Prospectus and any amendments or supplements
thereto, and the cost of furnishing copies thereof to the Underwriter, (b) the
preparation, printing and distribution of this
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<PAGE> 19
Agreement, the Company Shares and the Preferred Securities and the Blue Sky
Survey, (c) the issuance and delivery of the Company Shares and the Preferred
Securities to the Underwriter, including any transfer taxes payable upon the
sale of such securities to the Underwriter, (d) the fees and disbursements of
the Company's counsel and accountants, (e) NASD filing fees, (f) fees and
disbursements of counsel to the Underwriter in connection with the Blue Sky
Survey (such counsel's fees shall not exceed $______ exclusive of out-of-pocket
expenses of counsel), (g) the qualification of the Company Shares and the
Preferred Securities under the applicable securities laws in accordance with
Section 3(f) and any filing fee for review of the offering with the NASD, (h)
the legal fees and expenses of the Underwriter's counsel (such counsel's fees
shall not exceed $60,000 exclusive of out-of-pocket expenses of counsel) and
general out-of-pocket expenses of the Underwriter, (i) the fees and expenses of
the Indenture Trustee, including the fees and disbursements of counsel for the
Indenture Trustee, in connection with the Indenture and the Junior Subordinated
Debentures, (j) the fees and expenses of the Property Trustee and Delaware
Trustee, including the fees and disbursements of counsel for the Property
Trustee and the Delaware Trustee, in connection with the Trust Agreement and
the Certificate of Trust, and (k) all other costs incident to the performance
of the Offerors' obligations hereunder.
If (i) the Closing Time does not occur on or before _____________,
1998, (ii) the Company abandons or terminates the Offering, or (iii) this
Agreement is terminated by the Underwriter in accordance with the provisions of
Section 5 or 11(a), the Company shall reimburse the Underwriter for all its
reasonable out-of-pocket expenses, as set forth in this Section 4, including
the reasonable fees and disbursements of counsel for the Underwriter.
Section 5. Conditions of Underwriter's Obligations. The obligations of
the Underwriter to purchase and pay for the Company Shares and the Preferred
Securities that it has agreed to purchase pursuant to this Agreement are
subject to the accuracy of the representations and warranties of the Offerors
contained herein or in certificates of the officers or trustees of the Offerors
or any subsidiary delivered pursuant to the provisions hereof, to the
performance by the Offerors of their obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date of this Agreement or, with the Underwriter's
consent, at a later time and date not later, however, than 5:30 P.M. on the
first business day following the date hereof, or at such later time or on such
later date as the Underwriter may agree to in writing; at the Closing Time, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued under the 1933 Act and no proceedings for that purpose shall
have been instituted or shall be pending or, to the Underwriter's knowledge or
the knowledge of the Offerors, shall be contemplated by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the satisfaction of counsel for the Underwriter. If the
Offerors have elected to rely upon Rule 430A, a prospectus containing the Rule
430A Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements of
Rule 430A).
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(b) At the Closing Time, the Underwriter shall have received:
(i) The favorable opinion, dated as of Closing Time, of
Holland & Knight LLP, special counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriter,
substantially in the form set forth in Exhibit C.
(ii) The favorable opinion, dated as of Closing Time, of
__________________, special Delaware counsel for the Offerors, in form
and substance satisfactory to counsel for the Underwriter,
substantially in the form set forth in Exhibit D.
(iii) The favorable opinion, dated as of Closing Time, of
_________________, counsel for the Indenture Trustee and the Delaware
Trustee, in form and substance satisfactory to counsel for the
Underwriter, substantially in the form set forth in Exhibit E.
(iv) The favorable opinion, dated as of Closing Time, of
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., counsel for the
Underwriter, in form and substance satisfactory to the Underwriter.
In giving such opinions, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the federal law of the United
States, upon opinions of other counsel, who shall be counsel satisfactory to
counsel for the Underwriter (the Underwriter agrees and acknowledges that
Holland & Knight LLP and Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.,
will rely on the opinion of _________________ with respect to matters of
Delaware law), in which case the opinion shall state that counsel believes that
the Underwriter and Underwriter's counsel are entitled to so rely. Such counsel
may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company, the Bank and the Trust and certificates of public officials.
(c) At the Closing Time and again at the Option Closing Date, (i) the
Registration Statement and the Prospectus, as they may then be amended or
supplemented, shall contain all statements that are required to be stated
therein under the 1933 Act and the 1933 Act Regulations and in all material
respects shall conform to the requirements of the 1933 Act and the 1933 Act
Regulations, the Offerors shall have complied in all material respects with Rule
430A (if they shall have elected to rely thereon) and neither the Registration
Statement nor the Prospectus, as they may then be amended or supplemented, shall
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement, any material adverse
change in the condition (financial or otherwise), earnings, business affairs,
assets or business prospects of the Company and its subsidiaries, considered as
one enterprise, whether or not arising in the ordinary course of business, (iii)
no action, suit or proceeding at law or in equity shall be pending or, to the
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<PAGE> 21
knowledge of the Offerors, threatened against the Company or any subsidiary, or
the Trust that would be required to be set forth in the Prospectus other than
as set forth therein and no proceedings shall be pending or, to the knowledge
of the Offerors, threatened against the Offerors or any subsidiary before or by
any federal, state or other commission, board or administrative agency wherein
an unfavorable decision, ruling or finding could reasonably be expected to
materially adversely affect the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise, other than as set forth in the
Prospectus, (iv) each of the Offerors shall have complied, in all material
respects, with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Time or Option Closing Date,
as applicable, (v) the other representations and warranties of the Offerors set
forth in Section l(a) shall be accurate in all material respects as though
expressly made at and as of the Closing Time or Option Closing Date, as
applicable, and (vi) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose been initiated or, to the knowledge of the Offerors, threatened by the
Commission. At the Closing Time, the Underwriter shall have received a
certificate of the Chairman and of the Chief Financial Officer or Controller of
the Company, dated as of the Closing Time, to such effect.
(d) At the time that this Agreement is executed by the Company, the
Underwriter shall have received from Grant Thornton LLP a letter or letters,
dated such date, in form and substance satisfactory to the Underwriter,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the 1933 Act and the published 1933 Act
Regulations, and stating in effect that:
With respect to the Company:
(i) in their opinion, the consolidated financial statements
as of _____________, 1997 and 1996, and for each of the years in the
three year period ended _____________, 1997 and the related financial
statement schedules, if any, included or incorporated by reference in
the Registration Statement and the Prospectus and covered by their
opinions included therein comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
published 1933 Act Regulations;
(ii) on the basis of procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, interim financial
information for the unaudited interim consolidated financial
statements of the Company for the ___ month period ended ____________,
1997 and 1998, including a reading of the latest available unaudited
interim consolidated financial statements for the Company, a reading
of the minutes of all meetings of the Board of Directors of the
Company and the Bank and of the Audit and Executive Committees of the
Board of Directors since January 1, 1998, inquiries of certain
officials of the Company and its subsidiaries responsible for
financial and accounting matters, and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited interim consolidated financial information
do not comply as to form in all material respects with
applicable accounting requirements of the 1933
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<PAGE> 22
Act, or are not presented in conformity with generally
accepted accounting principles applied on a basis
consistent with that of the audited financial statements
included in the Prospectus;
(B) at a specified date not more than three days prior to
the date of this Agreement, there was any increase in the
capital stock, long-term debt, net current assets or real
estate owned, or any increase in total assets, deposits, loan
loss allowance or stockholders' equity of the Company and its
consolidated subsidiaries, in each case as compared with
amounts shown in the financial statements at ___________,
1998 included in the Registration Statement, except in all
cases for increases or decreases that the Registration
Statement discloses have occurred or may occur; or
(C) for the period from ____________, 1998 to a specified
date not more than three days prior to the date of this
Agreement, there was any decrease in net interest income,
non-interest income or net income or net income per common
and common equivalent share, or any increase the provision
for loan losses or non-interest expense in each case as
compared with a period of comparable length in the preceding
year, except in all cases for increases or decreases that the
Registration Statement discloses have occurred or may occur;
and
(iii) in addition to the procedures referred to in clause
(ii) above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Registration
Statement (including the Selected Consolidated Financial Data) (having
compared such items with, and have found such items to be in agreement
with, the financial statements of the Company or general accounting
records of the Company, as applicable, which are subject to the
Company's internal accounting controls or other data and schedules
prepared by the Company from such records); and
(iv) on the basis of a review of schedules provided to them
by the Company, nothing came to their attention that caused them to
believe that the pro forma information, set forth in the Prospectus
under the headings "Capitalization" and "_____________" had not been
correctly calculated on the basis described therein.
(e) At the Closing Time, the Underwriter shall have received from
Grant Thornton LLP a letter, in form and substance satisfactory to the
Underwriter and dated as of the Closing Time, to the effect that it reaffirms
the statements made in the letter furnished pursuant to Section 5(d), except
that he inquiries specified in Section 5(d) shall be made based upon the latest
available unaudited interim consolidated financial statements and the specified
date referred to shall be a date not more than three days prior to the Closing
Time.
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(f) At the Closing Time, counsel for the Underwriter shall have been
furnished with all such documents, certificates and opinions as they may
request for the purpose of enabling them to pass upon the issuance and sale of
the Company Shares and Preferred Securities as contemplated in this Agreement
and the matters referred to in Section 5(c) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Offerors, the performance of any of the covenants of the
Offerors, or the fulfillment of any of the conditions herein contained; all
proceedings taken by the Company at or prior to the Closing Time in connection
with the authorization, issuance and sale of the Company Shares, Preferred
Securities and the Junior Subordinated Debentures as contemplated in this
Agreement shall be satisfactory in form and substance to the Underwriter and to
counsel for the Underwriter.
