<PAGE> 1
As filed with the Securities and Exchange Commission on October 7, 1998
Registration Statement No. 333-60431
333-60431-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2 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>
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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.
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<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 OCTOBER , 1998
600,000 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 600,000 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 $8.00 and $9.00 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)
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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.
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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>
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PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSION(1)(3) UFH CAPITAL(2)(3) COMPANY(2)(3)
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<S> <C> <C> <C> <C>
Per share of Common Stock............ $ $ -- $
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Per Preferred Security............... $5.00 $ $5.00 $5.00
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Total Common Stock(4)................ $ $ -- $
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Total Preferred Securities(5)........ $6,000,000 $6,000,000 --
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</TABLE>
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(1) UFH Capital and the Company have each agreed to indemnify the Underwriter
against certain liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $400,000.
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of
the Company, the Company has agreed to pay to the Underwriter, as
compensation for arranging the investment therein of such proceeds,
$ per Preferred Security (or $ in the aggregate). See
"Underwriting."
(4) The Company has granted the Underwriter an option, exercisable within 30
days after the date of this Prospectus, to purchase an aggregate of up to
90,000 additional shares of Common Stock on the same terms and conditions as
set forth above to cover over-allotments, if any. If the Underwriter
exercises the over-allotment option in full, the total Price to Public,
Underwriting Commission, and Proceeds to Company will be $ , $ , and
$ , respectively. See "Underwriting."
(5) UFH Capital and the Company have granted the Underwriter an option,
exercisable within 30 days after the date of this Prospectus, to purchase up
to an additional $900,000 aggregate liquidation amount of the Preferred
Securities on the same terms as set forth above, solely to cover
over-allotments, if any. If such over-allotment option is exercised in full,
the total Price to Public and Proceeds to UFH Capital will be $6,900,000.
See "Underwriting."
The Securities are offered by the Underwriter subject to receipt and
acceptance by it, prior sale and the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the certificates representing shares of the Common
Stock will be made on or about , 1998 through the Depository Trust
Company or at the offices of William R. Hough & Co., St. Petersburg, Florida,
and that delivery of the Preferred Securities will be made in book-entry form
through the book-entry facilities of The Depository Trust Company on or about
, 1998 against payment therefor in immediately available funds.
WILLIAM R. HOUGH & CO. 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 _______________,
1998 (the "Distributions"). Such distributions are considered under current law
to be interest paid by the Company to the holders of Preferred Securities for
United States federal income tax purposes. Interest on the Junior Subordinated
Debentures will accrue at the same rate as distributions accrue on the Preferred
Securities. The Company has the right, so long as no Debenture Event of Default
(as defined herein) has occurred and is continuing, to defer payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not to exceed 20 consecutive quarters with respect to each deferral
period (each, an "Extended Interest Payment Period"); provided that no Extended
Interest Payment Period may extend beyond the Stated Maturity. Upon the
termination of any such Extended Interest Payment Period and the payment of all
amounts then due, the Company may elect to begin a new Extended Interest Payment
Period subject to the requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred, and the Company will not be permitted to
declare or pay any cash distributions with respect to debt securities that rank
pari passu with or junior to the Junior Subordinated Debentures or with respect
to its capital stock. During an Extended Interest Payment Period, interest on
the Junior Subordinated Debentures will continue to accrue (and the amount of
distributions to which holders of the Preferred Securities are entitled will
accumulate) at the rate of ____% per annum, compounded quarterly, 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
$41,000 of debt of a subsidiary of the Company that is guaranteed by the
Company), of which $15,000 is repayable prior to June 30, 1999. Of 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 June 30, 1998 and 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 services with emphasis on
commercial loans and loans under the lending program of the U.S. Small Business
Administration (the "SBA"). The Company's operations include three business
segments: commercial banking, trust services, and investment advisory services,
which constituted 98.6%, (4.5%) and 5.9%, respectively, of the Company's 1997
net income before taxes and corporate overhead. At June 30, 1998, the Company
had consolidated total assets of $178.1 million, net loans of $97.1 million,
deposits of $157.7 million and stockholders' equity of $11.5 million.
The Company and the Bank are currently regulated by the Federal Reserve,
and the Bank also is regulated by the Florida Department of Banking and Finance
(the "Department") and, to a lesser extent, the Federal Deposit Insurance
Corporation ("FDIC"). The Bank's deposits are insured by the FDIC up to
applicable limits.
The Company's other operating subsidiaries are Eickhoff, Pieper, &
Willoughby, Inc., an investment advisory firm registered under the Investment
Advisers Act of 1940 ("EPW") headquartered in Tampa, Florida, with an office in
Jacksonville, Florida, and United Trust Company, a Florida-chartered trust
company ("United Trust") registered with the Department and located in St.
Petersburg, Florida. EPW offers investment management services to corporate,
municipal and high net worth individual clients throughout the State of Florida.
As of June 30, 1998, EPW had $312.3 million in assets under management. United
Trust is a wholesale provider of data processing, administrative and accounting
support and asset custody services to professionals holding assets in trust
(primarily legal and accounting firms). United Trust also provides retail trust
and investment management services to individual and corporate clients. As of
June 30, 1998, United Trust had $241.9 million in assets under trust.
In 1986 a group of investors, headed by Neil W. Savage, the Company's
President and Chief Executive Officer and the Bank's Chairman and Chief
Executive Officer, acquired control of the Company, then known as Pinellas
Bancshares Corporation. The Company's name was changed to its present name in
1995. In September 1995, the Company acquired Fiduciary Services Corp. ("FSC"),
a trust data processing and accounting service for professionals, and merged FSC
into the Company. In January, 1996, the Company acquired EPW. The Company formed
United Trust during the fourth quarter of 1997 and effective December 31, 1997,
transferred all of the Bank's trust assets to United Trust.
The principal executive offices of the Company are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
1
<PAGE> 7
BUSINESS STRATEGY
The principal elements of the Company's business strategy are to
increase its market share in its existing business segments and to seek out
niche business segments in which the Company can compete effectively in order to
create new sources of non-interest income and increase traditional interest
income from new lending opportunities. The Company has sought to implement its
strategy of increasing its market share in its existing business segments by
expanding the Bank's market coverage through de novo branching, increasing the
Bank's emphasis on originating loans secured by real estate and other assets for
its own portfolio, originating secured and unsecured small business loans for
its own portfolio, and continuing to originate a high volume of SBA loans, both
for its own portfolio and for sale in the secondary market. A primary element of
the Company's business strategy as a community banking organization is to seek
to provide customers with a level of personalized service exceeding that
provided by its competitors, including the local banking operations of large
regional and national banking companies.
The Company has sought to add new sources of non-interest income through
the creation of United Trust, which receives fees for the wholesale trust
services it offers to legal and accounting firms and the retail trust and
investment management services it offers to other clients, and the acquisition
of EPW, which generates fee income from the investment management services it
offers to corporate, municipal and high net worth individual clients. By
expanding the range of trust and investment management services it offers, the
Company seeks to differentiate itself from other similarly sized community
banking organizations operating in the Company's market.
The results of the Company's business strategy have been substantial
asset and revenue growth. The Company's total assets have increased from
approximately $106.6 million at December 31, 1995 to $147.3 million at December
31, 1997. The Company's consolidated revenues (net interest income plus
non-interest income) increased from $7.1 million for the year ended December 31,
1995 to $9.9 million for the year ended December 31, 1997. During this period of
asset and revenue growth, the Company's net income decreased from $1.5 million
for the year ended December 31, 1995 to $1.4 million for the year ended December
31, 1997.
UFH CAPITAL TRUST I
UFH Capital is a statutory business trust formed under Delaware law
pursuant to (i) an initial trust agreement, dated as of July 30, 1998, executed
by the Company, as depositor, Wilmington Trust Company, as Property Trustee (the
"Property Trustee") and as Delaware Trustee (the "Delaware Trustee"), and the
administrative trustees (the "Administrative Trustees") named therein
(collectively, the "Trustees"), and (ii) a certificate of trust filed with the
Secretary of State of the State of Delaware on July 30, 1998. The initial trust
agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities and
the Company will acquire all of the Common Securities, which will represent an
aggregate liquidation amount equal to at least 3.0% of the total capital of UFH
Capital. The Common Securities will rank pari passu, and payments will be made
thereon pro rata with the Preferred Securities, except that upon the occurrence
and during the continuance of an Event of Default (as defined herein) under the
Trust Agreement resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Preferred Securities-Subordination of Common Securities."
UFH Capital exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of UFH
Capital, (ii) investing the gross proceeds of the Trust Securities in an
equivalent amount of the Junior Subordinated Debentures issued by the Company,
and (iii) engaging in only those other activities necessary thereto. The Junior
Subordinated Debentures and payments thereunder will be the only assets of UFH
Capital, and payments under the Junior Subordinated
2
<PAGE> 8
Debentures will be the only revenue of UFH Capital. UFH Capital has a term of 31
years, but may terminate earlier as provided in the Trust Agreement.
The principal executive offices of UFH Capital are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
THE OFFERINGS
<TABLE>
<S> <C>
COMMON STOCK OFFERING
Common Stock Offered by the Company........................... 600,000 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 90,000 shares of
Common Stock on the same terms and conditions as the initial
offering, solely to cover over-allotments, if any.
Offering Price................................................ Between $8 and $9 per share.
Common Stock to be outstanding
after the Common Stock Offering............................... 4,113,858 shares.
Nasdaq Small-Cap Market Symbol................................ Application has been made to have the Common Stock listed for
quotation on The Nasdaq 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 180,000 Preferred Securities on the same terms
and 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 _____________, 1998.
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 obligations under the Junior
Subordinated Debentures will be structurally subordinated to all
existing and future liabilities and obligations of its
subsidiaries.
Option to Extend Interest Payment Period..................... The Company has the right, at any time, so long as no
Debenture Event of Default has occurred and is continuing, to
defer payments of interest on the Junior Subordinated
Debentures for a period not exceeding 20 consecutive quarters;
provided, that no Extended Interest Payment Period may extend
beyond the Stated Maturity of the Junior Subordinated
Debentures. During an Extended Interest Payment Period,
quarterly Distributions on the Preferred Securities will be
deferred, though such Distributions would continue to accrue
with interest thereon compounded quarterly just as interest will
continue to accrue and compound on the Junior Subordinated
Debentures.
During an Extended Interest Payment Period, the Company and any
subsidiary will be prohibited, subject to certain exceptions
described herein, from declaring or paying any cash
distributions with respect to its debt securities that rank pari
passu with or junior to the Junior Subordinated Debentures or
with respect to its capital stock. Upon the termination of any
Extended Interest Payment Period and the payment of all amounts
then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing restrictions. See
"Description of the Preferred Securities-Distributions-Extended
Interest Payment Period" and "Description of the Junior
Subordinated Debentures-Option to Extend Interest Payment
Period." Should an Extended Interest Payment Period occur,
holders of Preferred Securities will be required to include
deferred interest income in their gross income for United States
federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments.
See "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 at any time or in part from time to
time, or (ii) at any time, in whole (but not in part), within 180
days following the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each case at a
redemption price equal to 100% of the principal amount of the
Junior Subordinated Debentures so redeemed, together with any
accrued but unpaid interest to the date fixed for redemption. See
"Description of the Junior Subordinated Debentures-Redemption or
Exchange."
Distribution of Junior Subordinated Subject to receipt of any required Federal Reserve approvals,
Debentures.................................................... 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 on the Preferred
Securities, in which event, the Guarantee will not apply to such
distributions unless and until UFH Capital has sufficient funds
available therefor. The obligations of the Company under the
Guarantee and the Preferred Securities are subordinate and
junior in right of payment to all 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 operating in conjunction with fewer than all of
the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of the
obligations of UFH Capital under the Preferred Securities. See
"Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
Voting Rights................................................ Except in limited circumstances, the holders of the Preferred
Securities will have no voting rights in UFH Capital. See
"Description of the Preferred Securities-Voting Rights;
Amendment of Trust Agreement."
Nasdaq Small-Cap Market Symbol............................... Application has been made to have the Preferred Securities
listed for quotation on The NASDAQ Small-Cap Market under
the symbol "UFHIP."
</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 the Bank and the sale of the Common Stock by the
Company (assuming an offering price of $8.50 per share of Common Stock) will be
approximately $10.2 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 8.5% and matures on November 1, 2007) and to
initially contribute $1 to $2 million to the capital of the Bank to support
future asset growth and fund the approximately $650,000 cost of establishing a
new branch. The remaining $5 to $6 million of proceeds will be used for general
corporate purposes, including working capital, with the anticipation that the
Company will use a portion of such proceeds to make additional capital
contributions to the Bank from time to time to support further growth and branch
expansion, and finance the Company's expansion into banking-related businesses
and additional financial services businesses. See "Use of Proceeds" and
"Business-Business Strategy."
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 six months ended June
30, 1998 and June 30, 1997 has been derived from Company-prepared financial
information and should be read in conjunction with the audited financial
statements, including the consolidated balance sheets at December 31, 1997 and
1996 and the related consolidated statements of operations, statement of change
in equity, and statements of cash flows for each of the years in the three-year
period ended December 31, 1997 and the notes thereto appearing elsewhere herein,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected financial ratios for the six months ended June 30,
1998 and 1997 have been annualized. Historical financial information is not
necessarily indicative of results of operations for any future period or
financial condition as of any future date.
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations and Other Data
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income ................... $ 6,007 $ 5,147 $ 10,792 $ 9,595 $ 9,124 $ 6,941 $ 5,665
Interest expense .................. 2,523 1,914 4,101 3,420 3,212 2,113 2,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income ............... 3,484 3,233 6,691 6,175 5,912 4,828 3,665
Provision for loan loss .......... 250 90 90 150 180 140 365
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses ................. 3,234 3,143 6,601 6,025 5,732 4,688 3,300
Other noninterest income .......... 1,909 1,475 3,240 2,572 1,237 1,359 1,196
General and administrative
("G&A") expenses ................ 3,810 3,433 7,112 6,115 4,500 3,793 3,200
Other noninterest expense ......... - 393 393 - - - -
Amortization of goodwill .......... 35 31 66 111 121 116 116
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before taxes ........... 1,298 761 2,270 2,371 2,348 2,138 1,180
Income tax expense ................ 512 291 860 891 871 774 421
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income ........................ $ 786 $ 470 $ 1,410 $ 1,480 $ 1,477 $ 1,364 $ 759
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Earnings per share, basic ......... $ 0.22 $ 0.13 $ 0.41 $ 0.47 $ 0.64 $ 0.78 $ 0.45
Weighted average shares
outstanding, basic .............. 3,481,947 3,430,818 3,432,768 3,026,619 2,163,117 1,578,471 1,419,393
Earnings per share, diluted ....... $ 0.21 $ 0.13 $ 0.38 $ 0.40 $ 0.43 $ 0.38 $ 0.23
Weighted average shares
outstanding, diluted ............ 3,864,879 3,795,738 3,785,712 3,761,406 3,442,245 3,603,549 3,477,555
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (at end of
period)
Total assets ...................... $ 178,148 $ 128,782 $ 147,319 $ 122,733 $ 106,594 $ 104,051 $ 81,178
Investment securities ............. 29,888 22,753 21,569 18,706 17,957 18,508 19,982
Loans, net of unearned income ..... 98,872 83,192 96,469 80,872 75,534 65,097 52,326
Allowance for loan losses ......... 1,759 1,678 1,647 1,610 1,527 1,335 875
Intangible assets ................. 1,396 1,409 1,336 1,440 919 604 719
Deposits .......................... 157,686 112,940 130,219 108,145 93,252 94,103 72,659
Stockholders' equity .............. 11,452 9,716 10,491 9,492 8,487 6,385 4,902
SELECTED FINANCIAL RATIOS
(annualized)
Return on average assets .......... 1.01% 0.75% 1.08% 1.32% 1.45% 1.56% 1.00%
Return on average equity .......... 14.07% 9.77% 14.25% 16.55% 20.84% 23.71% 16.29%
Equity to Assets .................. 7.21% 7.66% 7.56% 7.96% 6.95% 6.57% 6.15%
Dividend Payout ................... 30.71% 50.39% 33.65% 28.81% 25.69% 17.22% 21.97%
Net interest spread ............... 4.74% 5.27% 5.27% 5.58% 5.60% 5.64% 5.01%
Net interest margin ............... 5.25% 5.97% 5.95% 6.27% 6.38% 6.10% 5.53%
G&A expense to average assets ..... 4.92% 5.47% 5.44% 5.44% 4.42% 4.34% 4.22%
G&A efficiency ratio .............. 70.65% 72.91% 71.61% 69.90% 62.95% 61.31% 65.82%
Non-accrual loans to total loans
(at period end) ................... 3.97% 0.67% 0.41% 0.46% 0.02% - .05%
Nonperforming assets to total assets 2.38% 0.44% 0.27% 0.30% 0.02% 0.02% 0.41%
Loan loss allowance to total loans 1.77% 2.01% 1.70% 1.98% 2.02% 2.04% 1.61%
Loan loss allowance to nonperforming
loans ............................ 44.76% 299.11% 411.75% 432.80% 10,180.00% N/M 2.86%
OTHER DATA (at period end)
Number of branches ................ 4 4 4 4 3 3 3
Number of full-time equivalent
employees ......................... 88 86 89 74 63 47 43
</TABLE>
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 June 30, 1998, 7.6% of the Company's loans were
secured by one-to-four family residential real estate, 53.9% were secured by
commercial real estate and multifamily residential, 3.4% were construction loans
and the Company had other real estate ("ORE") acquired through foreclosure with
a book value of $0.3 million. The properties securing these loans are
concentrated in Florida. Real estate values and real estate markets generally
are affected by, among other things, changes in national, regional or local
economic conditions, fluctuations in interest rates and the availability of
loans to potential purchasers, changes in the tax laws and other governmental
statutes, regulations and policies and acts of nature. Any decline in real
estate prices, particularly in Florida, could significantly reduce the value of
the real estate collateral securing the Company's real estate loans, increase
the level of the Company's nonperforming loans, require write-downs in the book
value of its ORE, and have a material negative impact on the Company's financial
performance.
NONPERFORMING ASSETS
The Company's ratio of nonperforming assets to total assets was 2.38% at
June 30, 1998, which is above the average level of other similarly-sized
financial institutions. While the Company carefully manages its loan portfolio
with a view to minimizing its nonperforming assets, there can be no assurance
that the Company's ratio of nonperforming assets to total assets will improve or
not increase, particularly if general economic conditions deteriorate.
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's loans will
become delinquent and a portion of the loans will require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the view of the Company's regulators, and geographic and industry
loan concentration. If, however, delinquency levels were to increase as a result
of adverse general economic conditions, especially in Florida, the loan loss
reserve so determined by the Company may not be adequate. To the extent that the
Company's loan losses exceed its allowance for loan losses, the Company's
results of operations would be adversely affected. There can be no assurance
that the Company's allowance
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 $10.2 million, of which
approximately $7.6 million, or 74.5% of the net proceeds, is not being used to
repay debt. Approximately $1 to $2 million of the estimated $7.6 million of net
proceeds that is not being used to repay debt is anticipated to be contributed
to the capital of the Bank to support growth and fund the cost of establishing a
new branch. The balance of such proceeds may be used by the Company to make
additional capital contributions to support further growth and branch expansion
to finance possible expansion into banking-related businesses and additional
financial services businesses. It is anticipated that pending such uses, such
proceeds will be invested by the Company in certain short-term obligations. The
net proceeds of the Offerings, together with the Company's existing working
capital, will make a significant amount of funds available to the Company. The
Company will have substantial discretion over the use of such funds. There can
be no assurance the Company will deploy such funds in a manner that will enhance
the financial condition or results of operations of the Company. See "Use of
Proceeds."
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Company's profitability is dependent to a large extent on its net
interest income, which is the difference between its interest income on
interest-earning assets and its interest expense on interest-bearing
liabilities. The Company, like most financial institutions, is affected by
changes in general interest rate levels, which are currently at relatively low
levels, and by other economic factors beyond its control. Interest rate risk
arises from mismatches (i.e., the interest sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in terms
of the ratio of the interest rate sensitivity gap to total assets. More assets
repricing or maturing than liabilities over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities
repricing or maturing than assets over a given time frame is considered
liability-sensitive and is reflected as a negative gap. An asset-sensitive
position (i.e., a positive gap) will generally enhance earnings in a rising
interest rate environment and will negatively impact earnings in a falling
interest rate environment, while a liability-sensitive position (i.e., a
negative gap) will generally enhance earnings in a falling interest rate
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
The Company has attempted to structure its asset and liability management
strategies to mitigate the impact on net interest income of changes in market
interest rates. At June 30, 1998, the Company had a one year cumulative negative
gap of 17.8%. This negative one year gap position may, as noted above, have a
negative impact on earnings in a rising interest rate environment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination
by the Department as its chartering authority and primary regulator, by the
Federal Reserve as its federal regulator and by the FDIC as administrator of the
insurance fund that insures the Bank's deposits up to applicable limits. As the
holding company of the Bank, the Company is subject to regulation and oversight
by the Federal Reserve. Such regulation and supervision governs the activities
in which an institution may engage and is intended primarily for the protection
of the FDIC insurance funds and depositors. Regulatory authorities have been
granted extensive discretion in connection with their supervisory and
enforcement activities and regulations have been implemented which have
increased capital requirements, increased insurance premiums and have resulted
in increased administrative, professional and compensation expenses. Any change
in the regulatory structure or the applicable statutes or regulations could have
a material impact on the Company, the Bank and their operations. Additional
legislation and regulations may be enacted or adopted in the future which could
significantly affect the powers, authority and operations of the Bank and the
Bank's competitors which in turn could have a material adverse affect on the
Bank and its operations. See "Business-Supervision and Regulation."
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 as beneficiary, there can be no
assurance that the proceeds of any such policies would adequately compensate the
Company for the loss of the services of any of such persons. Neither Mr. Savage
nor Mr. Winner have entered into a non-competition agreement with the Company or
the Bank. Although both Mr. Eickhoff's and Mr. Curtis's employment contracts
contain non-competition clauses, the provisions terminate under certain
conditions. See "Management-Employment Contracts with Officers."
CONTROL BY EXISTING 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 49.8% of the outstanding Common Stock (or
approximately 48.9% 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 are expected to be unable to
compute payment, interest or delinquency. If "Year 2000" problems were to
develop, given the reliance of the Company on data processing services to
maintain customer balances, service customer accounts and to perform other
record keeping and service oriented functions associated with the Company's
three primary business segments, the occurrence of such an event could have a
material impact on the Company's results of operations, liquidity, and financial
condition. In 1997, the Company began the process of identifying the many
software applications and hardware devices expected to be impacted by this
issue. The Company outsources its principal data processing activities to a
third party and purchases most of its software applications from third party
vendors. The Company believes that its vendors and its significant customers are
actively addressing the potential problems associated with the Year 2000
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
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<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 Subordinated Debentures or make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Junior Subordinated Debentures.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES OFFERING
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
The ability of UFH Capital to pay amounts due on the Preferred
Securities is entirely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. The ability of the Company to pay
interest on the principal of the Junior Subordinated Debentures to UFH Capital
(and consequently, UFH Capital's ability to pay Distributions on the Preferred
Securities and the Company's ability to pay its obligations under the Guarantee)
will depend to a significant degree on the Bank's ability to pay dividends to
the Company in amounts sufficient to service the Company's obligations. The
Company is currently obligated to pay $251,900 in annual interest on
indebtedness which will rank senior to, or pari passu with, the Junior
Subordinated Debentures ($201,500 of which relates to indebtedness to be repaid
from the proceeds of the Offerings), and will be obligated to make any other
payments with respect to securities issued by the Company in the future which
are pari passu or have a preference over the Junior Subordinated Debentures
issued to UFH Capital with respect to the payment of principal, interest or
dividends. There is no restriction on the ability of the Company to issue, or
limitation on the amount of, securities which are pari passu or have a
preference over the Junior Subordinated Debentures issued to UFH Capital, nor is
there any restriction on the ability of the Company or the Bank to issue
additional capital stock or incur additional indebtedness.
The Bank's ability to pay dividends or make other capital distributions
to the Company is governed by both federal and Florida law and regulations
promulgated by the Federal Reserve and the Department, and is based on, among
other things, the Bank's regulatory capital levels and net income. Under the
Federal Reserve's capital regulations, the Bank is prohibited from making a
capital distribution that would cause it to become "undercapitalized" or if it
is already undercapitalized (i.e., has a risk-based capital ratio of less than
8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or a leverage ratio
of less than 3.0%). Under the Florida Financial Institutions Code, the prior
approval of the Department is required if the total of all dividends declared by
a bank in any calendar year will exceed the sum of the bank's net profits for
that year and its retained net profits for the preceding two years. Any
additional capital distributions would require prior Federal Reserve and
Department approval. As of June 30, 1998, the Bank was a well-capitalized
institution for purposes of the Federal Reserve's capital regulations and had
$2.8 million available for distribution as dividends to the Company. There is no
assurance that the Bank will remain a well-capitalized institution or that it
will be in a position to make dividend payments to the Company in an amount
sufficient for the Company to service the Junior Subordinated Debentures or for
UFH Capital to pay amounts due on the Preferred Securities. See
"Business-Supervision and Regulation."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the
benefit of the holders of Preferred Securities and under the Junior Subordinated
Debentures issued to UFH Capital are unsecured and rank subordinate and junior
in right of payment to all existing and future Senior Debt and Subordinated Debt
of the Company. At June 30, 1998, the Company had $2.4 million of Senior Debt
outstanding ($2.3 million of which is to be repaid from the proceeds of the
Offerings) and $630 thousand of outstanding Subordinated Debt. Only the capital
stock of the Company is currently junior in right of payment to the Junior
Subordinated Debentures issued to UFH Capital. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of a subsidiary, including the Bank, upon a liquidation or reorganization or
otherwise of such subsidiary (and thus the ability of holders of the Preferred
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of the subsidiary (including depositors in the
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<PAGE> 19
Bank), except to the extent that the Company may itself be recognized as a
creditor of the subsidiary. If the Company is a creditor of a subsidiary, the
claims of the Company would be subject to any prior security interest in the
assets of the subsidiary and any indebtedness of the subsidiary senior to that
of the Company. The Junior Subordinated Debentures, therefore, will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including the Bank. At June 30, 1998, the Bank had liabilities of
$164.0 million (including $158.3 million in deposits). Holders of Junior
Subordinated Debentures and the Preferred Securities should look only to the
assets of the Company for payments on the Junior Subordinated Debentures.
Neither the Indenture, the Guarantee nor the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt and
Subordinated Debt, that may be incurred by the Company or any of its
subsidiaries. See "Description of the Guarantee-Status of the Guarantee" and
"Description of the Junior Subordinated Debentures-Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each Extended
Interest Payment Period; provided that no Extended Interest Payment Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. In the
event of any such deferral, quarterly Distributions on the Preferred Securities
by UFH Capital will be deferred (and the amount of Distributions to which
holders of the Preferred Securities are entitled will accumulate additional
Distributions thereon at the rate of ____% per annum, compounded quarterly from
the relevant payment date for such Distributions) during such Extended Interest
Payment Period. During any such Extended Interest Payment Period, the Company
may not and may not permit any subsidiary to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions payable in any class of the
Company's capital stock, (c) any declaration of a dividend in connection with
the implementation of a shareholder rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (d) purchases of the Company's capital stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees), (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities. Prior to the termination of any such
Extended Interest Payment Period, the Company may further defer the payment of
interest; provided that no Extended Interest Payment Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any Extended Interest Payment
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of ____% compounded quarterly, to the extent
permitted by applicable law), the Company may elect to begin a new Extended
Interest Payment Period, subject to the above restrictions. Subject only to
compliance with the foregoing, there is no limit on the number of times that the
Company may elect to begin an Extended Interest Payment Period so long as no
Debenture Event of Default has occurred and is continuing. See "Description of
the Preferred Securities-Distributions-Extended Interest Payment Period" and
"Description of the Junior Subordinated Debentures-Option to Extend Interest
Payment Period."
Should an Extended Interest Payment Period occur, each holder of
Preferred Securities will be required to accrue and recognize as income (in the
form of original issue discount) in respect of its pro rata share of the
interest accruing on the Junior Subordinated Debentures held by UFH Capital for
United States federal income tax purposes. A holder of Preferred Securities
would, as a result, be required to include such income in gross income for
United States federal income tax purposes in advance of the receipt of cash, and
will not receive the cash related to such income from UFH Capital if the holder
disposes of the Preferred Securities prior to the record date for the payment of
the related Distributions. See "-Absence of Prior Public Market for the
Preferred Securities; Trading Price and Tax Considerations" and "Material
Federal Income Tax Considerations-Interest Income and Original Issue Discount."
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<PAGE> 20
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. Should the Company elect to exercise such right in the
future, however, the market price of the Preferred Securities is likely to be
adversely affected. As a result of the existence of the Company's right to defer
interest payments, the market price of the Preferred Securities may be more
volatile than the market prices of other securities on which original issue
discount accrues that do not provide for such optional deferrals.
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL TREATMENT
EVENT
The Company has the right to redeem the Junior Subordinated Debentures
in whole (but not in part) within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event (whether
occurring before or after _________, 2003), and, therefore, cause a mandatory
redemption of the Preferred Securities. The exercise of such right is subject to
the Company having received prior Federal Reserve approval to do so if then
required under applicable Federal Reserve capital guidelines or policies.
"Tax Event" means the receipt by the Company or UFH Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change), in
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities, there is more than an insubstantial risk that (i) UFH
Capital is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by the Company on the
Junior Subordinated Debentures is not, or, within 90 days of such opinion, will
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) UFH Capital is, or will be within 90 days
of the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges. The Company must request and
receive an opinion with regard to such matters within a reasonable period of
time after it becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Company or UFH
Capital of an opinion of counsel to the Company experienced in such matters to
the effect that, as a result of the occurrence of a change in law or regulation
or a written change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that UFH Capital is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which change or prospective
change becomes effective or would become effective, as the case may be, on or
after the date of original issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any Federal Reserve
or other official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities,
there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" except as otherwise restricted under the 25% Capital
Limitation (as defined herein), for purposes of the risk-based capital adequacy
guidelines of the Federal Reserve as then in effect and applicable to the
Company.
Future legislation or administrative or judicial interpretations could
give rise to a Tax Event, which may permit the Company to cause a redemption of
the Preferred Securities prior to _________, 2003. See "Material Federal Income
Tax Considerations-Possible Legislative and Other Actions Affecting Tax
Consequences." For a discussion of possible tax consequences of a redemption,
see "-Exchange of Preferred Securities for Junior Subordinated Debentures;
Redemption and Tax Consequences."
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<PAGE> 21
POSSIBLE SHORTENING OF MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the Stated Maturity
of the Junior Subordinated Debentures to a date not earlier than ___________,
2003. The exercise of such right is subject to the Company having received prior
Federal Reserve approval if then required under applicable capital guidelines or
regulatory policies. See "Description of the Junior Subordinated
Debentures-General."
LIMITED RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to
the extent not paid by UFH Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that UFH Capital
has funds available therefor at such time, (ii) the Redemption Price (as defined
herein) with respect to any Preferred Securities called for redemption, to the
extent that UFH Capital has funds available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or liquidation of UFH
Capital (other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the amount of the Liquidation
Distribution (as defined herein), to the extent UFH Capital has funds available
therefor at such time, and (b) the amount of assets of UFH Capital remaining
available for distribution to holders of the Preferred Securities upon
liquidation of UFH Capital. The holders of not less than a majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee (as defined in the Guarantee) in respect of the Guarantee
or to direct the exercise of any trust power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of the Preferred Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against UFH
Capital, the Guarantee Trustee or any other Person (as defined in the
Guarantee). If the Company were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, UFH Capital would lack funds
for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of Preferred
Securities would not be able to rely upon the Guarantee for such amounts. In the
event, however, that a Debenture Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest on
or principal of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
the Company will have a right of set-off under the Indenture to the extent of
any payment made by the Company to such holder of Preferred Securities in the
Direct Action. Except as described herein, holders of Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the Junior
Subordinated Debentures-Enforcement of Certain Rights by Holders of the
Preferred Securities," and "-Debenture Events of Default" and "Description of
the Guarantee." The Trust Agreement provides that each holder of the Preferred
Securities by acceptance thereof agrees to the provisions of the Guarantee and
the Indenture.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
The Company, as the holder of the Common Securities, has the right at
any time to dissolve, wind-up or terminate UFH Capital and cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in exchange therefor upon liquidation of UFH Capital. The exercise of
such right is subject to the Company having received prior Federal Reserve
approval if then required under applicable capital guidelines or regulatory
policies. The Company will have the right, in certain circumstances, to redeem
the Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior Subordinated Debentures by UFH Capital, in which
event UFH Capital will redeem the Trust Securities on a pro rata basis to the
same extent as the Junior Subordinated Debentures are redeemed by the Company.