(g) Between the date of this Agreement and the Closing Time, (i) no
downgrading shall have occurred in the rating accorded any securities of the
Company or any deposit instruments of the Bank by any "nationally recognized
statistical rating organizations" as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act and (ii) no such organization
shall have given any notice of any intended or potential downgrading or of any
surveillance or review, with possible negative implications, of its rating of
any of the Company's securities or any deposit instruments of the Bank.
(h) The Company shall have paid, or made arrangements satisfactory to
the Underwriter for the payment of, all such expenses as may be required by
Section 4 hereof.
(i) In the event the Underwriter exercise its option provided in
Section 2 hereof to purchase all or any portion of the Option Securities, the
obligations of the Underwriter to purchase the Option Securities that it has
agreed to purchase shall be subject to the accuracy of the representations and
warranties of the Offerors contained herein and of the statements in any
certificates furnished by the Offerors hereunder as of such Option Closing Date
(as if made on such date), to the performance by the Offerors of their
obligations hereunder and to the receipt by the Underwriter on the Option
Closing Date of:
(1) A certificate, dated the Option Closing Date, of
the Chairman and of the Chief Financial Officer or Controller
of the Company confirming that the certificate delivered on
the Closing Time pursuant to Section 5(c) hereof remains true
as of the Option Closing Date;
(2) The favorable opinion of Holland & Knight LLP,
counsel for the Company, addressed to the Underwriter and
dated the Option Closing Date, in form satisfactory to Smith,
Mackinnon, Greeley, Bowdoin & Edwards, P.A., counsel to the
Underwriter, relating to the Option Securities and otherwise
to the same effect as the opinion required by Section 5(b)
hereof;
(3) The favorable opinion of ________________,
special Delaware counsel for the Offerors, addressed to the
Underwriter and dated the Option Closing
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<PAGE> 24
Date, in form satisfactory to Smith, Mackinnon, Greeley,
Bowdoin & Edwards, P.A., counsel to the Underwriter,
relating to the Option Securities and otherwise to the same
effect as the opinion required by Section 5(b) hereof;
(4) The favorable opinion of ____________________,
counsel for the Indenture Trustee and the Delaware Trustee,
addressed to the Underwriter and dated the Option Closing
Date, in form satisfactory to Smith, Mackinnon, Greeley,
Bowdoin & Edwards, P.A., counsel to the Underwriter, relating
to the Option Securities and otherwise to the same effect as
the opinion required by Section 5(b) hereof;
(5) The favorable opinion of Smith, Mackinnon,
Greeley, Bowdoin & Edwards, P.A., dated the Option Closing
Date, relating to the Option Shares and otherwise to the same
effect as the opinion required by Section 5(b) hereof; and
(6) A letter from Grant Thornton LLP addressed to
the Underwriter and dated the Option Closing Date, in form
and substance satisfactory to the Underwriter and
substantially the same in form and substance as the letter
furnished to the Underwriter pursuant to Section 5(d) hereof.
(j) The Company Shares, Preferred Securities, the Guarantee and the
Junior Subordinated Debentures shall have been qualified or registered for
sale, or subject to an available exemption from such qualification or
registration, under the Blue Sky or securities laws of such jurisdictions as
shall have been reasonably specified by the Underwriter and the offering
contemplated by this Agreement shall have been cleared by the NASD.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by the Underwriter on notice to the Offerors at any
time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other Party, except as provided in Section 4.
Notwithstanding any such termination, the provisions of Sections 6, 7, 10 and
12 shall remain in effect.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Underwriter
and its officers, directors, employees, agents and counsel of the Underwriter
and each person, if any, who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against any loss,
liability, claim, damage, and expense whatsoever (which shall include, but not
be limited to, amounts incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim or investigation
whatsoever and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon or in connection
with (i) any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact required to be stated
therein or necessary to
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<PAGE> 25
make the statements therein not misleading, contained in (A) any Preliminary
Prospectus, the Registration Statement, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto or in any
document incorporated by reference therein or required to be delivered with any
Preliminary Prospectus or the Prospectus or (B) in any application or other
document or communication (collectively called an "application") executed by or
on behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the Company
Shares and Preferred Securities under the "blue sky" or securities laws thereof
or filed with the Commission or any securities exchange; unless such statement
or omission or alleged statement or omission was made in reliance upon and in
conformity with written information concerning the Underwriter, the
Underwriting Agreement or the compensation of the Underwriter furnished to the
Company by the Underwriter expressly for inclusion in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (ii) any
breach of any representation, warranty, covenant or agreement of the Company
contained in the Underwriting Agreement. For purposes of this section, the term
"expense" shall include, but not be limited to, counsel fees and costs, court
costs, out-of-pocket costs and compensation for the time spent by such
Underwriter's directors, officers, employees and counsel according to his or
her normal hourly billing rates. The indemnification provisions shall also
extend to all affiliates of the Underwriter, their respective directors,
officers, employees, legal counsel, agents and controlling persons within the
meaning of the federal securities laws. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have to the
Underwriter or the persons entitled to the benefit of these indemnification
provisions.
(b) The Underwriter agrees to indemnify and hold harmless the
Offerors, their directors, officers who signed the Registration Statement and
each person, if any, who controls the Offerors within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act, and each Selling Shareholder
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) above, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) or any application in reliance upon and in conformity with written
information about the Underwriter, the Underwriting Agreement or the
compensation of the Underwriter, furnished to either of the Offerors by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or such Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto) or in any application. The Company and each Selling
Shareholder acknowledge that the statements set forth in paragraphs _____ under
the caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Registration Statement or any Preliminary Prospectus or the Prospectus.
(c) An indemnified party shall give prompt notice to the indemnifying
party if any action, suit, proceeding or investigation is commenced in respect
of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve the indemnifying party from its
obligations to indemnify hereunder, except to the extent that the indemnifying
party has
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<PAGE> 26
been prejudiced in any material respect by such failure. If it so elects within
a reasonable time after receipt of such notice, an indemnifying party may
assume the defense of such action, including the employment of counsel
satisfactory to the indemnified parties and payment of all expenses of the
indemnified party in connection with such action. Such indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the indemnifying party in connection with the
defense of such action or the indemnifying party shall not have promptly
employed counsel reasonably satisfactory to such indemnified party or parties
or such indemnified party or parties shall have reasonably concluded that there
may be one or more legal defenses available to it or them or to other
indemnified parties that are different from or additional to those available to
one or more of the indemnifying parties, in any of which events such fees and
expenses shall be borne by the indemnifying party and the indemnifying party
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. The Company shall be liable for any settlement of
any claim against the Underwriter (or its directors, officers, employees,
affiliates or controlling persons), made with the Company's written consent,
which consent shall not be unreasonably withheld. The Company shall not,
without the written consent of the Underwriter, settle or compromise any claim
against it based upon circumstances giving rise to an indemnification claim
against the Company hereunder unless such settlement or compromise provides
that the Underwriter and the other indemnified parties shall be unconditionally
and irrevocably released from all liability in respect to such claim.
(d) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to these indemnification provisions is made
but it is found in a final judgment by a court that such indemnification may
not be enforced in such case, even though the express provisions hereof provide
for indemnification in such case, then the Company, on the one hand, and the
Underwriter, on the other hand, shall contribute to the amount paid or payable
by such indemnified persons as a result of such loss, liability, claim, damage
and expense in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the underwriting, and also the relative fault of the Company,
on the one hand, and the Underwriter, on the other hand, in connection with the
statements, acts or omissions which resulted in such loss, liability claim,
damage and expense, and any other relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation or
omission shall be entitled to contribution from any person who is not be found
liable for such fraudulent misrepresentation or omission. Notwithstanding the
foregoing, the Underwriter in the aggregate shall not be obligated to
contribute any amount hereunder that exceeds the amount of the underwriting
commission paid by the Company to the Underwriter in the aggregate with respect
to the Company Shares and Preferred Securities purchased by the Underwriter.
(e) The indemnity and contribution agreements contained herein are in
addition to any liability which the Company may otherwise have to the
Underwriter.
26
<PAGE> 27
(f) Neither termination nor completion of the engagement of the
Underwriter nor any investigation made by or on behalf of the Underwriter shall
affect the indemnification obligations of the Company or the Underwriter
hereunder, which shall remain and continue to be operative and in full force
and effect.
Section 7. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Offerors or its officers or trustees, set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Offerors, or the
Underwriter or any controlling person and will survive delivery of and payment
for the Company Shares and Preferred Securities.
Section 8. Offering by the Underwriter. The Trust and the Company are
advised by the Underwriter that the Underwriter propose to make a public
offering of the Common Stock and Preferred Securities, on the terms and
conditions set forth in the Registration Statement from time to time as and
when the Underwriter deem advisable after the Registration Statement becomes
effective. 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.
Section 9. Termination of Agreement.