Any such distribution or redemption prior to the Stated Maturity will be subject
to prior Federal Reserve approval if then required under applicable Federal
Reserve capital guidelines or regulatory policies. See "Description of the
Preferred
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<PAGE> 22
Securities-Redemption or Exchange-Tax Event Redemption, Investment Company Event
Redemption or Capital Treatment Event Redemption."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of UFH Capital should not be
a taxable event to holders of the Preferred Securities. If, however, UFH Capital
is characterized as an association taxable as a corporation at the time of the
dissolution of UFH Capital, the distribution of the Junior Subordinated
Debentures would constitute a taxable event to holders of Preferred Securities.
Moreover, any redemption of the Preferred Securities for cash would be a taxable
event to such holders. See "Material Federal Income Tax Considerations-Receipt
of Junior Subordinated Debentures or Cash Upon Liquidation of UFH Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of UFH
Capital. The Preferred Securities or the Junior Subordinated Debentures may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debentures, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein.
While there is no assurance that listing will be achieved, if the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of UFH Capital, the Company will use all reasonable efforts
to list the Junior Subordinated Debentures on The Nasdaq 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
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<PAGE> 23
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 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 $10.2 million of net proceeds from
the Offerings ($11.7 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 $5 to $6 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 $650,000 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
$5.0 to $6.0 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 $650,000 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 investors 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. The 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 the
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 $0.031/3 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.
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<PAGE> 26
CAPITALIZATION
The following table sets forth the actual and as adjusted consolidated
capitalization of the Company at June 30, 1998 (dollars in thousands). The as
adjusted capitalization gives effect to the Offerings, assumes an offering price
for the Common Stock of $8.50 per share, and is net of underwriting discounts
and estimated offering expenses of $400 thousand. The information set forth
below should be read in conjunction with the Consolidated Financial Statements
(and the related notes) of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1998
-------------------------
As
Actual Adjusted
------- --------
<S> <C> <C>
Company-obligated mandatorily redeemable capital securities of subsidiary trust holding
solely junior subordinated debentures of the Company(1) ........................................ $ - $ 6,000
Stockholder Equity:
7% convertible preferred stock $10 par value: 150,000 shares
authorized; 20,850 shares issued and outstanding at June 30, 1998; ........................ 209 209
Common Stock, $.01 par value; 20,000,000 shares authorized;
3,513,858 shares and 4,113,858 shares issued and outstanding at June 30,
1998 Actual and As Adjusted, respectively ................................................. 35 41
Paid-in Capital .............................................................................. 6,214 10,362
Net unrealized gain on securities available for sale, net .................................... 74 74
Retained Earnings ............................................................................ 4,920 4,920
------- --------
Total stockholders' equity ................................................................... 11,452 15,606
------- --------
Total Capitalization ................................................................... $11,452 $ 21,606
======= ========
</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 ............................................. 600,000 5,100,000 8.50
----------
Total ................................................ $5,780,923
==========
</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 June 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.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
COMPARISON OF BALANCE SHEETS AT JUNE 30, 1998 AND DECEMBER 31, 1997
Overview
At June 30, 1998, total assets of the Company were $178.1 million as
compared to $147.3 million at December 31, 1997, an increase of $30.8 million or
20.9%. This growth was primarily the result of an unusually high level of
interest bearing transaction account (NOW and money market accounts) deposits
from a single customer. As of June 30, 1998, the Bank had deposits from a single
customer of $36.1 million or 23.1% of the Bank's total deposits. As of December
31, 1997, deposits from this customer amounted to $9.2 million or 7.1% of the
Bank's total deposits. The Company expects deposit balances maintained at the
Bank by this customer to continue to fluctuate and to generally be lower than
the amount of such deposits at June 30, 1998. For example, as of August 31,
1998, this customer's deposits totalled $11.3 million, which contributed to a
reduction in the Company's total assets to $156.3 million at August 31, 1998.
The fluctuations in deposits by this single customer do not relate to any known
pattern, industry or economic trend. At June 30, 1998, the largest increase in
earning assets was in Federal Funds sold, a type of short term, overnight
investment, which was attributable to an increase in deposits occurring near the
end of the quarter. The unusual activity had little effect on average balances
for the quarter ended June 30, 1998 and therefore did not result in a
significant impact upon earnings for that period.
Investment Securities
Investment securities, consisting of U.S. Treasury, federal agency,
obligations of state and political subdivisions, mortgage-backed, and corporate
debt securities, were $29.9 million at June 30, 1998, compared to $21.6 million
at December 31, 1997, an increase of $8.3 million or 38.4%. Included in
investment securities at June 30, 1998, were $17.2 million of securities
recorded at market value held as "available for sale" to provide the Bank
greater flexibility to respond to changes in interest rates.
Loans
Total loans were $99.4 million at June 30, 1998, compared to $97.0
million at December 31, 1997, an increase of $2.4 million or 2.5%. Real estate
mortgage loans increased $3.9 million or 6.5%, commercial loans decreased $1.2
million or 4.0%, and all other loans including consumer loans were virtually
unchanged. Loans net of allowance for loan losses were $97.1 million at June 30,
1998, compared to $94.8 million at December 31, 1997.
Allowance for Loan Losses
The allowance for loan losses amounted to $1.8 million at June 30, 1998
or 1.78% of loans, compared to $1.6 million at December 31, 1997 or 1.71% of
loans. During the six months ended June 30, 1998, $146 thousand in loans were
charged off, $250 thousand was added to the allowance through a provision, which
was accounted for as an expense to reduce net income, and $8 thousand in loans
were recovered from loans previously charged off.
23
<PAGE> 29
Nonperforming Assets
Nonperforming assets were $4.3 million at June 30, 1998, compared to
$0.7 million at December 31, 1997. Nonperforming assets at June 30, 1998
consisted of nonperforming loans of $3.9 million and other real estate owned of
$0.3 million. Nonperforming loans included $1.0 million of the portion of
defaulted loans that is fully guaranteed by the SBA and the Bank expects to be
fully reimbursed by the SBA. A nonperforming loan of $1.1 million is in
foreclosure and management believes that the underlying collateral will be
sufficient to repay substantially all of the loan. Another of the nonperforming
loans in the amount of $1.3 million is being paid on a monthly basis on a
pre-judgment stipulation and interest and principal are being recorded on a cash
basis as received. ORE owned consisted of one property which has been listed for
sale. Management believes that this property is carried at a value which is
equal to its current market value.
Bank Premises and Equipment
Bank premises and equipment totaled $9.3 million at June 30, 1998,
compared to $9.5 million at December 31, 1997, a decrease of $0.2 million. This
decrease was primarily due to depreciation of buildings and equipment and
amortization of leasehold improvements.
Deposits
Total deposits were $ 157.7 million at June 30 1998, compared to $130.2
million at December 31, 1997, an increase of $27.5 million or 21.1%. From
December 31, 1997 to June 30, 1998 demand deposits decreased $2.8 million, NOW
and money market deposits increased $32.6 million, savings deposits decreased
$0.8 million, time deposits of $100 thousand or greater increased $0.2 million,
and other time deposits decreased $1.7 million.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding was $2.4 million at June 30, 1998, compared
to $2.7 million at December 31, 1997, a decrease of $0.3 million. This decrease
was primarily due to a repayment on a line of credit secured by the Bank's
Common Stock.
Stockholders' Equity
Stockholders' equity was $11.5 million at June 30, 1998, or 6.43% of
total assets, compared to $10.5 million or 7.12% of total assets at December 31,
1997. The increase in stockholders' equity was attributable to net income during
the period of $786 thousand and the issuance of $400 thousand of Common Stock,
partially offset by $241 thousand of dividend payments on Preferred and Common
Stock. At June 30, 1998, the Bank's Tier I (core) Capital ratio was 6.15%, its
Tier I Risk-based Capital ratio was 8.94%, and its Total Risk-based Capital
ratio was 10.19%. The capital ratios of the Bank at that date exceeded the
minimum regulatory guidelines for an institution to be considered "well
capitalized." See "Business-Supervision and Regulation."
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997
Overview
Net income for the six months ended June 30, 1998 was $786 thousand or
$0.21 per share, diluted, compared to $470 thousand or $0.13 per share, diluted,
for the same period in 1997. The increase of $316 thousand was primarily the
result of increases in interest income and non-interest income offset partially
by increases in the provision for loan losses, non-interest expenses, and income
taxes.
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 six months ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
(dollars in thousands)
Commercial United Company Commercial United Company
Banking Trust EPW Total Banking Trust EPW Total
---------- ------ ---- ------- ---------- ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income .............. $ 5,958 $ 79 $ 0 $ 6,037 $ 5,146 $ 0 $ 0 $ 5,146
Interest expense ............. 2,425 0 2 2,427 1,856 0 3 1,859
---------- ------ ---- ------- ---------- ------ ---- -------
Net interest income .......... 3,533 79 (2) 3,610 3,290 0 (3) 3,287
Loan loss provision .......... 250 0 0 250 90 0 0 90
---------- ------ ---- ------- ---------- ------ ---- -------
Net interest income after loan
loss provision ............ 3,283 79 (2) 3,360 3,200 0 (3) 3,197
Noninterest income ........... 771 442 720 1,933 599 310 590 1,499
General and administrative
("G&A") expenses .......... 2,710 467 646 3,823 2,461 430 523 3,414
Other noninterest expense .... 0 0 0 0 393 0 0 393
Amortization of goodwill ..... 7 12 0 19 7 8 0 15
---------- ------ ---- ------- ---------- ------ ---- -------
Total noninterest expense .... 2,717 479 646 3,842 2,861 438 523 3,822
---------- ------ ---- ------- ---------- ------ ---- -------
Net income before taxes ...... $ 1,337 $ 42 $ 72 1,451 $ 938 $ (128) $ 64 874
========== ====== ==== ======= ========== ====== ==== =======
Net corporate overhead expense 153 114
Income tax expense ........... 512 290
------- -------
Net income ................... $ 786 $ 470
======= =======
</TABLE>
Commercial Banking Activities. Net interest income from commercial
banking activities were $3.5 million for the six months ended June 30, 1998,
compared to $3.3 million for the same period in 1997, a $0.2 million or 6.1%
increase. The loan loss provision was $250 thousand for the six months ended
June 30, 1998, compared to $90 thousand for the same period of 1997, a $160
thousand or 177.8% increase. The increase in the provision was made to increase
the Bank's allowance for possible loan losses. The allowance was increased due
to growth in the loan portfolio of approximately $16 million and to an increase
in non-performing assets at June 30, 1998. See "Business-Asset Quality." The
Company believes that the allowance was adequate at June 30, 1998. Non-interest
income for the six months ended June 30, 1998 was $0.8 million, compared to $0.6
million for the same period of 1997, a $0.2 million or 33.4% increase. Total
non-interest expense was $2.7 million for the six months ended June 30, 1998,
compared to $2.9 million for the same period in 1997, a decrease of $0.2 million
or 6.9%. Net income before taxes was $1.3 million for the six months ended June
30, 1998, compared to $0.9 million for the same period in 1997, a $0.4 million
or 42.7% increase.
Trust Activities. United Trust reported net income before taxes of $42
thousand for the six months ended June 30, 1998, compared to a loss of $128
thousand for the same period in 1997, an improvement of $170 thousand. This
improvement was the result of additional fees generated by an increased volume
of trust accounts.
Investment Advisory Activities. Net income before taxes for EPW was $72
thousand for the six months ended June 30, 1998, compared to $65 thousand for
the same period in 1997, an increase of $7 thousand or 10.8%. This increase was
due to an increase in the volume of assets under management by EPW, due
primarily to appreciation in the market values of the portfolios under
management.
25
<PAGE> 31
Analysis of Net Interest Income
Net interest income for the six months ended June 30, 1998 was $3.6
million as compared to $3.2 million for the same period in 1997, a $0.4 million
or 12.5% increase. Interest income was $6.0 million for the six months ended
June 30, 1998, compared to $5.1 million for the same period in 1997, a $0.9
million or 17.7% increase. Interest expense was $2.4 million for the six months
ended June 30, 1998, compared to $1.9 million for the same period in 1997, a
$0.5 million or 26.4% increase.
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities for the six months ended June 30, 1998 and 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------
1998 1997
----------------------------- ----------------------------
Summary of average 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) ..................... $ 95,801 $ 4,871 10.17% $ 80,033 $ 4,251 10.62%
Securities:
Investment securities - taxable ... 24,666 798 6.47 22,601 746 6.60
Investment securities - non-taxable 420 12 9.22 519 15 8.92
Federal funds sold ................ 11,926 326 5.46 5,152 135 5.27
-------- -------- -------- --------
Total earning assets .............. 132,813 6,007 9.05% 108,305 5,147 9.51%
Non-earning assets ................ 22,190 17,338
-------- --------
Total average assets .............. $155,003 $125,643
======== ========
Interest bearing liabilities:
NOW & money market ................ $ 44,242 651 2.94% $ 28,958 369 2.55%
Savings ........................... 4,958 50 2.02 4,693 47 2.02
Time, $100,000 & over ............. 10,203 277 5.37 6,477 179 5.53
Time other ........................ 50,919 1,376 5.42 45,346 1,210 5.34
Convertible subordinated debentures 630 25 8.00 630 25 8.00
Long-term debt .................... 2,424 104 8.61 728 34 9.34
Other borrowings .................. 3,467 40 2.30 3,249 50 3.10
-------- -------- -------- --------
Total interest bearing liabilities 116,843 2,523 4.32% 90,081 1,914 4.25%
Non-interest bearing liabilities:
Deposits .......................... 25,522 24,530
Other ............................. 1,465 1,408
Stockholders' equity .............. 11,173 9,624
-------- --------
Total liabilities and stockholders'
equity ........................... $155,003 $125,643
======== ========
Net interest income & net interest
spread ............................ $ 3,484 4.73% $ 3,233 5.26%
======== ===== ======== =======
Net interest margin ................. 5.25% 5.97%
===== =======
</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
six month period ended June 30, 1998:
<TABLE>
<CAPTION>
Increase
(Decrease)
Changes in net interest income ------------------------------------------------
(dollars in thousands) Combination
Interest earning assets: Volume Rate Rate/Volume Total
------- ------- ------------ -------
<S> <C> <C> <C> <C>
Loans, net ............................. $ 837 $ (180) $ (37) $ 620
Securities:
Investment securities - taxable ........ 68 (14) (2) 52
Investment securities - non-taxable .... (4) 1 1 (2)
Federal funds sold ..................... 178 5 7 190
------- ------- ------------ -------
Total change in interest income ........ 1,079 (188) (31) 860
Interest-bearing liabilities:
NOW & money market ..................... 195 57 30 282
Savings ................................ 3 - - 3
Time, $100,000 & over .................. 103 (5) (3) 95
Time other ............................. 148 18 3 169
Convertible subordinated debentures .... - - - -
Long-term debt ......................... 76 (1) (3) 72
Other borrowings ....................... 3 (13) (1) (11)
------- ------- ------------ -------
Total change in interest expense ......... 528 56 26 610
------- ------- ------------ -------
Increase (decrease) in net interest income $ 551 $ (244) $ (57) $ 250
======= ======= ============ =======
</TABLE>
Noninterest Income
Noninterest income for the six months ended June 30, 1998 was $1.9
million, compared to $1.5 million for the same period in 1997, an increase of
$0.4 million or 26.7%. The increase was primarily due to increased income from
EPW and United Trust whose combined income increased $294 thousand during this
same period. Service charge income on deposits also increased by $20 thousand
during this same period and other income increased $120 thousand during this
period.
The following table indicates the components of noninterest income for
the six months ended June 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-----------------------------------------------------------------
Increase/
1998 1997 (Decrease)
--------------- ---------------- ----------------
<S> <C> <C> <C>
Service charges on deposit Accounts........................ $ 347 $ 327 $ 20
Trust and investment management income..................... 1,138 844 294
Loan servicing fees........................................ 72 97 (25)
Gain on sale of SBA loans.................................. 129 88 41
Other service charges, fees, and income.................... 223 119 104
--------------- ---------------- ----------------
Total noninterest income................................. $ 1,909 $ 1,475 $ 434
=============== ================ ================
</TABLE>
Noninterest Expense
Total noninterest expense for the six months ended June 30, 1998 was
$3.9 million, compared to $3.9 million for the same period in 1997, an increase
of less than $0.1 million.