(a) The Underwriter may terminate this Agreement, by notice to the
Offerors, at any time at or prior to the Closing Time (i) if there has been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition (financial or otherwise,
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise. whether or not arising in the
ordinary course of business), or (ii) if there has occurred any outbreak or
escalation of existing hostilities or other national or international calamity
or crisis the effect of which on the financial markets of the United States is
such as to make it, in the Underwriter's reasonable judgment, impracticable to
market the Company Shares, or the Preferred Securities or enforce contracts for
the sale of the such securities, or (iii) if trading in any securities of the
Company has been suspended by the Commission or the National Association of
Securities Dealers, Inc., or if trading generally on the New York Stock Exchange
or in the over-the-counter market has been suspended, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by such exchange or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority with
appropriate jurisdiction over such matters, or (iv) if a banking moratorium has
been declared by either federal or Florida authorities, or (v) if there shall
have been such material and substantial change in the market for securities in
general or in political, financial or economic conditions as in the
Underwriter's reasonable judgment makes it inadvisable to proceed with the
Offering, sale and delivery of the Company Shares, or the Preferred Securities
on the terms contemplated by the Prospectus, or (vi) if the Underwriter
reasonably determines (which determination shall be in good faith) that there
has not been satisfactory disclosure of all relevant
27
<PAGE> 28
financial information relating to the Offerors in the Offerors' disclosure
documents and that the sale of the Preferred Securities is inadvisable given
such disclosures, or (vii) if the Company shall have failed, refused or been
unable, on or prior to the Closing Date, or on or prior to any later date on
which the Option Shares are to be purchased, as the case may be, to perform any
agreement on its part to be performed, or because any other condition of the
Underwriter's obligations hereunder required to be fulfilled by the Company is
not fulfilled.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Sections 6 and 7 shall remain in effect.
Section 10. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices shall be addressed as follows:
If to the Underwriter:
William R. Hough & Co.
100 Second Avenue South, Suite 800
St. Petersburg, Florida 33701
Attention: Ronald Goff, First Vice President
with a copy to:
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Avenue, Suite 800
Orlando, Florida 32801
Attention: John P. Greeley
If to the Company or the Trust:
United Financial Holdings, Inc.
333 Third Avenue North
P. O. Box 14517
Saint Petersburg, Florida 33733
Attention: Neil W. Savage, President and
Chief Executive Officer
with a copy to:
Holland & Knight LLP
200 Central Avenue, Suite 1600
Post Office Box 3542
St. Petersburg, FL 33731-3542
Attention: Richard O. Jacobs
28
<PAGE> 29
Section 11. Parties. This Agreement is made solely for the benefit of
the Underwriter, and the officers, directors, employees, agents and counsel of
the Underwriter specified in Section 6, the Trust and the Company and, to the
extent expressed, any person controlling the Trust, the Company or the
Underwriter, and the directors of the Company, or trustees of the Trust, their
respective officers who have signed the Registration Statement and their
respective executors, administrators, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include any purchaser, as such
purchaser, from the Underwriter of the Company Shares, the Shareholders Shares,
and the Preferred Securities.
Section 12. Arbitration. Any claims, controversies, demands, disputes
or differences between or among the parties hereto or any persons bound hereby
arising out of, or by virtue of, or in connection with, or otherwise relating
to this Agreement shall be submitted to and settled by arbitration conducted in
St. Petersburg, Florida before one or three arbitrators, each of whom shall be
knowledgeable in the field of securities law and investment banking. Such
arbitration shall otherwise be conducted in accordance with the rules then
obtaining of the American Arbitration Association. The parties hereto agree to
share equally the responsibility for all fees of the arbitrators, abide by any
decision rendered as final and binding and waive the right to appeal the
decision or otherwise submit the dispute to a court of law for a jury or
non-jury trial. The parties hereto specifically agree that neither party may
appeal or subject the award or decision of any such arbitrator to appeal or
review in any court of law or in equity or in any other tribunal, arbitration
system or otherwise. Judgment upon any award granted by such arbitrator may be
enforced in any court having jurisdiction thereof.
Section 13. Governing Law and Time. This Agreement shall be governed
by the laws of the State of Florida. Specified times of the day refer to New
York City time.
Section 14. Counterparts. This Agreement may be executed in one or
more counterparts, and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
UFH CAPITAL TRUST I
By:
-----------------------------------------
Name:
Title: Trustee
29
<PAGE> 30
UNITED FINANCIAL HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
WILLIAM R. HOUGH & CO.
By:
----------------------------
Name:
Title:
30
<PAGE> 31
SCHEDULE A
<TABLE>
<CAPTION>
Amount of Initial Amount of Initial Percentage of
Trust Securities to Company Shares to Initial Securities
be Purchased be Purchased to be Purchased
------------------- ----------------- ------------------
<S> <C> <C> <C>
William R. Hough & Co.
------------------- ----------------- ------------------
</TABLE>
<PAGE> 32
EXHIBIT A
UFH CAPITAL TRUST I
(A DELAWARE BUSINESS TRUST)
___________ PREFERRED SECURITIES
_____% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
AND
UNITED FINANCIAL HOLDINGS, INC.
______ SHARES OF COMMON STOCK
PRICE DETERMINATION AGREEMENT
__________, 1998
William R. Hough & Co.
100 Second Avenue South
St. Petersburg, FL 33701
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated the date hereof
(the "Underwriting Agreement"), among UFH Capital Trust I, a Delaware business
trust (the "Trust"), United Financial Holdings, Inc. (the "Company" and
together with the Trust, the "Offerors"), and William R. Hough & Co. (the
"Underwriter"). Subject to the terms and conditions set forth therein, the
Underwriting Agreement provides for the purchase by the Underwriter from the
Trust, of ___________ of the _____% Cumulative Trust Preferred Securities of
the Trust (the "Preferred Securities"), subject to a _________ adjustment (to
cover over-allotments, if any). This Agreement is the Price Determination
Agreement referred to in the Underwriting Agreement.
A. Pursuant to Section 2 of the Underwriting Agreement, the Offerors
agree with the Underwriter as follows:
1. The public offering price per Preferred Security shall be $10.
<PAGE> 33
2. The purchase price for the Preferred Securities to be paid by the
Underwriter shall be $____ per Preferred Security.
3. The commission per Preferred Security to be paid by the Company to
the Underwriter for its commitments hereunder shall be $________ per Preferred
Security.
4. The distribution rate on the Preferred Securities shall be _____%
per annum.
B. Subject to the terms and conditions set forth therein, the
Underwriting Agreement provides for the purchase by the Underwriter from the
Company of ______ shares of Common Stock, subject, in the case of the Company,
to a ______ adjustment (to cover over-allotments, if any). Pursuant to Section 2
of the Underwriting Agreement, the Company agrees with the Underwriter as
follows:
1. The public offering price per Common Stock shall be $_____.
2. The purchase price for the Common Stock to be paid by the
Underwriter shall be $______ per Common Stock.
3. The commission per Common Stock to be paid by the Company to
the Underwriter for its commitments hereunder shall be
$______ per Common Stock.
The Offerors represent and warrant to the Underwriter that the
representations and warranties of the Offerors set forth in Section 1(a) of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
This Agreement shall be governed by the laws of the State of Florida.
If the foregoing is in accordance with the understanding of the
Underwriter of the agreement between the Underwriter and the Offerors, please
sign and return to the Company a counterpart hereof, whereupon this instrument,
along with all counterparts and together with the Underwriting Agreement, shall
be a binding agreement between the Underwriter and the Offerors in accordance
with its terms and the terms of the Underwriting Agreement.
Very truly yours,
UFH CAPITAL TRUST I
By:
------------------------------------
Name:
Title: Trustee
<PAGE> 34
UNITED FINANCIAL HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
WILLIAM R. HOUGH & CO.
By:
-----------------------------
Name:
Title:
<PAGE> 35
EXHIBIT B
Master Selected Dealer Agreement
Gentlemen:
(1) General. We understand that William R. Hough & Co. is entering
into this Agreement with us and other firms who may be offered the right to
purchase as principal a portion of securities being distributed to the public.
The terms and conditions of this Agreement shall be applicable to any public
offering of securities ("Securities") pursuant to a registration statement
filed under the Securities Act of 1933 (the "Securities Act") wherein William
R. Hough & Co. (acting for its own account or for the account of any
underwriting or similar group or syndicate) is responsible for managing or
otherwise implementing the sale of the Securities to selected dealers
("Selected Dealers") and has informed us that such terms and conditions shall
be applicable. Any such offering of Securities to us as a Selected Dealer is
hereinafter called an "Offering." In the case of any Offering in which you are
acting for the account of any underwriting or similar group or syndicate
("Underwriter"), the terms and conditions of this Agreement shall be for the
benefit of, and binding upon, such Underwriter, including, in the case of any
Offering in which you are acting with others as Underwriter. The term
"preliminary prospectus" means any preliminary prospectus relating to an
Offering of Securities or any preliminary prospectus supplement together with a
prospectus relating to an Offering of Securities; the term "Prospectus" means
the prospectus, together with the final prospectus supplement, if any, relating
to an Offering of Securities, filed pursuant to Rule 424(b) or Rule 424(c)
under the Securities Act or any successor or similar rules.
(2) Conditions of Offering Acceptance and Purchase. Any Offering will
be subject to delivery of the Securities and their acceptance by you and any
other Underwriter, may be subject to the approval of all legal matters by
counsel and the satisfaction of other conditions, and may be made on the basis
of reservation of Securities or an allotment against subscription. You will
advise us by telegram, telex, facsimile, e-mail, or other form of written
communication ("Written Communication") of the particular method and
supplementary terms and conditions (including, without limitation, the
information as to prices and offering date referred to in Section 3(b)) of any
Offering in which we are invited to participate. To the extent such
supplementary terms and conditions are inconsistent with any provision herein,
such terms and conditions shall supersede any such provision. Unless otherwise
indicated in any such Written Communication, acceptances and other
communications by us with respect to any Offering should be sent to William R.