27
<PAGE> 33
The following table reflects the components of noninterest expense for
the six months ended June 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-----------------------------------
Increase/
1998 1997 (Decrease)
------ ------ -----------
<S> <C> <C> <C>
Salaries and employee benefits ............. $2,263 $1,941 $ 322
Occupancy expense ......................... 291 204 87
Furniture and equipment expense ............ 256 217 39
Data processing expense .................... 221 211 10
Legal and professional fees ................ 85 63 22
Amortization of intangible assets .......... 35 32 3
Advertising ................................ 45 90 (45)
Relocation expense ......................... - 138 (138)
Stationery and Supplies .................... 79 79 -
Directors fees ............................. 82 111 (29)
Securities write-down ...................... - 255 (255)
Other operating expenses .................. 488 517 (29)
------ ------ -----------
Total noninterest expense ................ $3,845 $3,858 $ (13)
====== ====== ===========
</TABLE>
YEARS ENDED DECEMBER 31, 1997 AND 1996
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1997 AND DECEMBER 31, 1996
Overview
Total assets of the Company were $147.3 million at December 31, 1997,
compared to $122.7 million at December 31, 1996, an increase of $24.6 million or
20.0%. This increase was primarily the result of the Company's internal growth
of earning assets (primarily loans) funded by an increase in deposits.
Investment Securities
Investment securities, consisting of U.S. Treasury and federal agency
securities, obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $21.6 million at December 31, 1997, compared
to $18.7 million at December 31, 1996, an increase of $2.9 million or 15.3%. At
December 31, 1997, the Company held certain securities totaling $11.5 million as
"available for sale". These securities have been recorded at market value.
Loans
Total loans were $97.0 million at December 31, 1997, compared to $81.2
million at December 31, 1996, an increase of $15.8 million or 19.4%. For the
same period, real estate mortgage loans increased by $11.1 million or 22.5%,
commercial loans increased by $5.3 million or 21.0%, and all other loans
including consumer loans were virtually unchanged. Net loans were $94.8 million
at December 31, 1997, compared to $79.3 million at December 31, 1996.
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.
28
<PAGE> 34
Nonperforming Assets
Nonperforming assets were $651 thousand at December 31, 1997, compared
to $372 thousand at December 31, 1996, an increase of $279 thousand or 75.0%.
All nonperforming assets consisted of nonperforming loans.
Bank Premises and Equipment
Bank premises and equipment was $9.5 million at December 31, 1997,
compared to $6.0 million at December 31, 1996, an increase of $3.5 million or
58.3%. This increase was primarily due to the final funding of the building and
equipment related to the Company's new headquarters facility which opened in May
1997.
Deposits
Total deposits were $130.2 million at December 31, 1997, compared to
$108.1 million at December 31, 1996, an increase of $22.1 million or 20.4%. Of
the $22.1 million increase, $1.7 million was in demand deposits, $8.5 million
was in NOW and money market deposits, $0.6 million was in savings deposits, $4.9
million was in time deposits of $100,000 or greater, and $6.4 million was in
other time deposits.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding was $2.7 million at December 31, 1997,
compared to $0.8 million at December 31, 1996, an increase of $1.9 million. This
increase was due primarily to borrowings from a non-affiliated bank secured by
the Bank's common stock to fund the capitalization of United Trust.
Stockholders' Equity
Stockholders' equity was $10.5 million at December 31, 1997, or 7.12% of
total assets, compared to $9.5 million, or 7.73% of total assets at December 31,
1996. At December 31, 1997, the Bank's Tier I (core) Capital ratio was 6.77%,
its Tier I Risk-based Capital ratio was 8.90%, and its Total Risk-based Capital
ratio was 10.15%. The capital ratios of the Bank at that date all exceeded the
minimum regulatory guidelines for an institution to be considered "well
capitalized".
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996
Overview
Net income for the year ended December 31, 1997 was $1.4 million or
$0.38 per share diluted, compared to $1.5 million or $0.40 per share diluted for
the same period in 1996. On a pre-tax basis, United Trust lost $114 thousand in
1997 and $421 thousand in 1996, EPW's pre-tax profits increased to $149 thousand
from $92 thousand during this period and the Bank's pre-tax profits declined to
$2.5 million from $2.8 million during this same period.
Business Segment Information
The Company's operations include three business segments: commercial
banking, trust services (operated through United Trust) and investment
management services (operated through EPW). The following are the results of
operations for these three segments for the years ended December 31, 1997 and
1996 (dollars in thousands).
29
<PAGE> 35
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------
1997 1996
----------------------------------- ------------------------------------
Commercial United Company Commercial United Company
Banking Trust EPW Total Banking Trust EPW (1) Total
---------- ------ ------ ------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income ................... $ 10,785 $ 0 $ 0 $10,785 $ 9,577 $ 0 $ 0 $ 9,577
Interest Expense .................. 3,970 0 5 3,975 3,278 0 5 3,283
---------- ------ ------ ------- ---------- ------ ------- -------
Net Interest Income ............... 6,815 0 (5) 6,810 6,299 0 (5) 6,294
Loan Loss Provision ............... 90 0 0 90 150 0 0 150
---------- ------ ------ ------- ---------- ------ ------- -------
Net Interest Income after loan loss
provision ....................... 6,725 0 (5) 6,720 6,149 0 (5) 6,144
Noninterest Income ................ 1,286 765 1,238 3,289 1,251 381 936 2,568
General and Administrative ("G&A")
expenses ........................ 5,124 852 1,084 7,060 4,532 780 839 6,151
Other noninterest expense ......... 384 9 0 393 0 0 0 0
Amortization of goodwill .......... 15 18 0 33 14 22 0 36
---------- ------ ------ ------- ---------- ------ ------- -------
Total noninterest expense ......... 5,523 879 1,084 7,486 4,546 802 839 6,187
---------- ------ ------ ------- ---------- ------ ------- -------
Net Income before taxes ........... $ 2,488 $ (114) $ 149 $ 2,523 $ 2,854 $ (421) $ 92 $ 2,525
========== ====== ====== ========== ====== =======
Net Corporate Overhead expense .... 253 154
Income tax expense ................ 860 891
------- -------
Net income ........................ $ 1,410 $ 1,480
======= =======
</TABLE>
- -------------------
(1) For the eleven months ended December 31, 1996
Commercial Banking Activities. The Company's commercial banking
activities are conducted through the Bank. Net interest income of the Bank for
the year ended December 31, 1997 was $6.8 million, compared to $6.3 million for
the same period in 1996, a $0.5 million or 7.9% increase. Based on the Company's
analysis of its loan portfolio and loan loss reserve, the loan loss provision
was reduced $90 thousand for 1997, compared to $150 thousand for 1996, a 40.0%
decrease. Non-interest income for 1997 was $1.3 million, compared to $1.3
million for 1996. Total non-interest expense was $5.5 million for 1997, compared
to $4.6 million for 1996, a 19.6% increase. Net income before taxes was $2.5
million for 1997, compared to $2.9 million for 1996, a 13.8% decrease.
The decline in the Bank's net income before taxes in 1997 compared to
1996 was mainly due to increases in noninterest expenses. The principal
components of this increase were an increase in Company general and
administrative expenses of $592 thousand, a one time write-down of $255 thousand
in the value of a security held in portfolio, and $138 thousand from the
write-off of leasehold improvements in a facility which was abandoned. Other
increases in general and administrative expenses were substantially due to the
full year impact from a new branch which was opened in September 1996, expenses
associated with moving into the new headquarters building, and additional
employees hired for accounting and credit administration functions and other
support operations.
Trust Activities. United Trust reported a net loss before taxes of $114
thousand for the year ended December 31, 1997, compared to a loss of $421
thousand for 1996, an improvement of $307 thousand. This improvement was the
result of the increased volume of trust accounts.
Investment Advisory Activities. Net income before taxes for EPW was
$149 thousand for the year ended December 31, 1997, compared to $92 thousand for
the same period of 1996, a $57 thousand or 61.9% increase. This increase was
primarily due to an increase in the volume of assets under management by EPW
resulting from higher market values of the assets under management.
30
<PAGE> 36
\
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)
------------------------------------------------
Changes in net interest income (dollars in thousands) Combination
Volume Rate Rate/Volume Total
------- ------- ------------ -------
<S> <C> <C> <C> <C>
Interest earning assets:
Loans, net ................................................ $ 861 $ (24) $ 2 $ 839
Securities:
Investment securities - taxable ........................... 323 (24) (6) 293
Investment securities - non-taxable ....................... (15) (1) 6 (10)
Federal funds sold ........................................ 69 5 1 75
------- ------- ------------ -------
Total change in interest income ............................. 1,238 (44) 3 1,197
Interest bearing liabilities:
NOW & money market ........................................ 153 78 22 253
Savings ................................................... (4) (7) - (11)
Time, $100,000 & over ..................................... 180 (2) (1) 177
Time other ................................................ 234 50 5 289
Convertible subordinated debentures ....................... 4 - - 4
Long-term debt ............................................ 13 (9) (2) 2
Other Borrowings .......................................... (30) (5) 2 (33)
------- ------- ------------ -------
Total change in interest expense ............................ 550 105 26 681
------- ------- ------------ -------
Increase (decrease) in net interest income .................. $ 688 $ (149) $ (23) $ 516
======= ======= ============ =======
</TABLE>
Noninterest Income
Noninterest income for the year ended December 31, 1997 was $3.2 million
compared to $2.5 million for the same period in 1996, an increase of $0.7
million or 28.0%. This increase was primarily due to increased revenues from EPW
and United Trust whose combined revenues increased $657 thousand during this
period. Service charge income on deposits also increased by $119 thousand during
this same period. Gain on sale of SBA loans declined $135 thousand during this
period.
The following table indicates the components of noninterest income for
the years ended December 31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------------------
Increase/
1997 1996 (Decrease)
------------ ------------ ------------
<S> <C> <C> <C>
Service charges on deposit accounts........................ $ 675 $ 556 $ 119
Trust and investment management income..................... 1,886 1,229 657
Other service charges, fees, and income.................... 225 209 16
Loan servicing fees........................................ 164 153 11
Gain on sale of SBA loans.................................. 290 425 (135)
------------ ------------ ------------
Total noninterest income................................... $ 3,240 $ 2,572 $ 668
============ ============ ============
</TABLE>
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
32
<PAGE> 38
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 borrowings from all sources, in
determining the amount of credit to extend to an institution. As of June 30,
1998, the Company had no FHLB advances outstanding. See "Business-Supervision
and Regulation-Liquidity."
A Florida chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less deposits of certain public funds. The liquidity
reserve may consist
37
<PAGE> 43
of cash on hand, cash on demand with other correspondent banks and other
investments and short-term marketable securities as determined by the rules of
the Department, such as federal funds sold and United States securities or
securities guaranteed by the United States or agencies thereof. The Company
complies with applicable liquidity reserve requirements. As of June 30, 1998,
the Bank had liquidity of approximately $51.0 million or approximately 31.3% of
total deposits combined with borrowings. The Company's primary sources of funds
consist of principal payments on loans and investment securities, proceeds from
sales and maturities of securities available for sale and net increases in
deposits. The Company uses its funds principally to purchase investment
securities and fund existing and continuing loan commitments. At June 30, 1998,
the Company had commitments to originate loans totaling $18.1 million. Scheduled
maturities of certificates of deposit during the 12 months following June 30,
1998 total $46.7 million as of June 30, 1998. Management believes the Company
has adequate resources to fund all its commitments, and, if so desired, that it
can adjust the rates on certificates of deposit to retain deposits in a changing
interest-rate environment.
Asset/Liability Management
One of the primary objectives of the Company is to reduce fluctuations
in net interest income caused by changes in interest rates. To manage interest
rate risk, the Board of Directors has established interest-rate risk policies
and procedures which delegate to the Investment and Asset/Liability Committee
the responsibility to monitor and report on interest-rate risk, devise
strategies to manage interest-rate risk, monitor loan originations and deposit
activity, and approve all pricing strategies.
The management of interest-rate risk is one of the most significant
factors affecting the ability to achieve future earnings. The measure of the
mismatch of assets maturing or repricing within certain periods, and liabilities
maturing or repricing within the same period, is commonly referred to as the
"gap" for such period. Controlling the maturity or repricing of an institution's
assets and liabilities in order to minimize interest rate risk is commonly
referred to as gap management. "Negative gap" occurs when, during a specific
time period, an institution's liabilities are scheduled to reprice more rapidly
than its assets, so that, barring other factors affecting interest income and
expense, in periods of rising interest rates the institution's interest expense
would increase more rapidly than its interest income, and in periods of falling
interest rates the institution's interest expense would decrease more rapidly
than its interest income. "Positive gap" occurs when an institution's assets are
scheduled to reprice more rapidly than its liabilities, so that, barring other
factors affecting interest income and expense, in periods of falling interest
rates, the institution's interest income would decrease more rapidly than its
interest expense, and in periods of rising interest rates, the institution's
interest income would increase more rapidly than its interest expense. It is
common to focus on the one-year gap, which is the difference between the dollar
amount of assets and the dollar amount of liabilities maturing or repricing
within the next 12 months.
To the extent market conditions permit, the Bank follows a strategy
intended to protect its net interest income from adverse changes in interest
rates by maintaining spreads through the adjustability of its interest earning
assets and its interest bearing liabilities. The Bank employs a number of
strategies designed to protect its net interest income. The Bank calculates its
net interest margin on a monthly basis and compares it to a quarterly national
peer group ratio. Historically, the Bank has enjoyed a higher than peer group
average net interest margin as well as a higher margin than most of the
community banks operating in Pinellas County.
Additionally, the Investment and Asset/Liability Committee meets on a
quarterly basis to review the most recent margin analysis, the Bank's overall
pricing strategies, and a monthly gap report measuring its interest rate
sensitivity position.
The Bank is also a member of the FHLB. Member banks have access to a
variety of fixed and variable rate borrowings, ranging from overnight to up to
20 years or longer. Access to these instruments can permit the Bank to match
maturities of either specific groups of loans or larger, single loans.
Currently, the Bank has no FHLB advances outstanding.
The cumulative one-year gap at June 30, 1998 was a negative $31.8
million or a negative 17.8% (expressed as a percentage of total assets). The
exclusion of approximately $3.9 million of non-accrual loans increased the
negative gap
38
<PAGE> 44
by more than 2%. The Company performs an income simulation analysis to measure
net interest income volatility when the portfolio is subjected to a 200 basis
point interest rate shock. Based on the results of this simulation and the
current interest rate environment (taking into account competitive pricing and
generally declining interest rates), the Company believes that its gap position
as of June 30, 1998 was appropriate, and currently anticipates that a similar
negative gap position will continue in the subsequent one year time period.
As previously noted herein, the Bank had large deposits from a single
customer at June 30, 1998. These deposits are held in interest bearing demand
accounts. From an asset/liability management stand point, the Bank matches these
excess deposits with Federal Funds sold. See "Business-Sources of Funds." The
Bank earns a positive spread between the interest earned on the Federal Funds
sold and the interest paid on the respective deposit accounts.
The following table presents the maturities or repricing of
interest-earning assets and interest-bearing liabilities at June 30, 1998. The
balances shown have been derived based on the financial characteristics of the
various assets and liabilities. Adjustable and floating-rate assets are included
in the period in which interest rates are next scheduled to adjust rather than
their scheduled maturity dates. Fixed-rate loans are shown in the periods in
which they are scheduled to be repaid according to contractual amortization and,
where appropriate, prepayment assumptions based on the coupon rates in the
portfolio have been used to adjust the repayment amounts. Repricing of time
deposits is based on their scheduled maturities.
INTEREST SENSITIVITY ANALYSIS
<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 ........... $ 26,767 $ 0 $ 0 $ 0 $ 0 N/A $ 26,767
Securities ................... 1,864 215 2,720 15,029 10,060 N/A 29,888
Loans:(1)
Fixed ...................... 4,368 2,457 6,284 12,955 1,968 N/A 28,032
Variable ................... 34,897 1,490 3,639 26,096 1,429 N/A 67,551
-------- -------- -------- ------- ------- -------- --------
Total rate sensitive assets .... $ 67,896 $ 4,162 $ 12,643 $54,080 $13,457 N/A $152,238
======== ======== ======== ======= ======= ======== ========
LIABILITIES:
Interest demand .............. $ 57,312 $ 0 $ 0 $ 0 $ 0 $ 11,293 $ 68,605
Savings ...................... 4,449 0 0 0 0 0 4,449
Time deposits ................ 15,460 16,391 16,094 11,125 0 0 59,070
Other borrowings ............. 4,424 0 0 0 0 0 4,424
Long term debt ............... 2,333 4 8 26 630 0 3,001
-------- -------- -------- ------- ------- -------- --------
Total rate sensitive liabilities $ 83,978 $ 16,395 $ 16,102 $11,151 $ 630 $ 11,293 $139,549
======== ======== ======== ======= ======= ======== ========
Dollar gap ..................... $(16,082) $(12,233) $ (3,459) $42,929 $12,827 $(11,293) $ 12,689
Cumulative Dollar gap .......... $(16,082) $(28,315) $(31,774) $11,155 $23,982 $ 12,689 $ 12,689
Cumulative gap/total assets(2) . (9.03)% (15.89)% (17.83)% 6.26% 13.46% 7.12% 7.12%
</TABLE>
- -------------------
(1) Excludes nonaccrual loans of approximately $3.9 million.
(2) Calculated based on total assets of $178,148.
39
<PAGE> 45
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 expenses, including the updating of software and
hardware systems to ensure Year
40
<PAGE> 46
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.
41
<PAGE> 47
BUSINESS
THE COMPANY AND THE BANK
The Company is a registered bank holding company formed in 1982, the
principal subsidiary of which is the Bank, an FDIC-insured commercial bank
chartered under Florida law and headquartered in St. Petersburg, Florida. The
Company's other operating subsidiaries are EPW, an investment advisory firm
registered under the Investment Advisers Act of 1940 headquartered in Tampa,
Florida, with an office in Jacksonville, Florida, and United Trust, a
Florida-chartered trust company registered with the Department and located in
St. Petersburg, Florida. At June 30, 1998, the Company had consolidated total
assets of $178.1 million, net loans of $97.1 million, deposits of $157.7 million
and stockholders' equity of $11.5 million.
The Bank is a community-oriented full service, commercial bank founded
in 1979 and currently operating from four branch offices serving the southern
Pinellas County area of the State of Florida. It offers consumer and commercial
loans, ATM cards, credit cards, and a full range of deposit account types
including demand deposits, NOW accounts, money market accounts, savings
accounts, and certificates of deposit. The primary focus of the Bank's
commercial lending activities is on loans to small and medium sized businesses
and professional firms. The Bank's commercial loans include loans secured by
real estate or other assets, loans made under the SBA's lending program and
secured and unsecured loans to small businesses. The Company believes the Bank
is one of the largest originators, among similarly sized financial institutions,
of SBA loans in the State of Florida (measured by dollar volume of loans
originated).
EPW is an investment advisory firm formed in 1983 which offers
investment management services to corporate, municipal and high net worth
individual clients throughout the State of Florida. As of June 30, 1998, EPW had
$312.3 million in assets under management. United Trust is a wholesale provider
of data processing, administrative and accounting support and asset custody
services to professionals holding assets in trust (primarily legal and
accounting firms). United Trust also provides retail trust and investment
management services to individual and corporate clients. As of June 30, 1998,
United Trust had $241.9 million in assets under trust.
The principal executive offices of the Company are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
BACKGROUND
In 1986 a group of investors, headed by Neil W. Savage, the Company's
President and Chief Executive Officer and the Bank's Chairman and Chief
Executive Officer, acquired control of the Company, then known as Pinellas
Bancshares Corporation. The Company's name was changed to its present name in
1995 and the Bank's name was changed from United Bank of Pinellas to its present
name that same year.
In September 1995 the Company purchased FSC, a trust data processing and
accounting service for professionals, and merged this entity into the Company.
In January 1996, the Company acquired EPW. The Company formed United Trust
during the fourth quarter of 1997 and effective December 31, 1997, transferred
all of the Bank's trust assets to United Trust.
BUSINESS STRATEGY
The principal elements of the Company's business strategy are to
increase its market share in its existing business segments and to seek out
niche business segments in which the Company can compete effectively in order to
create new sources of non-interest income and increase traditional interest
income from new lending opportunities. The Company has sought to implement its
strategy of increasing its market share in its existing business segments by
expanding the Bank's market coverage through de novo branching, increasing the
Bank's emphasis on originating loans secured by real estate and other assets for
its own portfolio, pursuing small business secured and unsecured lending for its
own portfolio, and
42
<PAGE> 48
continuing to originate a high volume of SBA loans, both for its own portfolio
and for sale in the secondary market. A primary element of the Company's
business strategy as a community banking organization is to seek to provide
customers with a level of personalized service exceeding that provided by its
competitors, including the local banking operations of large regional and
national banking companies.
The Company has sought to add new sources of non-interest income through
the creation of United Trust, which receives fees for the wholesale trust
services it offers to legal and accounting firms and the retail trust and
investment management services it offers to other clients, and the acquisition
of EPW, which generates fee income from the investment management services it
offers to corporate, municipal and high net worth individual clients. By
expanding the range of trust and investment management services it offers, the
Company seeks to differentiate itself from other similarly sized community
banking organizations operating in the Company's market. While pursuing these
strategies, management remains committed to improving asset quality, managing
interest rate risk, enhancing profitability and maintaining its status as a
well-capitalized institution for regulatory capital purposes.
The results of the Company's business strategy have been substantial
asset and revenue growth. The Company's total assets have increased from
approximately $106.6 million at December 31, 1995 to $147.3 million at December
31, 1997. The Company's consolidated revenues increased from $7.1 million for
the year ended December 31, 1995 to $9.9 million for the year ended December 31,
1997. During this period of asset and revenue growth, the Company's net income
decreased from $1.5 million for the year ended December 31, 1995 to $1.4 million
for the year ended December 31, 1997.
The Company intends to continue selectively adding branches in its
market area, and recently gave notice of its intent to exercise an option to
purchase a proposed branch site. It is anticipated that the Bank will spend
approximately $650,000 to open such branch. The Company has no current plans to
add Bank branches outside of the Pinellas County market. The Company's current
goal is to try and open one new branch each year. Accordingly, in the future,
the Company may consider strategic expansion though the acquisition of other
banks or bank branches or by de novo branching. Similar to the Company's
previous efforts that resulted in it establishing United Trust and acquiring
EPW, the Company may consider from time to time expansion opportunities into
other business lines that might add to the Company's non-interest income and the
acquisition or development of other businesses that the Company considers
complementary to its existing business. For example, the Company recently
commenced efforts to consider the feasibility of making a minority investment in
an existing or new property casualty insurance company. From time to time, the
Company may commence similar exploratory efforts to evaluate the possibility of
acquiring or establishing similar or additional lines of business. A substantial
portion of the net proceeds from the Offerings will be available to the Company
to finance any such efforts that the Company decides to pursue. The Company has
not, however, identified any acquisition candidates or made any commitments to
create any new business units, and there can be no assurance that the Company
will locate any suitable acquisition candidates, complete any new business
acquisitions, develop any new business lines or receive any needed regulatory
approvals to conduct such activities, or that any of such activities, if
conducted, will be profitable for the Company.
MARKET AREA
Currently, the Bank has four offices located in southern Pinellas
County, Florida, which is the Bank's primary market area. The population of
Pinellas County was estimated to be 888,000 on April 1, 1997 by the University
of Florida's Bureau of Economic and Business Research. This compares with a
population of 852,000 at the 1990 census and 729,000 at the 1980 census.
Pinellas County has been a retirement and tourism destination for many years,
and over 25% of its population is over 65 years of age, compared with a state
wide average of 18.6%.
According to information published by the Florida Bankers Association,
as of December 31, 1997, Pinellas County was the fourth largest county in
Florida in terms of bank and thrift deposits, with total deposits of $12.2
billion, or 6.49% of the state's total deposits. There is a significant seasonal
population increase during the months of November to April of each year;
seasonal residents are not included in the cited population statistics. The
Company believes that while the population of Pinellas County will continue to
grow, the rate of growth is likely to be lower than the population growth
43
<PAGE> 49
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
44
<PAGE> 50
borrowings may be used to support expanded lending activities. Management
believes that the Company's funding requirements can be met through retail
deposits in the Company's local market area without reliance on brokered
deposits. For additional discussion of asset and liability management policies
and strategies, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Asset/Liability Management."
As of June 30, 1998, the scheduled maturities of deposits of $100,000 or
more were as follows:
<TABLE>
<S> <C>
Three months or less....................................................................... $3,161,629
Over three through six months.............................................................. 2,700,608
Six through twelve months.................................................................. 2,394,879
Over twelve months......................................................................... 1,317,670
----------
$9,574,786
==========
</TABLE>
The Bank offers a full range of deposit services, including checking and
other transaction accounts, savings accounts and time deposits. The following
table sets forth the deposit structure of the types of deposit accounts offered
by the Bank at June 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Weighted Percent
Average of Total
Interest Rate Amount Deposits
------------- --------- --------
<S> <C> <C> <C>
Non-interest bearing ..................... 00.0% $ 25,562 16.2%
NOW accounts ............................. 3.38 68,605 43.5
Savings .................................. 2.02 4,449 2.8
Time deposits with original maturities of:
One year or less ...................... 5.21 33,922 21.6
Over 1 year through 5 years ........... 5.68 25,148 15.9
--------- ---------
Total time deposits ................. 5.41 59,070 37.5
--------- ---------
Total deposits ...................... 3.55% $ 157,686 100.0%
========= =========
</TABLE>
At June 30, 1998, scheduled maturities of time deposits were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Percent of
Time Time
Period Ended June 30, Deposits Deposits
--------------------- ---------------
<S> <C> <C>
1999............................................................................. $ 46,743 79.2%
2000-2001........................................................................ 6,642 11.2
2002-2006........................................................................ 5,685 9.6
-------------------- ---------------
Total time deposits.................................................... $ 59,070 100.0%
==================== ===============
</TABLE>
As of June 30, 1998, the Bank had deposits from a single customer of
$36.1 million or 23.1% of the Bank's total deposits. As of December 31, 1997,
deposits from this customer amounted to $9.2 million or 7.1% of the Bank's total
deposits. The Company expects deposit balances maintained at the Bank by this
customer to continue to fluctuate and to generally be lower than the amount of
such deposits at June 30, 1998. For example, as of August 31, 1998, this
customer's deposits totalled $11.3 million, which contributed to a reduction in
the Company's total assets to $156.3 million at August 31, 1998. The funds from
this customer's unusual deposit activity were invested primarily in Federal
funds sold, which are short term, liquid investments. Because of the Company's
liquidity position, management does not expect that a material decline in the
deposit balances maintained at the Bank by this customer would have a materially
negative effect on the financial condition, including liquidity, or results of
operations of the Company or the Bank.
45
<PAGE> 51
LENDING ACTIVITIES
The primary source of income generated by the Bank is interest earned on
loans held in the Bank's loan portfolio. The Bank's lending activities include
commercial, real estate and consumer loans. During 1997, the Bank's net loans
increased $19.3 million.
Commercial Loans. The Bank offers commercial loans for working capital
purposes, business expansion, seasonal needs, acquisition of equipment, and
other business needs. Collateral pledged to secure these loans may include
equipment, accounts receivable, or other assets. The Bank often requires
personal guarantees of these loans.
SBA Loans. The SBA lending program was established by Congress in 1953
to assist new and established small businesses in obtaining necessary capital.
Under this program, the SBA guarantees up to 90% of the principal balance of the
loan, subject to a maximum guarantee per loan of $750,000, thereby removing a
portion of the credit risk to the lending financial institution and generally
enabling lenders to offer loans under this program at more attractive interest
rates for borrowers than other available financing. The SBA loans originated by
the Company typically have SBA guarantees for 60% to 90% of the principal
balance of the loan. The existence of a secondary market for the guaranteed
portion of the SBA loans provides the Bank an opportunity to sell the guaranteed
portion of the loans and obtain additional liquidity and income. The Bank
typically services such loans and receives servicing fees with respect to such
loans.
The only loans sold by the Bank during 1996 and 1997 were SBA loans.
When the Bank sells an SBA loan and retains the servicing of the loan, a
servicing asset is recorded. The book value of such assets, which the Company
believes approximates the fair value of such assets, at June 30, 1997, December
31, 1997, and June 30, 1998 was $23 thousand, $78 thousand, and $107 thousand,
respectively. Amortization expense relating to such servicing assets of $2
thousand and $6 thousand was recorded for 1997 and 1998, respectively. The
Company periodically reviews these assets for impairment. No valuation for
impairment of these assets was deemed necessary for the periods presented.
At December 31, 1996, the Bank had $7.0 million of SBA loans, of which
approximately 27.0% was guaranteed by the SBA. During 1996, the Bank sold
guaranteed portions of its SBA loans totaling $5.2 million. At December 31,
1997, the Bank had $5.7 million of SBA loans, of which approximately 19.0% was
guaranteed by the SBA. During 1997, the Bank sold guaranteed portions of its SBA
loans totaling $3.7 million. The Bank had gains on the sale of SBA loans during
1996 and 1997 of $425 thousand and $290 thousand, respectively, and had loan
servicing fees on SBA loans during 1996 and 1997 of $153 thousand and $164
thousand, respectively.
Real Estate Loans. The Bank offers commercial and, on a limited basis,
residential real estate loans. Commercial real estate loans are made for general
corporate purposes, construction and expansion of facilities. Residential loans
are made in the form of fixed and variable rate mortgages and home equity loans.
46
<PAGE> 52
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
June 30, At December 31,
-------- ------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate ..................... $ 47,476 $ 44,547 $ 38,074 $ 38,439
One-to-four family residential ............. 7,575 7,482 6,716 7,371
Multifamily residential .................... 6,108 5,485 2,898 2,230
Construction and land development .......... 3,352 3,071 1,795 1,456
-------- -------- -------- --------
Total real estate mortgage loans ......... 64,511 60,585 49,483 49,496
Commercial loans ............................. 29,310 30,536 25,239 19,711
Consumer loans ............................... 3,896 3,998 3,831 3,199
Other Loans .................................. 1,731 1,871 2,661 3,409
-------- -------- -------- --------
Gross loans ................................ 99,448 96,990 81,214 75,815
Allowances for loan losses ................... (1,759) (1,648) (1,610) (1,527)
Unearned Fees ............................... (577) (521) (341) (281)
-------- -------- -------- --------
Total loans net of allowance and unearned fees $ 97,112 $ 94,821 $ 79,263 $ 74,007
======== ======== ======== ========
<CAPTION>
At
June 30, At December 31,
-------- ------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate ..................... 47.7% 45.9% 46.9% 50.7%
One-to-four family residential ............. 7.6 7.7 8.2 9.7
Multifamily residential .................... 6.2 5.7 3.6 3.0
Construction and land development .......... 3.4 3.2 2.2 1.9
-------- -------- -------- --------
Total real estate mortgage loans ......... 64.9 62.5 60.9 65.3
Commercial loans ............................. 29.5 31.5 31.1 26.0
Consumer loans ............................... 3.9 4.1 4.7 4.2
Other Loans .................................. 1.7 1.9 3.3 4.5
-------- -------- -------- --------
Gross loans ................................ 100% 100% 100% 100%
======== ======== ======== ========
</TABLE>
The following table sets forth the contractual amortization of real
estate and commercial loans at June 30, 1998 and December 31, 1997. Loans having
no stated schedule of repayments and no stated maturity are reported as due in
one year or less. The table also sets forth the dollar amount of loans scheduled
to mature after one year, according to their interest rate characteristics
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
----------------------- ------------------------
Real Real
Estate Commercial Estate Commercial
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Amounts due:
One year or less ................................... $ 29,621 $ 20,803 $ 29,645 $ 22,250
After one through five years ....................... 32,220 7,751 30,409 7,518
More than five years ............................... 2,670 756 531 768
-------- -------- -------- --------
Total ........................................ $ 64,511 $ 29,310 $ 60,585 $ 30,536
======== ======== ======== ========
Interest rate terms on amounts due after one year:
Adjustable ......................................... $ 24,183 $ 3,620 $ 20,774 $ 3,489
Fixed............................................... 10,707 4,887 10,166 4,797
-------- -------- -------- --------
Total......................................... $ 34,890 $ 8,507 $ 30,940 $ 8,286
======== ======== ======== ========
</TABLE>
47
<PAGE> 53
INVESTMENT MANAGEMENT SERVICES
EPW offers investment management services to high net worth individuals,
corporate pension and profit sharing plans, charitable entities, and state and
local government pension plans. EPW receives fees for its services which vary
according to the amount of assets in the account under management. EPW markets
its services throughout the State of Florida.
TRUST SERVICES
United Trust offers wholesale trust services that include on-line trust
account information processing, asset custody and investment support services.
These services are offered to legal and accounting firms and to other
custodians. United Trust also offers retail trust services including investment
management, probate and custodian services which are marketed principally to
customers of the Bank and EPW and clients of local attorneys and accountants.
CREDIT ADMINISTRATION
The loan approval process consists of a combination of individual and
committee loan authority. Individual lending authority is based upon experience
and is broken down into secured and unsecured requests. The Officers' Loan
Committee (the "Officers' Loan Committee") is made up of commercial lenders and
credit administration personnel. The Officers' Loan Committee currently has
final approval on all unsecured credit for $50,000 to $500,000 and secured
credits for $150,000 to $500,000. The General Loan Committee (the "General Loan
Committee") is made up of four non-employee directors, the Chairman of the Board
of Directors of the Company ("Board of Directors") and the President of the
Bank. The General Loan Committee has final approval authority for all loans from
$500,000 to the legal lending limit of the Bank, except for loans involving
directors of the Bank which must be approved by a vote of the full Board of
Directors with the interested director not present during the loan discussion
and vote.