Hough & Co. You reserve the right to reject any acceptance in whole or in part.
Payment for Securities purchased by us is to be made at such office as you may
designate, at the public offering price, or, if you shall so advise us, at such
price less the concession to dealers or at the price set forth or indicated in
a Written Communication, on such date as you shall determine, on one day's
prior notice to us, by wire transfer to a William R. Hough & Co. account,
against delivery of certificates or other forms evidencing such Securities. If
payment is made for Securities purchased by us at the public offering price,
the concession to which we shall be entitled will be paid to us upon
termination of the provisions of Section 3(b) with respect to such Securities.
<PAGE> 36
Unless we promptly give you written instructions otherwise, if
transactions in the Securities may be settled through the facilities of The
Depository Trust Company, delivery of Securities purchased by us will be made
through such facilities if we are a member, or if we are not a member,
settlement may be made through our ordinary correspondent who is a member.
(3) Representations, Warranties, and Agreements.
(a) Prospectuses. You shall provide us with such number of copies of
each preliminary, prospectus, the Prospectus and any supplement thereto
relating to each Offering as we may reasonably request for the purposes
contemplated by the Securities Act and the Securities Exchange Act of 1934
(Exchange Act) and the applicable Rules and regulations of the Securities and
Exchange Commission thereunder. We represent that we are familiar with Rule
15c2-8 under the Exchange Act relating to the distribution of preliminary and
final prospectuses and agree that we will comply therewith. We agree to keep an
accurate record of our distribution (including dates, number of copies, and
persons to whom sent) of copies of the Prospectus or any preliminary prospectus
(or any amendment or supplement to any thereof), and promptly upon request by
you, to bring all subsequent changes to the attention of anyone to whom such
material shall have been furnished. We agree to furnish to persons who receive
a confirmation of sale a copy of the Prospectus filed pursuant to Rule 424(b)
or Rule 424(c) under the Securities Act. We agree that in purchasing Securities
in an Offering we will rely upon no statements whatsoever, written or oral,
other than the statements in the Prospectus delivered to us by you. We will not
be authorized by the issuer or other seller of Securities offered pursuant to a
Prospectus or by any Underwriter to give any information or to make any
representation not contained in the Prospectus in connection with the sale of
such Securities.
(b) Offer and Sale to the Public. With respect to any Offering of
Securities, you will inform us by a Written Communication of the public
offering price, the selling concession, the reallowance (if any) to dealers,
and the time when we may commence selling Securities to the public. After such
public offering has commenced, you may change the public offering price, the
selling concession, and the reallowance to dealers. With respect to each
Offering of Securities, until the provisions of this Section 3(b) shall be
terminated pursuant to Section 4, we agree to offer Securities to the public
only at the public offering price, except that if a reallowance is in effect, a
reallowance from the public offering price not in excess of such reallowance
may be allowed as consideration for services in distribution to dealers who are
actually engaged in the investment banking or securities business, who execute
the written agreement prescribed by Rule 2740 of the Rules of Conduct of the
National Association of Securities Dealers, Inc. (the "NASD") and who are
either members in good standing of the NASD or foreign brokers or dealers not
eligible for membership in the NASD who represent to us that they will promptly
reoffer such Securities at the public offering price and will abide by the
conditions with respect to foreign brokers and dealers set forth in Section
3(e).
(c) Stabilization and Overallotment. You may, with respect to any
Offering, be authorized to over-allot in arranging sales to Selected Dealers,
to purchase and sell Securities, any other securities of the issuer of the
Securities of the same class and series and any other securities of such issuer
that you may designate for long or short account, and to stabilize or maintain
the market price of the Securities. We agree to advise you from time to time
upon request, prior to the termination of the provisions of Section 3(b) with
respect to any Offering, of the amount of
<PAGE> 37
Securities purchased by us hereunder remaining unsold and we will, upon your
request, sell to you, for the accounts of the Underwriter, such amount of
Securities as you may designate, at the public offering price thereof less an
amount to be determined by you not in excess of the concession to dealers. In
the event that prior to the later of (i) the termination of the provisions of
Section 3(b) with respect to any Offering, or (ii) the covering by you of any
short position created by you in connection with such Offering for your account
or the account of one or more Underwriters, you purchase or contract to
purchase for the account of any of the Underwriters, in the open market or
otherwise, any securities delivered to us, you reserve the right to withhold
the above-mentioned concession to dealers on such Securities if sold to us at
the public offering price, or if such concession has been allowed to us through
our purchase at a net price, we agree to repay such concession upon your
demand, plus in each case any taxes on redelivery, commissions, accrued
interest, and dividends paid in connection with such purchase or contract to
purchase.
(d) Open Market Transactions. We agree to abide by Regulation M under
the Exchange Act and we agree not to bid for, purchase, attempt to purchase, or
sell, directly or indirectly, any Securities, any other Reference Securities
(as defined in Regulation M) of the issuer, or any other securities of such
issuer as you may designate, except as brokers pursuant to unsolicited orders
and as otherwise provided in this Agreement. If the Securities are common stock
or securities convertible into common stock, we agree not to effect, or attempt
to induce others to effect, directly or indirectly, any transactions in or
relating to any stock of such issuer, except to the extent permitted by Rule
101 of Regulation M under the Exchange Act.
(e) NASD. We represent that we are actually engaged in the investment
banking or securities business and we are either a member in good standing of
the NASD, or, if not such a member, a foreign dealer not eligible for
membership. If we are such a member we agree that in making sales of the
Securities we will comply with all applicable Rules of the NASD, including,
without limitations the NASD's Interpretation with Respect to Free-Riding and
Withholding and Rule 2740 of the Conduct Rules. If we are such a foreign
dealer, we agree not to offer or sell any Securities in the United States of
America except through you and in making sales of Securities outside the United
States of America we agree to comply as though we were a member with such
Interpretation and Rule 2730, 2740 and 2750 of the Conduct Rules of the NASD
and to comply with Rule 2420 of the Conduct Rules of the NASD as it applies to
a nonmember broker or dealer in a foreign country.
(f) Relationship among Underwriter and Selected Dealers. You may buy
Securities from or sell Securities to any Underwriter or Selected Dealer and,
with your consent, the Underwriter (if any) and the Selected Dealers may
purchase Securities from and sell Securities to each other at the public
offering price less all or any part of the concession. We are not authorized to
act as agent for you or any Underwriter or the issuer or other seller of any
Securities in offering Securities to the public or otherwise. Nothing contained
herein or in any Written Communication from you shall constitute the Selected
Dealers partners with you or any Underwriter or with one another. Neither you
nor any Underwriter shall be under any obligation to us except for obligations
assumed hereby or in any Written Communication from you in connection with any
Offering. In connection with any Offering, we agree to pay our proportionate
share of any claim, demand, or liability asserted against us, and the other
Selected Dealers or any of them, or against you or the Underwriter, if any,
based
<PAGE> 38
on any claim that such Selected Dealers or any of them constitute an
association, unincorporated business, or other separate entity, including in
each case our proportionate share of any expense incurred in defending against
any such claim, demand, or liability.
(g) Blue Sky Laws. Upon application to you, you will inform us as to
the jurisdictions in which you believe the Securities have been qualified for
sale or are exempt under the respective securities or "blue sky" laws of such
jurisdictions. We understand and agree that compliance with the securities or
"blue sky" laws in each jurisdiction in which we shall offer or sell any of the
Securities shall be our sole responsibility and that you assume no
responsibility or obligations as to the eligibility of the Securities for sale
or our right to sell the Securities in any jurisdiction.
(h) Compliance with Law. We agree that in selling Securities pursuant
to any Offering (which agreement shall also be for the benefit of the issuer or
other seller of such Securities), we will comply with the applicable provisions
of the Securities Act and the Exchange Act, the applicable Rules and
regulations of the Securities and Exchange Commission thereunder, the
applicable Rules and regulations of the NASD, and the applicable Rules and
regulations of any securities exchange having jurisdiction over the Offering.
You shall have full authority to take such action as you may deem advisable in
respect of all matters pertaining to any Offering. Neither you nor any
Underwriter shall be under any liability to us, except for lack of good faith
and for obligations expressly assumed by you in this Agreement; provided,
however, that nothing in this sentence shall be deemed to relieve you from any
liability imposed by the Securities Act.
(4) Termination Supplements and Amendments. This Agreement may be
terminated by either party hereto upon five business days' written notice to
the other party; provided that with respect to any Offering for which a Written
Communication was sent and accepted prior to such notice, this Agreement as it
applies to such Offering shall remain in full force and effect and shall
terminate with respect to such Offering in accordance with the last sentence of
this Section. This Agreement may be supplemented or amended by you by written
notice thereof to us, and any such supplement or amendment to this Agreement
shall be effective with respect to any Offering to which this Agreement applies
after the date of such supplement or amendment. Each reference to "this
Agreement" herein shall, as appropriate, be to this Agreement as so amended and
supplemented. The terms and conditions set forth in Sections 3(b) and (d) with
regard to any Offering will terminate at the close of business on the thirtieth
day after the date of the initial public offering of the Securities to which
such Offering relates, but such terms and conditions, upon notice to us, may be
terminated by you at any time.
(5) Successors and Assigns. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and other persons specified or
indicated in Section 1, and the respective successors and assigns of each of
them.