The Company has a policies and procedures manual which addresses the
specific underwriting guidelines for specific types of credits. Any deviation
from these guidelines is considered to be a policy exception which must be
outlined during the approval process and voted upon by the appropriate committee
or approved by a loan officer with sufficient lending authority. The guidelines
are reviewed and approved by the Board of Directors on an annual basis.
The Company's lending philosophy is to extend credit to businesses or
individuals in the Bank's market area who demonstrate sufficient cash flow to
repay the debt and whose track record indicate they are borrowers with whom the
Bank desires to establish an ongoing lending relationship.
The loan portfolio is under continued review in order to monitor
potential credit deterioration. Loans are graded at their inception by the loan
officers. Credit administration reviews existing credits on an on-going basis.
The Company also employs an independent third-party loan review company which
reviews specific larger size credits on a quarterly basis. This quarterly review
is presented to the General Loan Committee for its further review.
ASSET QUALITY
Allowance/Provision for Loan Losses. The allowance for loan losses
represents management's estimate of an amount adequate to provide for potential
losses within the existing loan portfolio. The determination of the adequacy of
the loan loss reserve is based upon various considerations, including an
analysis of the risk involved in the various loan grades, historical loan
losses, review of larger classified loans, a review of the underlying collateral
on specific loans and current economic conditions. The reserve is reviewed
internally on a quarterly basis and is also reviewed by the appropriate
regulatory agencies upon their examination visit.
48
<PAGE> 54
The following table sets forth information concerning the activity in
the allowance for loan losses during the periods indicated (dollars in
thousands):
<TABLE>
<CAPTION>
At June 30, At December 31,
---------------- ------------------
1998 1997 1996 1995
---------------- ------------------
<S> <C> <C> <C> <C>
Allowance at beginning of period ........... $1,648 $1,610 $1,527 $ 1,335
Charge-offs:
Real estate loans ........................ -- -- -- --
Commercial loans ......................... 131 52 38 --
Consumer loans ........................... 16 39 31 1
------ ------ ------ -------
Total charge-offs .................. 147 91 69 1
Recoveries:
Real estate loans ........................ -- -- -- 3
Commercial loans ......................... 8 39 1 9
Consumer loans ........................... -- -- 1 1
------ ------ ------ -------
Total recoveries .................. 8 39 2 13
Net charge-offs ............................ 138 52 67 (12)
Provision for loan losses .................. 250 90 150 180
------ ------ ------ -------
Allowance at end of period ................. $1,759 $1,648 $1,610 $ 1,527
====== ====== ====== =======
</TABLE>
The following table presents information regarding the Company's total
allowance for loan losses as well as its allocation of such amount to the
various loan categories based upon management's estimates (dollars in
thousands).
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 December 31, 1996
------------------------- ------------------- ---------------------------
Percentage Percentage Percentage
of Loan of Loan of Loan
Allowance Allocation Amount Portfolio Amount Portfolio Amount Portfolio
-------- ----------- ------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Performing/not classified:
Commercial Loans..................... $ 388 26% $ 368 31% $ 324 30
Real Estate Loans ................... 485 57 459 53 406 55
Consumer Loans ...................... 97 9 92 9 81 10
-------- -------- ------ -------- -------- -------
Subtotal ............................ 970 92 919 93 811 95
Non-performing/ classified:
Marginal ........................... 46 3 2 5 -- 0
Substandard ......................... 643 5 483 2 221 5
Doubtful ............................ -- 0 -- 0 -- 0
Loss ................................ -- 0 -- 0 -- 0
-------- -------- ------ -------- -------- -------
Subtotal ............................ 689 8 485 7 221 5
Unallocated ......................... 100 0 244 0 578 0
-------- -------- ------ -------- -------- -------
Total ............................... $ 1,759 100% $1,648 100% $ 1,610 100%
======== ======== ====== ======== ======== =======
</TABLE>
Nonperforming Assets. Nonperforming assets include (i) loans which are
90 days or more past due and have been placed into non-accrual status, (ii)
accruing loans that are 90 days or more delinquent that are deemed by management
to be adequately secured and in the process of collection, and (iii) ORE (i.e.,
real estate acquired through foreclosure or deed in lieu of foreclosure). All
delinquent loans are reviewed on a regular basis and are placed on non-accrual
status when, 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.
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<PAGE> 55
The following table sets forth information regarding the components of
nonperforming assets at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
At
June 30, At December 31,
-------- ---------------------------
1998 1997 1996 1995
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Real estate loans ...................... $3,054 $374 $330 $15
Commercial loans ....................... 876 26 42 --
Consumer loans ......................... -- -- -- --
------ ---- ---- ---
Total non-accrual loans(1) .......... 3,930 400 372 15
Other Real Estate ...................... 283 -- -- --
Accruing Loans 90 days past due ........ 42 251 -- 6
------ ---- ---- ---
Total nonperforming assets .......... $4,255 $651 $372 $21
====== ==== ==== ===
</TABLE>
- --------------------
(1) $1,006 of the non-accrual loans as of June 30, 1998 consist of the
portion of defaulted loans that is fully guaranteed by the SBA, for
which the Bank expects to be reimbursed by the SBA. $1,275 of the
non-accrual loans as of June 30, 1998 are being paid on a monthly basis
on a pre-judgment stipulation, and interest and principal are being
recorded as received on a cash basis.
COMPETITION
The banking industry in general, and the Bank's market area in
particular, are characterized by significant competition for both deposits and
lending opportunities. In its market area, the Bank competes with other
commercial banks, thrift institutions, credit unions, finance companies, mutual
funds, insurance companies, brokerage and investment banking firms, and various
other non-bank providers of financial services. Competition for deposits may
have the effect of increasing the rates of interest the Bank will pay on
deposits, which would increase the Bank's cost of funds and possibly reduce its
net earnings. Competition for loans may have the effect of lowering the rate of
interest the Bank will receive on its loans, which would lower the Bank's return
on invested assets and possibly reduce its net earnings. Many of the Bank's
competitors have been in existence for a significantly longer period of time
than the Bank, are larger and have greater financial and other resources and
lending limits than the Bank, and may offer certain services that the Bank does
not provide.
There are approximately 293 branch offices of commercial banks and
thrift institutions operating in Pinellas County. In order to compete
effectively, the Bank seeks to differentiate its services from those offered by
larger institutions, including the branch offices of large regional and national
bank holding companies. The Bank seeks to provide banking products and services
which are customized to its market area and target customers on a personalized
basis, which management believes cannot be matched by many of the larger
institutions that tend to offer many banking products and services on an
impersonal basis. Management believes that, as the banking industry has
undergone further consolidation, the opportunity to attract customers seeking
personalized service has been enhanced. The Bank seeks to tailor its products
and services to its specific geographic market and targeted customers, and to
thereby attract the business of professionals, entrepreneurs, and small to
medium sized commercial businesses while continuing to provide exceptional
banking services to all of its customers. The profitability of the Bank depends
upon its ability to compete effectively in its market area. While management
believes that the Bank's local ownership, community oriented operating
philosophy and personalized service enhances the Bank's ability to compete in
its market area, there can be no assurance that the Bank will be able to
continue to compete effectively or that competitive factors will not have an
adverse effect on the Bank's operating results or financial condition.
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<PAGE> 56
EMPLOYEES
At June 30, 1998, the Company had 84 full-time and 10 part-time
employees, none of whom were represented by a union or subject to a collective
bargaining agreement. The Company believes its relations with its employees to
be good.
SUPERVISION AND REGULATION
The Company and the Bank are extensively regulated under both federal
and state law. The following is a brief summary of certain statutes, rules and
regulations affecting the Company and the Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referenced below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Company's business. Supervision,
regulation and examination of the Company and the Bank by the bank regulatory
agencies are intended primarily for the protection of depositors rather than
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 with any other bank
holding company. Similar federal statutes require bank holding companies and
other companies to obtain the prior approval of the Office of Thrift Supervision
("OTS") before acquiring ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community served. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the communities
to be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977, as amended
(the "CRA").
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), authorizes (i) the Company, and any other bank
holding company located in Florida to acquire a bank located in any other state,
and (ii) any bank holding company located outside Florida to acquire any
Florida-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that national
and state-chartered banks may branch interstate through acquisitions of banks in
other states, unless a state has "opted out" of the interstate branching
provisions of the Interstate Banking Act prior to June 1, 1997. Neither Florida
nor any other state in the southeastern United States has "opted out".
Accordingly, the Company would have the ability to acquire a bank in a state in
the Southeast and thereafter consolidate all of its bank subsidiaries into a
single bank with interstate branches.
The BHC Act generally prohibits the Company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
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<PAGE> 57
In determining whether a particular activity is permissible, the Federal
Reserve must consider whether the performance of such an activity reasonably can
be expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. The investment
management, data processing, administrative and accounting support and asset
custody services offered by EPW and United Trust have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The BHC
Act does not place territorial limitations on permissible nonbanking activities
of bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a bank holding company or its non-bank subsidiaries to terminate
any activity or to terminate its ownership or control of any subsidiary when it
has reasonable cause to believe that continuation of such activity or such
ownership or control constitutes a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of the holding company.
Under Federal Reserve policy, bank holding companies are expected to act
as a source of financial strength and support to their subsidiary banks. This
support may be required at times when, absent such Federal Reserve policy, the
holding company may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any bank subsidiary are subordinate in right
of payment to deposits and to certain other indebtedness of such subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the capital
of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority payment.
Regulation of the Bank. The Bank is organized as a Florida-chartered commercial
bank and is regulated and supervised by the Department. In addition, the Bank is
regulated and supervised by the Federal Reserve, which serves as its primary
federal regulator and, to a lesser extent, by the FDIC as the administrator of
the fund that insures the Bank's deposits. Accordingly, the Department and the
Federal Reserve conduct regular examinations of the Bank, reviewing the adequacy
of the loan loss reserves, quality of loans and investments, propriety of
management practices, compliance with laws and regulations, and other aspects of
the Bank's operations. In addition to these regular examinations, the Bank must
furnish to the Federal Reserve quarterly reports containing detailed financial
statements and schedules.
Federal and Florida banking laws and regulations govern all areas of the
operations of the Bank, including reserves, loans, mortgages, capital, issuances
of securities, payment of dividends, and establishment of branches. As its
primary federal regulator, the Federal Reserve has authority to impose
penalties, initiate civil and administrative actions and take other steps
intended to prevent the Bank from engaging in unsafe or unsound practices. The
Bank is a member of the BIF and, as such, deposits in the Bank are insured by
the FDIC to the maximum extent permissible by law.
The Bank is subject to the provisions of the CRA. Under the CRA, the
Bank has a continuing and affirmative obligation consistent with its safe and
sound operation to help meet the credit needs of its entire communities,
including low-and moderate-income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit the Bank's discretion to develop the types of products and services that
it believes are best suited to their particular communities, consistent with the
CRA. The CRA requires the appropriate federal bank regulatory agency (in the
case of the Bank, the Federal Reserve), in connection with their regular
examinations, to assess a financial institution's record in meeting the credit
needs of the community serviced by it, including low- and moderate-income
neighborhoods. A federal banking agency's assessment of a financial
institution's CRA record is made available to the public. Further, such
assessment is required whenever the institution applies to, among other things,
establish a new branch that will accept deposits, relocate an existing office or
merge or consolidate with, or acquire the assets of or assume the liabilities
of, a federally-regulated financial institution. In the case where the Company
applies for approval to acquire a bank or other bank holding company, the
federal regulator approving the transaction will also assess the CRA records of
the Bank. The Bank received a "Satisfactory" CRA rating in its most recent
examination.
In April 1995, the federal banking agencies adopted amendments revising
their CRA regulations, with a phase-in schedule applicable to various
provisions. Among other things, the amended CRA regulations, which became fully
effective on July 1, 1997, substitute for the prior process-based assessment
factors a new evaluation system that will rate
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<PAGE> 58
an institution based on its actual performance in meeting community needs. In
particular, the system now focuses on three tests: (i) a lending test, to
evaluate the institution's record of making loans in its service areas; (ii) an
investment test, to evaluate the institution's record of investing in community
development projects; and (iii) a service test, to evaluate the institution's
delivery of services through its branches and other offices. The amended CRA
regulations also clarify how an institution's CRA performance will be considered
in the application process. The Company does not anticipate that the revised CRA
regulations will have any material impact on the Bank's operations or its CRA
rating.
Deposit Insurance. The Bank is subject to FDIC deposit insurance assessments.
The Bank is also subject to a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (i) well capitalized,
(ii) adequately capitalized, and (iii) undercapitalized. An institution is also
assigned, by the FDIC, to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the risk-based assessment system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates on deposits for an institution in the highest category (i.e.,
"well capitalized" and "healthy") are less than assessment rates on deposits for
an institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern").
In addition to FDIC insurance assessments, the Bank is also subject to
assessments used to pay interest on bonds issued by the Financing Corporation
(the "FICO") under the Deposit Insurance Funds Act (the "Funds Act"). Prior to
enactment of the Funds Act, only insurance payments by SAIF-member institutions
were available to satisfy FICO's interest payment obligations. Through the end
of 1999, the FICO assessment rate on BIF-assessable deposits is required by the
statute to be one-fifth of the SAIF rate. Thereafter, FICO assessment rates for
members of both insurance funds will presumably be equalized.
Currently, the FICO assessment rate for BIF-assessable deposits is 0.013
percent (or 1.3 basis points) and the FICO assessment rate for SAIF assessable
deposits is 0.0648 percent (or 6.48 basis points). In 1997, the Bank's total
FICO payment obligation was $12,500, all of which was attributable to the
BIF-assessable deposits. The Bank has no SAIF assessable deposits.
Capital Requirements. The Company and the Bank are required to comply with the
capital adequacy standards established by the Federal Reserve. There are three
basic measures of capital adequacy for banks that have been promulgated by the
Federal Reserve; two risk-based measures and a leverage measure. All applicable
capital standards must be satisfied for a bank holding company and a bank to be
considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guidelines for the ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance-sheet items, such as
standby letters of credit) is 8.0%. At least half of Total Capital (i.e., 4% of
risk-weighted assets) must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves ("Tier 2 Capital"). In addition, the Federal Reserve has
established minimum leverage ratio guidelines for bank holding companies. These
guidelines provide for a minimum ratio of Tier 1 Capital to average assets,
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<PAGE> 59
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 Capital
ratio of 7% during the period of time that such investment limitations are
exceeded. If the Bank's Tier 1 Capital ratio falls below 7%, the Bank is
required to increase its capital by an amount sufficient to reach the 7% minimum
ratio within 90 days. As of June 30, 1998, the Bank's Tier 1 Capital ratio was
6.87%. Upon completion of the Offerings, the Bank's Tier 1 Capital ratio will
exceed 7%.
Dividends. As a Florida-chartered commercial bank, the Bank is subject
to the laws of Florida as to the payment of dividends. Under the Florida
Financial Institutions Code, the prior approval of the Department is required if
the total of all dividends declared by a bank in any calendar year will exceed
the sum of the bank's net profits for that year and its retained net profits for
the preceding two years.
Under Federal law, if, in the opinion of the federal banking regulator,
a bank or thrift under its jurisdiction is engaged in or is about to engage in
an unsafe or unsound practice (which, depending on the financial condition of
the depository
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<PAGE> 60
institution, could include the payment of dividends), such regulation may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Prompt Corrective
Action regulations adopted by the federal banking agencies, a depository
institution may not pay any dividend to its holding company if payment would
cause it to become undercapitalized or if it already is undercapitalized.
Federal Reserve System. The Federal Reserve regulations require banks to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The new Federal Reserve
regulations, effective December 16, 1997, generally require that reserves be
maintained against aggregate transaction accounts as follows: (i) for accounts
aggregating $47.8 million or less (subject to adjustment by the Federal Reserve)
the reserve requirement is 3%; and (ii) for accounts greater than $47.8 million,
the reserve requirement is $1.434 million plus 10.0% (subject to adjustment by
the Federal Reserve between 8% and 14%) against that portion of total
transaction accounts in excess of $47.8 million. The first $4.7 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve)
are exempted from the reserve requirements. As of June 30, 1998, the Bank was in
compliance with the foregoing requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve may be used to satisfy
liquidity requirements imposed by the Department. Because required reserves must
be maintained in the form of either vault cash, a noninterest-bearing account at
a Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement is to reduce the Bank's
interest-earning assets.
Liquidity. Under Florida banking regulations, the Bank is required to
maintain a daily liquidity position equal to at least 15% of its total
transaction accounts and 8% of its total nontransaction accounts, less those
deposits of public funds for which security has been pledged as provided by law.