(6) Governing Law. This Agreement and the terms and conditions set
forth herein with respect to any Offering together with such supplementary
terms and conditions with respect to such Offering as may be contained in any
Written Communication from you to us in connection therewith shall be governed
by, and construed in accordance with, the laws of the State of New York.
<PAGE> 39
By signing this Agreement we confirm that our subscription to, or our
acceptance of any reservation of any Securities pursuant to an Offering shall
constitute (i) acceptance of and agreement to the terms and conditions of this
Agreement (as supplemented and amended pursuant to Section 4) together with and
subject to any supplementary terms and conditions contained in any Written
Communication from you in connection with such Offering, all of which shall
constitute a binding agreement between us and you, individually, or as
Underwriter, (ii) in confirmation that our representations and warranties set
forth in Section 3 are true and correct at that time and (iii) confirmation
that our agreements set forth in Sections 2 and 3 have been and will be fully
performed by us to the extent and at the times required thereby.
Very truly yours,
---------------------------------
(Name of Firm)
---------------------------------
(Authorized Signature)
---------------------------------
(Title)
Confirmed, as of the date first above written:
WILLIAM R. HOUGH & CO.
By:
-------------------------------
<PAGE> 40
William F. Hough & Co.
100 Second Avenue South, Suite 800
St. Petersburg, FL 33701
(813) 895-8830
(813) 895-8895 (fax)
Execution Date: ___________________
<PAGE> 41
EXHIBIT C
The opinion of special counsel to the Company to be delivered pursuant to
Section 5(b)(i) of the Underwriting Agreement shall be substantially to the
effect that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida with requisite corporate power
and authority to own, lease and operate its properties and conduct its business
as described in the Registration Statement and is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended. Each of the
Company's subsidiaries is duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation, with requisite
corporate power and authority to own, lease and operate its respective
properties and conduct its business as described in the Registration Statement,
except where the failure to be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its subsidiaries,
considered as one enterprise. The Bank is a Florida-chartered commercial bank
duly organized, validly existing and in good standing under the laws of the
State of Florida. The Trust is validly existing in good standing as a business
trust under the Delaware Business Trust Act, 12 Del. C. Section 3801 et seq.
2. The Company and each subsidiary are duly qualified to transact business as
foreign corporations under the corporation laws of each jurisdiction in which
the Company or such subsidiary, as the case may be, owns or leases property of
a nature, has an office, or transacts business of a type, that would make such
qualification necessary, except where the failure to so qualify would not have
a material adverse effect on the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise.
3. The deposit accounts of the Bank are insured by either the Savings
Association Insurance Fund or the Bank Insurance Fund of the FDIC up to the
maximum amount allowable by law and, to such counsel's knowledge, no
proceedings for the termination or revocation of such membership or insurance
are pending or threatened.
4. All of the issued and outstanding shares of capital stock of each of the
Company's subsidiaries have been duly and validly authorized and issued and are
fully paid and nonassessable and, to such counsel's knowledge, are owned by the
Company or the Bank, as the case may be, free and clear of any security
interests, liens, pledges, claims or other encumbrances, except where the
failure to own such shares free and clear of any security interests, liens,
pledges, claims or other encumbrances would not have a material adverse effect
on the condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered as one
enterprise and except that the Trust Preferred Securities are not owned by the
Company or the Bank.
<PAGE> 42
5. The issued and outstanding shares of capital stock of the Company
immediately prior to the issuance and sale of the Company Shares to be sold by
the Company hereunder have been duly authorized and validly issued, are fully
paid and nonassessable, and there are no preemptive, preferential or, except as
described in the Prospectus and to such counsel's knowledge after
investigation, other rights to subscribe for or purchase any shares of capital
stock of the Company, and to such counsel's knowledge after investigation, no
shares of capital stock of the Company have been issued in violation of such
rights.
6. The certificates for the Company Shares and the Preferred Securities to be
delivered hereunder are in due and proper form and conform to the requirements
of applicable law; and when duly countersigned by the Company's transfer agent,
and delivered to the Underwriter or upon the order of the Underwriter against
payment of the agreed consideration therefor in accordance with the provision
of the Agreement, the Company Shares and the Preferred Securities to be sold by
the Company and the Trust, respectively, represented thereby will be duly
authorized and validly issued, fully paid and nonassessable, and free of any
preemptive, preferential or other rights to subscribe for or purchase shares of
Common Stock and Preferred Securities, respectively, and, upon delivery to the
Underwriter or upon the order against payment of the agreed consideration
therefor in accordance with the provisions of the Agreement, the Underwriter
will acquire good and marketable title thereto, free and clear of any lien,
claim, security interest, encumbrance, or restriction on transfer (except for
any restriction under the 1933 Act and applicable Blue Sky Laws).
7. The Common Stock is registered under the 1934 Act.
8. The Company is not, nor with the giving of notice or passage of time,
would be, in violation of the Articles of Incorporation or Bylaws or, to such
counsel's knowledge after investigation, in default in any material respect in
the performance of any agreement, lease, franchise, license, permit, mortgage,
deed of trust, evidence of indebtedness or other instrument or document that is
filed as an exhibit to the Registration Statement, to which the Company is
subject or bound.
9. All offers and sales by the Company of its capital stock before the date
hereof were at all relevant times duly registered under or exempt from the
registration requirements of the 1933 Act, and were duly registered under or
the subject of an available exemption from the registration requirements of any
applicable Blue Sky Laws.
10. The Company and the Trust each has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement and to issue, sell and
deliver the Preferred Securities to be sold by it to the Underwriter as
provided therein; the Underwriting Agreement has been duly authorized, executed
and delivered by the Company and the Trust, and constitutes a legal valid, and
binding obligation of each of the Company and the Trust and is enforceable
against each of the Company and the Trust in accordance with its terms, except
as enforceability of the Underwriting Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and by equitable principles limiting the right to specific
performance or other equitable relief and except as the obligations of the
Company under the indemnification and contribution provisions of Section 6 of
the Underwriting Agreement may be
<PAGE> 43
limited by laws or unenforceable as against public policy, as to which no
opinion is expressed, and an implied covenant of good faith and fair dealing.
11. The Trust Agreement has been duly authorized, executed and delivered by
the Company, and is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, readjustment of debt, moratorium, fraudulent conveyance or
similar laws relating to or affecting creditors' rights generally, general
equity principles (whether considered in a proceeding in equity or at law).
12. The Guarantee Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, readjustment of debt moratorium, fraudulent conveyance or similar
laws relating to or affecting creditors' rights generally, general equity
principles (whether considered in a proceeding in equity or at law).
13. The Expense Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, readjustment of debt, moratorium, fraudulent conveyance or
similar laws relating to or affecting creditors' rights generally, general
equity principles (whether considered in a proceeding in equity or at law).
14. The Indenture has been duly authorized, executed and delivered by the
Company, has been duly qualified under the Trust Indenture Act and is a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, readjustment
of debt, moratorium, fraudulent conveyance or similar laws relating to or
affecting creditors' rights generally, general equity principles (whether
considered in a proceeding in equity or at law).
15. The Subordinated Debentures have been duly authorized, executed and
delivered by the Company and, when duly authenticated in accordance with the
Indenture and delivered and paid for in accordance with the Debenture
Subscription Agreement, will be valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, readjustment
of debt, moratorium, fraudulent conveyance or similar laws relating to or
affecting creditors' rights generally, general equity principles (whether
considered in a proceeding in equity or at law).
16. Neither the Company nor the Trust is an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
Investment Company Act of 1940, as amended.
<PAGE> 44
17. The statements set forth in the Registration Statement under the captions
"Regulation and Supervision," "Description of Preferred Securities,"
"Description of Junior Subordinated Debentures," "Description of Guarantee" and
"Relationship Among the Preferred Securities, the Junior Subordinated
Debentures and the Guarantee," insofar as they purport to describe the
provisions of the laws referred to therein, fairly summarize the legal matters
described therein.
18. The statements of law or legal conclusions and opinions set forth in the
Registration Statement under the caption "Certain Federal Income Tax
Consequences," subject to the assumptions and conditions described therein,
constitute such counsel's opinion.
19. The Registration Statement was declared effective under the Securities
Act as of the date and time specified in such order, any required filing of the
Prospectus or any supplement thereto pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b) and, to such
counsel's knowledge and information, no stop order suspending the effectiveness
of the Registration Statement has been issued under the Securities Act and no
proceedings therefor have been initiated or threatened by the Commission.
20. The Registration Statement (including the Rule 430A Information, if
applicable) and the Prospectus and any amendment or supplement thereto (except
for the financial statements and other financial and statistical data included
therein or omitted therefrom, as to which such counsel need express no
opinion), as of their respective effective or issue dates, comply or complied
as to form in all material respects to the applicable requirements of the 1933
Act and the 1933 Act Regulations.
21. The documents incorporated by reference in the Prospectus (except for the
financial statements and other financial or statistical data included therein
or omitted therefrom, as to which such counsel expresses no opinion, and except
to the extent that any statement therein is modified or superseded in the
Prospectus), as of the dates they were filed with the Commission, complied as
to form in all material respects to the applicable requirements of the 1934 Act
and the 1934 Act Regulations.
22. Such counsel knows of no legal or governmental proceedings pending to
which the Company or any subsidiary is a party or of which any property of the
Company or any subsidiary is the subject that are required to be disclosed in
the Registration Statement or that would affect the consummation of the
transactions contemplated in the Underwriting Agreement, the Indenture or the
Preferred Securities, and such counsel knows of no such proceedings that are
threatened or contemplated by governmental authorities or threatened by others.
23. Such counsel knows of no contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be described in the
Registration Statement or to be filed as exhibits thereto other than those
described therein or filed or incorporated by reference as exhibits thereto,
and such instruments as are summarized in the Registration Statement are fairly
summarized in all material respect
24. No approval, authorization, consent, registration, qualification or other
order of any public board or body is required in connection with the execution
and delivery of the Underwriting
<PAGE> 45
Agreement, the Trust Agreement, the Guarantee Agreement, the Expense Agreement
and the Indenture or the issuance and sale of the Preferred Securities or the
consummation by the Company of the other transactions contemplated by the
Underwriting Agreement, the Trust Agreement, the Guarantee Agreement, the
Expense Agreement or the Indenture, except such as have been obtained under the
Securities Act, the Exchange Act and the Trust Indenture Act or such as may be
required under the blue sky or securities laws of various states in connection
with the offering and sale of the Preferred Securities.
25. To such counsel's knowledge, the Company and each of its subsidiaries,
including the Bank, each has all material licenses, permits and other
governmental authorizations currently required for the conduct of its business
as presently conducted.
26. The execution and delivery of the Underwriting Agreement, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement and the Indenture,
the issue and sale of the Preferred Securities and the Subordinated Debentures,
the compliance by the Company with the provisions of the Preferred Securities,
the Subordinated Debentures, the Indenture, the Guarantee Agreement and the
Expense Agreement and the Underwriting Agreement and the consummation of the
transactions therein contemplated will not conflict with or constitute a breach
of, or default under, the articles of incorporation or by-laws of the Company
or any subsidiary or a breach or default under any contract, indenture,
mortgage, loan agreement, note, lease or other instrument known to such counsel
to which either the Company or any subsidiary is a party or by which any of
them or any of their respective properties may be bound except for such
breaches as would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs, assets or business
prospects of the Company and its subsidiaries considered as one enterprise, nor
will such action result in a violation on the part of the Company or any
subsidiary of any applicable law or regulation or of any administrative,
regulatory or court decree known to such counsel.
27. Counsel will supplementally provide a written statement that such counsel
has participated in the preparation of the Registration Statement and
Prospectus and has reviewed the documents incorporated by reference in the
Prospectus and no facts have come to the attention of such counsel to lead it
to believe (a) that the Registration Statement (including the Rule 430A
Information if applicable) or any amendment thereto (except for the financial
statements and other financial or statistical data included therein or omitted
therefrom, as to which such counsel need express no opinion), at the time the
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or (b)
that the Prospectus or any amendment or supplement thereto (except for the
financial statements and other financial or statistical data included therein
or omitted therefrom as to which such counsel need express no opinion), at the
time the Prospectus was issued, or at the Closing Time, included or includes an
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (c) that the
documents incorporated by reference in the Prospectus (except for the financial
statements and other financial or statistical data contained therein or omitted
therefrom as to which such counsel expresses no opinion, and except to the
extent that any statement therein is modified or superceded in the Prospectus
or any subsequently filed
<PAGE> 46
document which is incorporated by reference into the Prospectus), as of the
dates they were filed with the Commission, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
<PAGE> 47
EXHIBIT D
The opinion of counsel, as special Delaware counsel to the Company and the
Trust to be delivered pursuant to Section 5(b)(iii) of the Underwriting
Agreement shall be substantially to the effect that:
1. The Trust has been duly created and is validly existing in good standing
as a business trust under the Delaware Business Trust Act, 12 Del. C. Section
3801 et seq. (the "Delaware Act"), and all filings required under the laws of
the State of Delaware with respect to the creation and valid existence of the
Trust as a business trust have been made.
2. Under the Delaware Act and the Trust Agreement, the Trust has the trust
power and authority to own its property and to conduct its business, all as
described in the Prospectus.
3. The Trust Agreement constitutes a valid and binding obligation of the
Company and the Property Trustee and the Delaware Trustee, and is enforceable
against the Company and the Trustees, in accordance with its terms.
4. Under the Delaware Act and the Trust Agreement, the Trust has the trust
power and authority to execute and deliver, and to perform its obligations
under, the Underwriting Agreement and to issue and perform its obligations
under the Preferred Securities and the Trust Common Securities.
5. Under the Delaware Act and the Trust Agreement, the execution and delivery
by the Trust of the Underwriting Agreement, and the performance by the Trust of
its obligations thereunder, have been duly authorized by all necessary trust
action on the part of the Trust.
6. The Preferred Securities have been duly authorized by the Trust Agreement
and are duly and validly issued and, when issued against payment therefor as
set forth in the Underwriting Agreement will be, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust and are entitled to
the benefits of the Trust Agreement. The Holders, as beneficial owners of the
Trust, will be entitled to the same limitations of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Holders may be
obligated pursuant to the Trust Agreement, (i) to provide indemnity and/or
security in connection with and pay taxes or governmental charges arising from
transfers or exchanges of Preferred Securities Certificates and the issuance of
replacement Preferred Securities Certificates, and (ii) to provide security or
indemnity in connection with requests of or directions to the Property Trustee
to exercise its rights and powers under the Trust Agreement.
7. Under the Delaware Act and the Trust Agreement, the issuance of the
Preferred Securities and Trust Common Securities is not subject to preemptive
rights.
8. The Trust Common Securities have been duly authorized by the Trust
Agreement and are duly and validly issued undivided beneficial interests in the
assets of the Trust and are entitled to the benefits of the Trust Agreement.
<PAGE> 48
9. The issuance and sale by the Trust of the Preferred Securities and Trust
Common Securities, the purchase by the Trust of the Subordinated Debentures,
the execution, delivery and performance by the Trust of the Underwriting
Agreement, the consummation by the Trust of the transactions contemplated by
the Underwriting Agreement and the compliance by the Trust with its obligations
thereunder will not violate (i) any of the provisions of the Certificate of
Trust or the Trust Agreement or (ii) any applicable Delaware law or
administrative regulation.
<PAGE> 49
EXHIBIT E
The opinion of counsel to Trust Company and Delaware Trustee to be delivered
pursuant to Section 5(b)(ii) of the Underwriting Agreement shall be
substantially to the effect that:
1. The Trust Company is duly incorporated and is validly existing in good
standing as a banking corporation with trust powers under the laws of the State
of Delaware.
2. The Indenture Trustee has the requisite power and authority to execute,
deliver and perform its obligations under the Indenture, and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of the Indenture.
3. The Guarantee Trustee has the requisite power and authority to execute,
deliver and perform its obligations under the Guarantee Agreement, and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of the Guarantee Agreement.
4. The Property Trustee has the requisite power and authority to execute and
deliver the Trust Agreement, and has taken all necessary corporate action to
authorize the execution and delivery of the Trust Agreement.
5. Each of the Indenture and the Guarantee Agreement has been duly executed
and delivered by the Indenture Trustee and the Guarantee Trustee, respectively,
and constitutes a legal, valid and binding obligation of the Indenture Trustee
and the Guarantee Trustee, respectively, enforceable agama the Indenture
Trustee and the Guarantee Trustee, respectively, in accordance with its
respective terms, except that certain payment obligations may be enforceable
solely against the assets of the Trust and except that such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, liquidation,
fraudulent conveyance and transfer or other similar laws affecting the
enforcement of creditors' rights generally, and by general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether such enforceability, is
considered in a proceeding in equity or at law), and by the affect of
applicable public policy on the enforceability of provisions relating to
indemnification or contribution.
6. The Subordinated Debentures delivered on the date hereof have been duly
authenticated by the Indenture Trustee in accordance with the terms of the
Indenture.
<PAGE> 1
EXHIBIT 4.9
NUMBER SHARES
C
[UNITED FINANCIAL
HOLDINGS, INC. LOGO]
COMMON STOCK
PAR VALUE $.01 CUSIP 91032K 10 6
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
UNITED FINANCIAL HOLDINGS, INC.
CERTIFICATE OF STOCK
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS, the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
UNITED FINANCIAL HOLDINGS, INC.
CORPORATE SEAL 1982 FLORIDA
/s/ Elizabeth S. Schmidt /s/ Neil W. Savage
- ------------------------- ------------------------------
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
RELIANCE TRUST COMPANY
(ATLANTA, GA) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
(c) SECURITY-COLUMBIAN UNITED STATES BANKNOTE COMPANY 1960
<PAGE> 2
UNITED FINANCIAL HOLDINGS, INC.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common UNIF GIFT MIN ACT-_____Custodian_____
TEN ENT --as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act_________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated____________________
NOTICE:____________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
Exhibit 5.2
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
November 3, 1998
UFH Capital Trust I
c/o United Financial Holdings, Inc.