The Bank may satisfy its liquidity requirements with cash on hand (including
cash items in process of collection), deposits held with the Federal Reserve,
demand deposits due from correspondent banks, Federal funds sold,
interest-bearing deposits maturing in 31 days or less and the market value of
certain unencumbered, rated, investment-grade securities and securities issued
by Florida or any county, municipality or other political subdivision within the
State. The Federal Reserve also reviews the Bank's liquidity position as part of
its examination and imposes similar requirements on the Bank. Any
Florida-chartered commercial bank that fails to comply with its liquidity
requirements generally may not further diminish liquidity either by making any
new loans (other than by discounting or purchasing bills of exchange payable at
sight) or by paying dividends. At June 30, 1998, the Bank's net liquid assets
exceeded the minimum amount required under the applicable Florida regulations.
Monetary Policy and Economic Controls. The banking business is affected
not only by general economic conditions, but also by the monetary policies of
the Federal Reserve. Changes in the discount rate on member bank borrowing,
availability of borrowing at the "discount window", open market operations, the
imposition of changes in reserve requirements against bank deposits and the
imposition of and changes in reserve requirements against certain borrowings by
banks and their affiliates are some of the instruments of monetary policy
available to the Federal Reserve. The monetary policies have had a significant
effect on the operating results of commercial banks and are expected to continue
to do so in the future. The monetary policies of the Federal Reserve are
influenced by various factors, including inflation, unemployment and short- and
long-term changes in the international trade balance and in the fiscal policies
of the United States Government. Future monetary policies and the effect of such
policies on the future business and earnings of the Bank cannot be predicted.
Future Legislation. Various legislation, including proposals to overhaul
the bank regulatory system and expand the powers of bank holding companies, is
from time to time introduced in Congress. Such legislation may change banking
statutes and the operating environment of the Company and its bank and non-bank
subsidiaries in substantial and unpredictable ways. One such proposal, H.R. 10,
passed the U.S. House of Representatives on May 14, 1998. That bill would amend
the BHC Act to make insurance and securities underwriting and other non-banking
activities permissible for bank holding companies. However, there is no
assurance that such legislation as currently drafted, or any other legislation,
will ultimately be enacted and, if enacted, the ultimate effect that any such
potential legislation or implementing regulations would have upon the financial
condition or results of operations of the Company.
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<PAGE> 61
CHANGES IN ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") recently adopted or
issued proposals and guidelines that may have a significant impact on the
accounting practices of commercial enterprises in general and financial
institutions in particular.
During 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," which was
effective for the Company's fiscal year beginning January 1, 1997. SFAS 125
provides standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. In addition to providing
further guidance related to the recording of mortgage servicing rights, SFAS No.
125 requires an entity to classify loans securitized which are retained in its
portfolio and excess spread related to mortgage servicing rights as trading
assets. SFAS No. 125 has not had a material impact on the Company's results of
operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which was effective for the Company's current fiscal year beginning
January 1, 1998. SFAS 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances in the financial
statements. Comprehensive income is defined to include those revenues, expenses,
gains, and losses of a normal, recurring nature, as well as items which are
non-recurring, unusual and infrequent. The adoption of SFAS No. 130 did not have
a material effect on the Company's financial statements.
Also, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which is effective for the
Company's current fiscal year beginning July 1, 1998. SFAS No. 131 establishes
standards for the way the Company reports information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements. Management has
implemented SFAS No. 131 in the year ended December 31, 1997 and believes its
trust operations and investment advisory activities are immaterial to the
consolidated financial statements in terms of their respective assets, revenues,
profit or loss and other operating data.
PROPERTIES
The principal executive offices of the Company, the Bank and United
Trust are located in an office building at 333 Third Avenue North, St.
Petersburg, Florida 33701. This facility was completed in late 1997, is owned by
the Company and has a total of five floors and approximately 47,400 square feet
of usable space. The Company and its subsidiaries occupy a total of
approximately 25,000 square feet on the first two floors and a portion of the
third floor of the building. As of June 30, 1998, the balance of the building
was leased to tenants. Adequate parking, lobby, safe deposit boxes, and
drive-thru facilities are provided to customers of the Bank at this location.
The Bank has additional branch locations at 5801 North 49th Street
(North Office), 5601 North Park Street (Five Towns Office), and 6500 Gulf
Boulevard (St. Pete Beach Office), all in St. Petersburg, Florida. Except for
the Five Towns Office, these facilities are owned by the Company and offer both
lobby and drive-thru banking facilities to the Bank's customers. The Five Towns
Office is leased for a term expiring October 31, 2001, with four renewal
options.
Additionally, the Bank has given notice of its intent to exercise an
option to purchase a bank branch site at 7490 Bryan Dairy Road in Pinellas Park
by 1998 year-end with an anticipated opening during the first quarter of 1999.
It will be the Bank's fifth banking branch office and will offer lobby,
drive-thru and safe deposit facilities to the Bank's customers.
EPW's main office is located in an office building in Tampa, Florida in
which EPW leases approximately 3,190 square feet of space pursuant to a lease
expiring February 28, 2003, with no renewal option. EPW's Jacksonville, Florida
office operates out of a private home owned by an officer of EPW.
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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.
57
<PAGE> 63
MANAGEMENT
Set forth below is certain information concerning the Company's
directors and executive officers. The Company's directors are elected for one
year terms.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Position with Position with the Bank,
Name Age the Company United Trust or EPW
- ---- --- -------------- ------------------------
<S> <C> <C> <C>
Ronald E. Clampitt.................................. 53 Director
David K. Davis, M.D................................. 74 Director Vice Chairman of the Bank
Edward D. Foreman................................... 54 Director
Charles O. Lowe..................................... 60 Director Executive Vice President of
United Trust
John B. Norrie...................................... 55 Director, Chairman
Neil W. Savage...................................... 57 Director, President Chairman and CEO of the
and CEO Bank
Harold J. Winner.................................... 49 Director President of the Bank
Ward J. Curtis, Jr................................... 52 Director, Executive Chairman, CEO and
Vice President President of United Trust
Henry Esteva........................................ 79 Director, Chairman
Emeritus
Ian F. Irwin........................................ 48 Director
Jack A. MaCris, M.D................................. 73 Director
Ronald Petrini...................................... 53 Director
John B. Wier, Jr.................................... 59 Director
William A. Eickhoff................................. 51 Director, Executive Chairman and Chief
Vice President 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 Senior Vice President and
and Chief Financial Chief Financial Officer of
Officer the Bank
Susan L. Blackburn.................................. 39 Senior Vice President of
the Bank
46 Vice President Vice President of the Bank
P. Dennis Barletta..................................
John Pieper......................................... 54 President of EPW
</TABLE>
58
<PAGE> 64
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.
59
<PAGE> 65
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
$10,000 per year for services rendered as Vice Chairman of the Bank.
Additionally, non-employee directors are eligible for a bonus based on the
profitability of the Company. No other directors receive separate compensation
for services rendered as a director.
60
<PAGE> 66
Executive Compensation
The following table summarizes the compensation during the fiscal
years ended December 31, 1997, 1996 and 1995, the Company's Chief Executive
Officer and the four highest paid executive officers of the Company
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ------------------------------------
AWARDS PAYOUTS
---------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTTP ALL OTHER
NAME AND COMPENSATION AWARDS(s) OPTIONS/SARs PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) 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 12,006
Chairman and Chief 1996 106,767 0 2,627 0 0 0 13,885
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
(prior salary continuation plan); 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 (prior
salary continuation plan). Additionally, the Company paid premiums on
certain life insurance policies for the benefit of Mr. Eickhoff
totaling $3,281 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 $8.25 per share on December 31, 1997.
61
<PAGE> 67
The following table contains information about stock option grants to
Named Executive Officers during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
<TABLE>
<CAPTION>
Number of
Securities % of Total Options
Underlying Granted to Exercise or
Options Employees Base Price Expiration
Name Granted in Fiscal Year ($/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
Shares Acquired Value Options at Options at
Name on Exercise Realized FY-Ended FY-End(1)
- ---- --------------- -------- ------------- -------------
Exercisable/ Exercisable/
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.
62
<PAGE> 68
EMPLOYMENT CONTRACTS WITH OFFICERS
Neil W. Savage. Mr. Savage is employed as President and Chief
Executive Officer of the Company pursuant to an employment agreement for a term
that began on October 17, 1997 and terminates as provided therein. Mr. Savage
receives an annual salary of $136,000 with annual salary increases, is eligible
to receive certain bonuses and certain other compensation as provided in the
senior management committee incentive schedule approved and adopted by the
Company from time to time, and is provided the use of an automobile for company
duties. Additionally, Mr. Savage is entitled to participate in any employee
benefit plan maintained by the Company and receive health and dental insurance.
Mr. Savage's employment may be terminated upon disability or attaining age 65,
at the election of Mr. Savage with 90 days notice, upon the dissolution and
liquidation of the Company (other than as part of a reorganization, merger,
consolidation or sale of all or substantially all of the assets of the Company
whereby the business is continued), by the Company for "just cause" and by the
Company upon six months notice with or without cause. If Mr. Savage's
employment is terminated by the Company (other than for "just cause"), he is
entitled to continue to receive compensation provided in his employment
agreement for a period of 12 months.
Harold J. Winner. Mr. Winner is employed as President of the Bank
pursuant to an employment agreement for a term that began on December 4, 1997
and terminates as provided therein. Mr. Winner receives an annual salary of
$94,100 with annual salary increases, is eligible to receive certain bonuses and
certain other compensation as provided in the senior management committee
incentive schedule approved and adopted by the Company from time to time, and
is provided the use of an automobile for company duties. Additionally, Mr.
Winner is entitled to participate in any employee benefit plan maintained by
the Company and receive health and dental insurance. Mr. Winner's employment
may be terminated upon disability or attaining age 65, at the election of Mr.
Winner with 90 days notice, upon the dissolution and liquidation of the Company
(other than as part of a reorganization, merger, consolidation or sale of all
or substantially all of the assets of the Company whereby the business is
continued), by the Company for "just cause" and by the Company upon six months
notice with or without cause. If Mr. Winner's employment is terminated by the
Company (other than for "just cause"), he is entitled to continue to receive
compensation provided in his employment agreement for a period of 12 months.
Cynthia A. Stokes. Ms. Stokes is employed as Director of Operations of
the Company pursuant to an employment agreement for a term that began on
December 5, 1997 and terminates as provided therein. Ms. Stokes receives an
annual Salary of $65,823 with annual increases, and is eligible to receive
certain bonuses and certain other compensation as provided in the senior
management committee incentive schedule approved and adopted by the Company
from time to time. Additionally, Ms. Stokes is entitled to participate in any
employee benefit plan maintained by the Company and receive health and dental
insurance. The agreement may be terminated upon disability or attaining age 65,
at the election of Ms. Stokes with 90 days notice, upon the dissolution and
liquidation of the Company (other than as part of a reorganization, merger,
consolidation or sale of all or substantially all of the assets of the Company
whereby the business is continued), by the Company for "just cause" and by the
Company upon six months notice with or without cause. If Ms. Stokes's
employment is terminated by the Company (other than for "just cause"), she is
entitled to continue to receive compensation provided in her employment
agreement for a period of 12 months.
Ward J. Curtis, Jr. Mr. Curtis is employed as Chairman, Chief
Executive Officer and President of United Trust pursuant to an employment
agreement, as amended, for a term that began September 29, 1995 and terminates
as provided therein. Mr. Curtis receives an annual salary of $129,395 with
annual salary increases, is eligible to receive certain bonuses and is provided
the use of an automobile for Company duties. Additionally, Mr. Curtis is
entitled to participate in employee benefit plan maintained by the Bank and is
entitled to receive benefits under the Trust Department Stock Option Plan, as
amended (the "Trust Plan"). Mr. Curtis' employment agreement contains a
non-competition clause pursuant to which Mr. Curtis may not compete with or
solicit customers from the Bank in Pinellas County during his employment and
for a period of two years thereafter; provided, however, that such
non-competition clause shall terminate after 2001 and may under certain
circumstances terminate after 2000. Additionally, Mr. Curtis' employment
agreement was amended on July 22, 1997, to provide that if a Change of Control
(as defined in the FSC Right of First Refusal Agreement dated
63
<PAGE> 69
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 any employee benefit plan maintained by EPW and the Company and
is eligible to receive benefits under the EPW Stock Option Plan, as amended
(the "EPW Plan"). EPW is required to provide a minimum of $900,000 in life
insurance to Mr. Eickhoff with a current death benefit of $265,061.
Furthermore, Mr. Eickhoff's employment agreement was amended on July 22, 1997,
to provide that if a Change of Control (as defined in the EPW Right of First
Refusal Agreement dated December 28, 1995) occurs prior to December 31, 2000,
Mr. Eickhoff shall be paid his unearned employment bonus in an amount set forth
in the amendment and such unearned bonus shall be paid in cash. The amendment
also provides that in the event of a Change of Control, the acquiror shall have
certain rights with respect to Mr. Eickhoff's continued employment or
termination thereof. Finally, the amendment to Mr. Eickhoff's employment
agreement provides that in the event he earns any bonus for the year 2000, such
bonus shall be paid in cash or in the Company's stock (at the most recent ESOP
price) at the option of Mr. Eickhoff.
OTHER COMPENSATORY BENEFIT PLANS WITH OFFICERS
Neil W. Savage. The Bank has entered into a salary continuation
agreement with Mr. Savage dated December 8, 1997 pursuant to which certain
benefits will be paid to Mr. Savage, under certain situations following his
termination, out of the Bank's general assets. Mr. Savage is entitled to
receive a benefit in the amount of 60% of his final salary upon termination of
his employment either (i) on or after the Normal Retirement Age (as defined
therein), (ii) for Disability (as defined therein), or (iii) for Change of
Control (as defined therein), payable monthly for 239 additional months.
Alternatively, if Mr. Savage is terminated for reasons other than death,
disability, "for cause" or following a change of control, Mr. Savage shall be
paid 60% of his final salary multiplied by a vesting percentage set forth in
Mr. Savage's agreement payable monthly for a term of 239 additional months.
Harold J. Winner. The Bank has entered into a salary continuation
agreement with Mr. Winner dated December 5, 1997 pursuant to which certain
benefits will be paid to Mr. Winner, under certain situations following his
termination, out of the Bank's general assets. Mr. Winner shall be entitled to
receive benefits in the amount of 50% of his final salary upon termination of
his employment either (i) on or after the Normal Retirement Age (as defined
therein), (ii) for Disability (as defined therein), or (iii) for Change of
Control (as defined therein), payable monthly for 239 additional months.
Alternatively, if Mr. Winner is terminated for reasons other than death,
disability, "for cause" or following a change of control, Mr. Winner shall be
paid 50% of his final salary multiplied by a vesting percentage set forth in
Mr. Winner's agreement payable monthly for a term of 239 additional months.
64
<PAGE> 70
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
65
<PAGE> 71
shareholders upon a Change of Control exceed the Return Amount (as defined in
the Plan), which is an investment return on the Company's capital of 16.5%
compounded since the formation of the Company in 1982. The pool available for
cash awards, after the calculation, is allocated two-thirds to officers and
one-third to directors and is further reduced by the value of Options and
certain Salary Continuation Agreements (as defined in the Plan) in effect. The
Plan further provides that if, on any Change of Control, payments to
"disqualified persons" as defined in Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), constitute "excess golden
parachute payments" within the meaning of such Code sections, no such payments
will be made until the matter is submitted to the shareholders for vote and,
before the Change of Control occurs, a sufficient percentage of the
shareholders vote to approve the excess payments.
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> 72
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 as 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 expiration 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
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> 73
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 June 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 June 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
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 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
June 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> 74
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Southeast Realty Interests, Inc. On November 24, 1997, Southeast
Realty Interests, Inc. ("SERI"), an affiliate of Mr. Irwin, entered into an
exclusive right to lease agreement (the "Lease Agreement") with a subsidiary of
the Company that owns the building in which the Company's principal executive
office is located. Pursuant to the Lease Agreement, SERI was granted the
exclusive right to lease 17,918 square feet in the building located at 333
Third Avenue North, St. Petersburg, Florida at stated terms. The Lease
Agreement expired on July 14, 1998. As of June 30, 1998, the space was 100%
leased. Commissions of $39,490 were paid to SERI during the term of the Lease
Agreement.