333 Third Avenue North
St. Petersburg, Florida 33701
Re: UFH Capital Trust I
Ladies and Gentlemen:
We have acted as special Delaware counsel for United Financial
Holdings, Inc., a Florida corporation (the "Company") and UFH Capital Trust I, a
Delaware business trust (the "Trust") in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, as filed with the
office of the Secretary of State of the State of Delaware (the "Secretary of
State") on July 30, 1998;
(b) The Trust Agreement of the Trust, dated as of July 30,
1998, among the Company and the trustees named therein;
(c) The Registration Statement, as amended (the "Registration
Statement"), on Form SB-2, including a preliminary prospectus with respect to
the Trust (the "Prospectus"), relating to the __% Cumulative Trust Preferred
Securities of the Trust representing preferred undivided beneficial interests in
the assets of the Trust (each, a "Preferred Security" and collectively, the
"Preferred Securities"), to be filed by the Company and the Trust with the
Securities and Exchange Commission on or about October 7, 1998;
<PAGE> 2
UFH Capital Trust I
November 3, 1998
Page 2
(d) The Amended and Restated Trust Agreement of the Trust,
dated as of October __, 1998 (including Exhibits C and E thereto) (the
"Declaration"), among the Company, the trustees of the Trust named therein, and
the holders, from time to time, of the undivided beneficial interests in the
assets of the Trust; and
(e) A Certificate of Good Standing for the Trust, dated
November 3, 1998, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Declaration and the
Certificate of Trust are in full force and effect and have not be amended, (ii)
except to the extent provided in paragraph 1 below, the due organization or due
formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties to the documents examined by us has the power and authority to execute
and deliver, and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a Preferred Security was
issued by the Trust (collectively, the "Preferred Security Holders") of a
Preferred Security Certificate for such Preferred Security and the payment for
such Preferred Security, in accordance with the Declaration and the Prospectus
and (vii) that the Preferred Securities have been issued and sold to the
Preferred Security Holders in accordance with the Declaration and the
Prospectus. We have not participated in the preparation of the Registration
Statement or the Prospectus and assume no responsibility for their contents.
<PAGE> 3
UFH Capital Trust I
November 3, 1998
Page 3
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of UFH Capital Trust I November 3,
1998 Page 3 any other jurisdiction, including federal laws and rules and
regulations relating thereto. Our opinions are rendered only with respect to
Delaware laws and rules, regulations and orders thereunder which are currently
in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Business Trust Act.
2. The Preferred Securities of the Trust represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, are 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. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/Richards, Layton & Finger, PA
EAM
<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".
/s/ Grant Thornton, LLP
- -----------------------
Grant Thornton, LLP
Tampa, Florida
November 18, 1998
<PAGE> 1
EXHIBIT 25.1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
UNITED FINANCIAL HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Florida
(State of incorporation) (I.R.S. employer identification no.)
333 Third Avenue North
St. Petersburg, Florida 33701
(Address of principal executive offices) (Zip Code)
___% Junior Subordinated Debentures
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
-------------------------- --------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
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AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter the
seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
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Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt, to
receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in
all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other persons
and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes,
vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond
or other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or
in conjunction with any other person or persons, corporation
or corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to
be entered in any court of record within the State of Delaware
or elsewhere, or which may now or hereafter be required by any
law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in
any other trust capacity in the receiving, holding, managing,
and disposing of any and all estates and property, real,
personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation
is so appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to receive
a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
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owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part
of the property held or owned by the Corporation, and to sell
and pledge such bonds, as and when the Board of Directors
shall determine, and in the promotion of its said corporate
business of investment and to the extent authorized by law, to
lease, purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any name and
nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation,
and to pay for the same in cash, stock of this Corporation,
bonds or otherwise; to hold or in any manner to dispose of the
whole or any part of the property so purchased; to conduct in
any lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such
business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes, drafts,
bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall
(except where otherwise expressed in said paragraph) be nowise
limited or restricted by reference to or inference from the
terms of any other clause of this or any other paragraph in
this charter, but that the objects, purposes and powers
specified in each of the clauses of this paragraph shall be
regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the number
of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(2) The rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other
class or classes, or series of the same or other class of
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stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
and the terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or all
series of Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b)
of this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
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receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article FOURTH, each holder of Common Stock shall have one
vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate
fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with
or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding
voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share
of capital stock of the Corporation which were at any time
within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or
indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of capital stock of the
Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person
is an Affiliate or Associate of another, (3) whether a person
has an agreement, arrangement or understanding with another as
to the matters referred to in paragraph (3) of section (c), or
(4) whether the assets subject to any business combination or
the consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect to
any act or omission occurring prior to the time of such repeal
or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors
at which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 21, 1998 By: /s/ Emmett R. Harmon
----------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks
with state publication requirements. It has not been approved by any state
banking authorities. Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
------------------------ ----------
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances.............................................................................0
Held-to-maturity securities...........................................................................195,579
Available-for-sale securities.......................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income ...............................3,978,706
LESS: Allowance for loan and lease losses .................................63,164
LESS: Allocated transfer risk reserve ..........................................0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts.............................................................................0
Premises and fixed assets (including capitalized leases)..............................................135,596
Other real estate owned.................................................................................1,696
Investments in unconsolidated subsidiaries and associated companies.....................................1,066
Customers' liability to this bank on acceptances outstanding................................................0
Intangible assets......................................................................................55,759
Other assets..........................................................................................103,586
Total assets........................................................................................6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices.................................................................................4,568,934
Noninterest-bearing ......................................................838,655
Interest-bearing .......................................................3,730,279
Federal funds purchased and Securities sold under agreements to repurchase............................418,382
Demand notes issued to the U.S. Treasury...............................................................99,350
Trading liabilities (from Schedule RC-D)....................................................................0
Other borrowed money:.................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding....................................................0
Subordinated notes and debentures...........................................................................0
Other liabilities (from Schedule RC-G).................................................................91,728
Total liabilities...................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus...............................................................0
Common Stock..............................................................................................500
Surplus (exclude all surplus related to preferred stock)...............................................62,118
Undivided profits and capital reserves................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities..................................6,520
Total equity capital..................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.................................6,208,857
</TABLE>
<PAGE> 1
Exhibit 25.2
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
UNITED FINANCIAL HOLDINGS, INC.
UFH CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Florida
Delaware 59-2156002
(State of incorporation) (I.R.S. employer identification no.)
333 Third Avenue North
St. Petersburg, Florida 33701
(Address of principal executive offices) (Zip Code)
___% Cumulative Trust Preferred Securities of UFH Capital Trust I
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
--------------------- --------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
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Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or other
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
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(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of any
of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
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owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every kind
with any person, firm, association or corporation, and, without limit
as to amount, to draw, make, accept, endorse, discount, execute and
issue promissory notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value $1.00
per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
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stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions of
such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of Preferred
Stock in relation to the relative powers, preferences and rights of each
other series of Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of such of
the series of Preferred Stock as are from time to time outstanding shall
not be required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and rights
of such other series shall be fixed by the Board of Directors as senior to,
or on a parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors may
provide in the resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article FOURTH that the
consent of the holders of a majority (or such greater proportion as shall
be therein fixed) of the outstanding shares of such series voting thereon
shall be required for the issuance of any or all other series of Preferred
Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be conducted
and managed by a Board of Directors. The number of directors constituting
the entire Board shall be not less than five nor more than twenty-five as
fixed from time to time by vote of a majority of the whole Board, provided,
however, that the number of directors shall not be reduced so as to shorten
the term of any director at the time in office, and provided further, that
the number of directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the first
class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships resulting
from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders shall
elect a successor to such director to hold office until the next election
of the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State of
Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any other
person with which such first mentioned person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned through
application of paragraph (3) above but shall not include any other Voting
Shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall be
as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in charge
of such of the departments or division of the Company as it may deem advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall be
selected by the Board of Directors from its own members, none of whom shall be
an officer of the Company, and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board
of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to the
office of the President conferred or imposed upon him by statute or assigned to
him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated by
the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets and
liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general supervision
over the internal operations of the Company, including accounting, and shall
render to the Board of Directors at appropriate times a report relating to the
general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in charge
of the Audit Division of the Company with such title as the Board of Directors
shall prescribe, shall report to and be directly responsible only to the Board
of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented thereby is transferable only upon the books of the
Company by the holder thereof or his attorney, upon surrender of the certificate
properly endorsed. Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate or certificates
shall be issued in lieu thereof. Duplicate certificates of stock shall be issued
only upon giving such security as may be satisfactory to the Board of Directors
or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1.(A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 21, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been
approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ........................................................ 232,976
Interest-bearing balances .................................................................................. 0
Held-to-maturity securities ............................................................................................ 195,579
Available-for-sale securities .......................................................................................... 1,416,957
Federal funds sold and securities purchased under agreements to resell ................................................. 150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................................ 3,978,706
LESS: Allowance for loan and lease losses .......................................... 63,164
LESS: Allocated transfer risk reserve .............................................. 0
Loans and leases, net of unearned income, allowance, and reserve ........................................... 3,915,542
Assets held in trading accounts ........................................................................................ 0
Premises and fixed assets (including capitalized leases) ............................................................... 135,596
Other real estate owned ................................................................................................ 1,696
Investments in unconsolidated subsidiaries and associated companies .................................................... 1,066
Customers' liability to this bank on acceptances outstanding ........................................................... 0
Intangible assets ...................................................................................................... 55,759
Other assets ........................................................................................................... 103,586
Total assets ........................................................................................................... 6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices.............................................................................. 4,568,934
Noninterest-bearing ................................................................. 838,655
Interest-bearing .................................................................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase ............................................. 418,382
Demand notes issued to the U.S. Treasury ............................................................................... 99,350
Trading liabilities (from Schedule RC-D) ............................................................................... 0
Other borrowed money: .................................................................................................. ///////
With original maturity of one year or less ................................................................. 524,000
With original maturity of more than one year ............................................................... 43,000
Bank's liability on acceptances executed and outstanding ............................................................... 0
Subordinated notes and debentures ...................................................................................... 0
Other liabilities (from Schedule RC-G) ................................................................................. 91,728
Total liabilities ...................................................................................................... 5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus .......................................................................... 0
Common Stock ........................................................................................................... 500
Surplus (exclude all surplus related to preferred stock) ............................................................... 62,118
Undivided profits and capital reserves ................................................................................. 394,325
Net unrealized holding gains (losses) on available-for-sale securities ................................................. 6,520
Total equity capital ................................................................................................... 463,463
Total liabilities, limited-life preferred stock, and equity capital .................................................... 6,208,857
</TABLE>
2
<PAGE> 1
EXHIBIT 25.3
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
UNITED FINANCIAL HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Florida
(State of incorporation) (I.R.S. employer identification no.)
333 Third Avenue North
St. Petersburg, Florida 33701
(Address of principal executive offices) (Zip Code)
United Financial Holdings, Inc. Guarantee with respect to
___% Cumulative Trust Preferred Securities
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By:/s/ Emmett R. Harmon
------------------------ ------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter the
seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real
<PAGE> 5
and personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require,
to make by-laws not inconsistent with the Constitution or laws
of the United States or of this State, to discount bills,
notes or other evidences of debt, to receive deposits of
money, or securities for money, to buy gold and silver bullion
and foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in
all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other persons
and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes,
vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond
or other instrument issued by any state, municipality, body
politic, corporation,
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<PAGE> 6
association or person, either alone or in conjunction with any
other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to
be entered in any court of record within the State of Delaware
or elsewhere, or which may now or hereafter be required by any
law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in
any other trust capacity in the receiving, holding, managing,
and disposing of any and all estates and property, real,
personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation
is so appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to receive
a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of
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<PAGE> 7
capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and
to exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the whole
or any part of the property held or owned by the Corporation,
and to sell and pledge such bonds, as and when the Board of
Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized
by law, to lease, purchase, hold, sell, assign, transfer,
pledge, mortgage and convey real and personal property of any
name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation,
and to pay for the same in cash, stock of this Corporation,
bonds or otherwise; to hold or in any manner to dispose of the
whole or any part of the property so purchased; to conduct in
any lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such
business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes, drafts,
bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
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<PAGE> 8
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall
(except where otherwise expressed in said paragraph) be nowise
limited or restricted by reference to or inference from the
terms of any other clause of this or any other paragraph in
this charter, but that the objects, purposes and powers
specified in each of the clauses of this paragraph shall be
regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred
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<PAGE> 9
Stock which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other
class or classes, or series of the same or other class of
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
and the terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or all
series of Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall
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<PAGE> 10
have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of section (b) of
this Article FOURTH), and subject further to any conditions which
may be fixed in accordance with the provisions of section (b) of
this Article FOURTH, then and not otherwise the holders of Common
Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b)
of this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to receive all of the remaining assets
of the Corporation, tangible and intangible, of whatever kind
available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by
them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article FOURTH, each holder of Common Stock shall have one
vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by
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<PAGE> 11
the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in section (b) of this Article FOURTH
and the consent, by class or series vote or otherwise, of the
holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board
of Directors of any other series of Preferred Stock whether or not
the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with,
the powers, preferences and rights of such outstanding series, or
any of them; provided, however, that the Board of Directors may
provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article
FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding
shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
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<PAGE> 12
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and
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<PAGE> 13
declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall
be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
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<PAGE> 14
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate
fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with
or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding
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shares of capital stock of the Corporation entitled to vote generally in the
election of directors, considered for the purpose of this Article FIFTEENTH as
one class ("Voting Shares"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding
voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share
of capital stock of the Corporation which were at any time
within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
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(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or
indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of capital stock of the
Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person
is an Affiliate or Associate of another, (3) whether a person
has an agreement, arrangement or understanding with another as
to the matters referred to in paragraph (3) of section (c), or
(4) whether the assets subject to any business combination or
the consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of
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$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect to
any act or omission occurring prior to the time of such repeal
or modification."
14
<PAGE> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of
<PAGE> 20
its members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in charge
of such of the departments or division of the Company as it may deem advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
2
<PAGE> 21
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the
3
<PAGE> 22
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
4
<PAGE> 23
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall be
selected by the Board of Directors from its own members, none of whom shall be
an officer of the Company, and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
5
<PAGE> 24
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct.
6
<PAGE> 25
He shall also exercise such powers and perform such duties as may from time to
time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board
of Directors shall preside at all meetings of the Board of Directors at which
the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to the
office of the President conferred or imposed upon him by statute or assigned to
him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated by
the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets and
liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of
7
<PAGE> 26
Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general supervision
over the internal operations of the Company, including accounting, and shall
render to the Board of Directors at appropriate times a report relating to the
general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in charge
of the Audit Division of the Company with such title as the Board of Directors
shall prescribe, shall report to and be directly responsible only to the Board
of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented
8
<PAGE> 27
thereby is transferable only upon the books of the Company by the holder
thereof or his attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be cancelled at the
time of transfer, and before a new certificate or certificates shall be issued
in lieu thereof. Duplicate certificates of stock shall be issued only upon
giving such security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases,
9
<PAGE> 28
contracts, agreements, bonds, notes, mortgages and all other instruments
incident to the business of this Company or in acting as executor,
administrator, guardian, trustee, agent or in any other fiduciary or
representative capacity by any and every method of appointment or by whatever
person, corporation, court officer or authority in the State of Delaware, or
elsewhere, without any specific authority, ratification, approval or
confirmation by the Board of Directors or the Executive Committee, and any and
all such instruments shall have the same force and validity as though expressly
authorized by the Board of Directors and/or the Executive Committee.
10
<PAGE> 29
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1.(A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of
11
<PAGE> 30
such claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the Corporation shall
have the burden of proving that the claimant was not entitled to the requested
indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
12
<PAGE> 31
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 21, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 32
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ........................................................ 232,976
Interest-bearing balances .................................................................................. 0
Held-to-maturity securities ............................................................................................ 195,579
Available-for-sale securities .......................................................................................... 1,416,957
Federal funds sold and securities purchased under agreements to resell ................................................. 150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income......................................... 3,978,706
LESS: Allowance for loan and lease losses....................................... 63,164
LESS: Allocated transfer risk reserve........................................... 0
Loans and leases, net of unearned income, allowance, and reserve ........................................... 3,915,542
Assets held in trading accounts ........................................................................................ 0
Premises and fixed assets (including capitalized leases) ............................................................... 135,596
Other real estate owned ................................................................................................ 1,696
Investments in unconsolidated subsidiaries and associated companies .................................................... 1,066
Customers' liability to this bank on acceptances outstanding ........................................................... 0
Intangible assets ...................................................................................................... 55,759
Other assets ........................................................................................................... 103,586
Total assets ........................................................................................................... 6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 33
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices .................................................................................................... 4,568,934
Noninterest-bearing . . . . . . . . ............................................. 838,655
Interest-bearing. . . . . . . . . . ............................................. 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase ............................................. 418,382
Demand notes issued to the U.S. Treasury ............................................................................... 99,350
Trading liabilities (from Schedule RC-D) ............................................................................... 0
Other borrowed money: ///////
With original maturity of one year or less ................................................................. 524,000
With original maturity of more than one year ............................................................... 43,000
Bank's liability on acceptances executed and outstanding ............................................................... 0
Subordinated notes and debentures ...................................................................................... 0
Other liabilities (from Schedule RC-G) ................................................................................. 91,728
Total liabilities ...................................................................................................... 5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus .......................................................................... 0
Common Stock ........................................................................................................... 500
Surplus (exclude all surplus related to preferred stock) ............................................................... 62,118
Undivided profits and capital reserves ................................................................................. 394,325
Net unrealized holding gains (losses) on available-for-sale securities ................................................. 6,520
Total equity capital ................................................................................................... 463,463
Total liabilities, limited-life preferred stock, and equity capital .................................................... 6,208,857
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<CIK> 0001067206
<NAME> UNITED FINANCIAL HOLDING INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,684,056
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 245,000
<TRADING-ASSETS> 148,834
<INVESTMENTS-HELD-FOR-SALE> 16,052,927
<INVESTMENTS-CARRYING> 12,795,890
<INVESTMENTS-MARKET> 13,104,635
<LOANS> 110,573,976
<ALLOWANCE> 1,826,342
<TOTAL-ASSETS> 158,495,588
<DEPOSITS> 136,611,075
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,632,075
<LONG-TERM> 3,306,902
0
208,500
<COMMON> 35,139
<OTHER-SE> 11,768,097
<TOTAL-LIABILITIES-AND-EQUITY> 158,495,588
<INTEREST-LOAN> 7,552,770
<INTEREST-INVEST> 1,165,596
<INTEREST-OTHER> 606,820
<INTEREST-TOTAL> 9,325,186
<INTEREST-DEPOSIT> 3,664,698
<INTEREST-EXPENSE> 3,934,071
<INTEREST-INCOME-NET> 5,391,115
<LOAN-LOSSES> 340,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,978,926
<INCOME-PRETAX> 2,161,552
<INCOME-PRE-EXTRAORDINARY> 2,161,552
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,374,924
<EPS-PRIMARY> .39
<EPS-DILUTED> .36
<YIELD-ACTUAL> 5.28
<LOANS-NON> 2,998,000
<LOANS-PAST> 133,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,647,355
<CHARGE-OFFS> 169,469
<RECOVERIES> 8,456
<ALLOWANCE-CLOSE> 1,826,342
<ALLOWANCE-DOMESTIC> 1,826,342
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