The Southeast Companies of Tampa Bay, Inc. On March 18, 1997, The
Southeast Companies of Tampa Bay, Inc. (the "Manager"), also an affiliate of
Mr. Irwin, entered into a Property Management Agreement with a subsidiary of
the Company pursuant to which it was employed to act as the sole and exclusive
manager in the leasing, operation and management of the building in which the
Company's principal executive offices are located at 333 Third Avenue North,
St. Petersburg, Florida for total annual consideration of approximately
$17,000. The agreement automatically renews each year unless either party
terminates it by providing notice of cancellation at least 60 days prior to
March 31 of the year that the agreement is in effect.
Certain Extensions of Credit. As of June 30, 1998, the following loans
in excess of $60,000 to the Company's directors, executive officers and
principal shareholders were outstanding: Mr. Clampitt, $303,052; Mr. Eickhoff,
$76,924; Mr. Irwin and affiliated entities, $1,507,944; Dr. MaCris, $65,874;
Mr. Norrie and affiliated entities, $633,850; and Mr. Wier and affiliated
entities, $971,327. Certain additional amounts are available to be borrowed by
these individuals and other officers and directors under existing lines of
credit and other arrangements. All of the foregoing extensions of credit were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time made
for comparable transactions with others and did not involve more than the
normal risk of collectability or present other unfavorable features.
The Company may engage in additional transactions with affiliates of
the Company from time to time when it's board of directors determines it is in
the best interest of the Company to do so. The Company currently intends to
continue to make available the extensions of credit referenced above. The
Company believes that the transactions previously entered into by the Company
with its affiliates, as well as those that may be undertaken with its
affiliates in the future, have been and will continue to be on terms at least
as favorable as those that could have been negotiated with unaffiliated third
parties.
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<PAGE> 75
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of July 1, 1998, and as adjusted to
reflect the sale of 600,000 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% 4.1%
David K. Davis, M.D.(2) ........................................... 107,073 3.0% 2.6%
Henry Esteva(3) ................................................... 46,218 1.3% 1.1%
Edward D. Foreman(4) .............................................. 58,377 1.7% 1.4%
Charles O. Lowe(5) ................................................ 63,462 1.8% 1.5%
Jack A. MaCris, M.D.(6) ........................................... 100,167 2.8% 2.4%
John B. Norrie(7) ................................................. 129,390 3.7% 3.1%
William Eickhoff(8) ............................................... 93,793 2.6% 2.2%
Ronald R. Petrini(9) .............................................. 10,776 * *
John B. Wier, Jr.(10) ............................................. 299,367 8.5% 7.2%
Ward J. Curtis, Jr.(11) ........................................... 137,667 3.9% 3.3%
Neil W. Savage(12) ................................................ 220,047 6.1% 5.2%
Harold J. Winner(13) .............................................. 92,295 2.6% 2.2%
Claude C. Focardi(14) ............................................. 421,826 12.0% 10.2%
Ian F. Irwin(15) .................................................. 271,758 7.7% 6.6%
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% 49.8%
</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 the majority shareholder.
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<PAGE> 76
(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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<PAGE> 77
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 June 30, 1998, 3,513,858 shares of Common Stock and 20,850 shares of 7%
Preferred Stock were issued and outstanding. The 7% Preferred Stock is
noncallable and is convertible into Common Stock at the election of the holder
at a price of $1.1856013 per share of Common Stock. All of the 6% Preferred
Stock was converted in 1995 and 1996.
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.
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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 December 31, 1998. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which Distributions are payable on
the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions, interest or other
payment in respect of any such delay) with the same force and effect as if made
on the date such payment was originally due and payable. "Business Day" means
any day other than a Saturday or a Sunday, a day on which banking institutions
in the City of New York are authorized or required by law or executive order to
remain closed or a day on which the corporate trust office of the Property
Trustee or the Debenture Trustee is closed for business. In the event UFH
Capital does not have sufficient funds to pay Distributions, the remedy of a
holder of Preferred Securities is to institute a legal proceeding directly
against the Company for enforcement of payment of such Distributions to such
holder. See "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
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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 December 31, 1998, to the Person (as defined
in the Indenture) in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of UFH Capital, the Junior Subordinated
Debentures will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Preferred Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on the date such payment was
originally due and payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of ____% thereof, compounded
quarterly. The term "interest", as used herein, includes quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date and Additional Interest, as applicable.
The Junior Subordinated Debentures will mature on _______, 2028, the
Stated Maturity. Such date may be shortened at any time by the Company to any
date not earlier than _______, 2003, subject to the Company having received
prior regulatory approval if then required under applicable capital guidelines
or regulatory policies. In the event that the Company elects to shorten the
Stated Maturity of the Junior Subordinated Debentures, it will give notice
thereof to the Debenture 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 June 30, 1998, the Company
had aggregate Senior Debt and Subordinated Debt of $3.0 million. Because the
Company is a holding company, the Junior Subordinated Debentures are effectively
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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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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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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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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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ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("ERISA Plans"), generally may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the ERISA Plan.
In any case, the Company and/or any of its affiliates may be considered
a "party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain plans
(generally, ERISA Plans maintained or sponsored by, or contributed to by, any
such persons with respect to which the Company or an affiliate is a fiduciary or
ERISA Plans for which the Company or an affiliate provides services). The
acquisition and ownership of Preferred Securities by an ERISA Plan (or by an
individual retirement arrangement or other ERISA Plans described in Section
4975(e)(1) of the Code) with respect to which the Company or any of its
affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, ERISA Plans with respect to which the Company or any of
its affiliates is a party in interest or a disqualified person should not
acquire Preferred Securities unless such Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any other ERISA
Plans or other entities whose assets include ERISA Plan assets subject to ERISA
or Section 4975 of the Code proposing to acquire Preferred Securities should
consult with their own counsel.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriter, William R. Hough & Co., has agreed to purchase from
the Company the number of shares of Common Stock and from UFH Capital the number
of Preferred Securities set forth below. The Underwriter is committed to
purchase and pay for all Preferred Securities if any Preferred Securities are
purchased and has agreed to purchase the shares of Common Stock at the initial
offering price less the underwriting discounts and commission set forth on the
cover page of this Prospectus.
<TABLE>
<CAPTION>
Number of
Shares of Number of
Preferred Shares of
Underwriter Securities Common Stock
- ----------- ---------- ------------
<S> <C> <C>
William R. Hough & Co.........................................
</TABLE>
The Underwriter proposes to offer the shares of Common Stock directly
to the public at the initial offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $___ per share. The Underwriter may allow and such dealers may re-allow a
concession not in excess of $___ per share to certain other dealers. The
Underwriter has informed the Company that it does not intend to confirm sales to
any accounts over which they exercise discretionary authority. After the initial
public offering of the shares, the offering price and other selling terms may
from time to time be varied by the Underwriter. Without the prior consent of the
Company, no investor may purchase more than 100,000 shares of Common Stock in
the Common Stock Offering.
The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $___ per Preferred
Security. The Underwriter may allow and such dealers may re-allow a concession
not in excess of $___ per Preferred Security to certain other dealers. After the
Offerings, the price to the public and other selling terms may be changed by the
Underwriter.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation an amount of $___ per Preferred Security for the Underwriter's
arranging the investment therein of such proceeds.
The Company has granted to the Underwriter an option, exercisable no
later than 30 days after the date of this Prospectus, to purchase up to 90,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus, to cover
over-allotments, if any. If the Underwriter exercises its over-allotment option,
the Underwriter has agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the foregoing table bears to the total
number of shares of Common Stock offered hereby. The Underwriter may exercise
such option only to cover over-allotments made in connection with the sale of
share of Common Stock offered hereby.
The Company and UFH Capital have granted to the Underwriter an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional $900,000 aggregate liquidation amount of the Preferred Securities on
the terms set forth on the cover page hereof less underwriting discounts. The
Underwriter may exercise such option to purchase additional Preferred Securities
solely for the purpose of covering over-allotments, if any, incurred in the sale
of the Preferred Securities. To the extent that the Underwriter exercises its
option to purchase additional Preferred Securities, UFH Capital will issue and
sell to the Company additional Common Securities and the Company will issue and
sell to UFH Capital Junior Subordinated Debentures in an aggregate principal
amount equal to the total aggregate Liquidation Amount of the additional
Preferred Securities being purchased pursuant to the option and the additional
Common Securities.
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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 July 1, 1998, William R. Hough, a controlling stockholder of
William R. Hough & Co., owned 169,374 shares or 4.8% of the Company's issued and
outstanding Common Stock (4.1% after giving effect to the Common Stock
Offering).
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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> 112
UNITED FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Six Months Ended June 30, 1998 and 1997
Years Ended December 31, 1997, 1996 and 1995
<PAGE> 113
UNITED FINANCIAL HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at June 30, 1998 (unaudited),
December 31, 1997 and 1996 F-3
Consolidated Statements of Earnings for the six months ended June 30, 1998
and 1997 (unaudited) and for the years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Comprehensive Income for the six months ended
June 30, 1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995 F-6
Consolidated Statement of Stockholders' Equity for the six months ended
June 30, 1998 (unaudited) and for the years ended December 31, 1997,
1996 and 1995 F-7
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and 1997 (unaudited) and for the years ended December 31, 1997, 1996 and 1995 F-8
Notes to Consolidated Financial Statements F-11
</TABLE>
F-1
<PAGE> 114
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> 115
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
ASSETS 1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,820,439 $ 7,336,809 $ 7,902,388
Federal funds sold 26,767,000 7,441,000 7,061,000
Securities held to maturity, market value of
$12,805,968, $10,212,426 and $9,007,905, respectively 12,707,218 10,097,258 9,195,963
Securities available for sale, at market 17,180,997 11,472,052 9,510,205
Loans, net 97,111,855 94,821,324 79,262,508
Premises and equipment, net 9,290,916 9,541,801 5,987,428
Federal Home Loan Bank stock 433,500 364,900 318,800
Federal Reserve Bank stock 158,800 153,750 153,750
Accrued interest receivable 993,878 950,042 778,555
Intangible assets, less accumulated amortization of $1,615,688,
$1,570,288 and $1,506,977, respectively 1,396,235 1,336,494 1,440,141
Other assets 4,286,734 3,803,254 1,122,554
------------ ------------ ------------
Total assets $178,147,572 $147,318,684 $122,733,292
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 25,562,276 28,384,616 $ 26,646,609
NOW and money market 68,604,527 36,031,184 27,571,149
Savings 4,448,969 5,245,222 4,688,430
Time, $100,000 and over 9,574,786 9,692,130 4,734,628
Other time 49,495,244 50,865,952 44,504,101
------------ ------------ ------------
Total deposits 157,685,802 130,219,104 108,144,917
Securities sold under agreements to repurchase 4,168,418 1,080,745 1,768,859
Accrued interest payable 399,160 396,184 336,785
Convertible subordinated debentures 630,000 630,000 630,000
Long-term debt 2,370,652 2,678,152 813,950
Other liabilities 1,441,943 1,823,337 1,547,126
------------ ------------ ------------
Total liabilities 166,695,975 136,827,522 113,241,637
COMMITMENTS AND CONTINGENCIES -- -- --
STOCKHOLDERS' EQUITY
7% convertible preferred stock, $10 par value; 150,000 shares
authorized; 20,850 shares issued and outstanding at June 30,
1998 and 23,350 shares issued and outstanding at December 31,
1997 and 1996 208,500 233,500 233,500
Common stock, $.01 par value; 20,000,000 shares authorized;
3,513,858 shares issued and outstanding at June 30, 1998;
3,444,318 and 3,431,004 shares issued and outstanding at
December 31, 1997 and 1996, respectively 35,138 34,443 34,308
Paid-in Capital 6,213,977 5,789,932 5,737,567
Accumulated other comprehensive income 73,507 57,499 45,872
Retained earnings 4,920,475 4,375,788 3,440,408
------------ ------------ ------------
Total stockholders' equity 11,451,597 10,491,162 9,491,655
------------ ------------ ------------
Total liabilities and stockholders' equity $178,147,572 $147,318,684 $122,733,292
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 116
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest income
Loans and loan fees $ 4,870,947 $ 4,251,306 $ 8,960,703 $ 8,121,249 $ 7,590,367
Securities
U.S. Treasury 293,562 277,513 598,549 316,369 288,782
Obligations of other U.S.
Government agencies and corporations 411,110 385,392 746,786 702,235 662,531
Obligations of states and political 39,570 54,670 86,868
subdivisions 36,578 20,551
Other 69,393 76,904 151,612 180,517 219,489
Federal funds sold and securities
purchased under reverse
repurchase agreements 325,620 135,691 295,297 220,028 276,165
----------- ----------- ----------- ----------- -----------
Total interest income 6,007,210 5,147,357 10,792,517 9,595,068 9,124,202
Interest expense
NOW and money market 650,990 368,818 794,997 541,882 665,270
Savings 50,174 47,448 96,656 107,523 121,262
Time deposits, $100,000 and over 277,247 179,210 419,007 241,685 210,474
Other time 1,375,734 1,210,339 2,603,631 2,314,600 1,941,403
Long-term debt 129,586 57,797 130,547 124,544 86,331
Federal funds purchased and
securities sold under agreements
to repurchase 39,835 50,391 56,248 89,338 187,509
----------- ----------- ----------- ----------- -----------
Total interest expense 2,523,566 1,914,003 4,101,086 3,419,572 3,212,249
----------- ----------- ----------- ----------- -----------
Net interest income 3,483,644 3,233,354 6,691,431 6,175,496 5,911,953
Provision for loan losses 250,000 90,000 90,000 150,000 180,000
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 3,233,644 3,143,354 6,601,431 6,025,496 5,731,953
Other income
Service charges on deposit accounts 347,093 327,187 674,637 555,747 576,656
Trust and investment management
income 1,137,978 843,965 1,886,534 1,229,136 57,869
Other service charges, fees and income 424,405 304,237 679,081 787,210 602,695
----------- ----------- ----------- ----------- -----------
Total other income 1,909,476 1,475,389 3,240,252 2,572,093 1,237,220
</TABLE>
(continued)
F-4
<PAGE> 117
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Other expense
Salaries and employee benefits $ 2,262,606 $ 1,941,665 $ 4,047,859 $ 3,723,903 $ 2,593,728
Occupancy expense 290,858 203,828 514,374 387,256 280,286
Furniture and equipment expense 255,755 216,958 494,360 423,224 279,596
Data processing expense 221,308 211,453 417,522 375,339 315,553
Legal and professional fees 85,035 62,743 176,778 152,766 122,426
Amortization of intangible assets 34,624 31,831 66,802 111,208 121,048
Other operating expenses 694,421 1,189,671 1,854,300 1,052,426 908,754
----------- ----------- ----------- ----------- -----------
3,844,607 3,858,149 7,571,995 6,226,122 4,621,391
----------- ----------- ----------- ----------- -----------
Earnings before income taxes 1,298,513 760,594 2,269,688 2,371,467 2,347,782
Income tax expense (benefit)
Current 563,400 339,450 957,932 952,448 981,272
Deferred (51,000) (49,000) (97,986) (61,000) (110,000)
----------- ----------- ----------- ----------- -----------
512,400 290,450 859,946 891,448 871,272
----------- ----------- ----------- ----------- -----------
NET EARNINGS $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
=========== =========== =========== =========== ===========
Earnings Per Share:
Basic $ .22 $ .13 $ .41 $ .47 $ .64
Diluted $ .21 $ .13 $ .38 $ .40 $ .43
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 118
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Net earnings $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
Other comprehensive income:
Unrealized holding gains
(losses) 25,666 (14,040) 18,642 (103,639) 277,398
Income tax (expense)
benefit related to items of
other comprehensive income (9,658) 5,283 (7,015) 38,999 (104,385)
----------- ----------- ----------- ----------- -----------
Comprehensive income $ 802,121 $ 461,387 $ 1,421,369 $ 1,415,379 $ 1,649,523
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 119
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
7% 6%
Convertible Convertible
Common Preferred Preferred Paid-In
Stock Stock Stock Capital
----- ----- ----- -------
<S> <C> <C> <C> <C>
Balance December 31, 1994 $16,242 $ 982,500 $1,000,000 $2,736,923
Net Earnings -- -- -- --
2% Common Stock dividend 516 -- -- 154,113
Conversion of 6% Preferred to Common Stock 6,828 -- (874,860) 867,908
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 1,275 -- -- 381,225
Contribution by Parent to Fiduciary Services Corporation 1,500 -- -- 448,500
------- --------- ---------- ----------
Balance at December 31, 1995 26,361 982,500 125,140 4,588,669
Net Earnings -- -- -- --
2% Common Stock dividend 669 -- -- 265,230
Conversion of 6% Preferred to Common Stock 996 -- (125,140) 124,098
Conversion of 7% Preferred to Common Stock 6,192 (749,000) -- 742,698
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 90 -- -- 16,872
------- --------- ---------- ----------
Balance at December 31, 1996 34,308 233,500 -- 5,737,567
Net Earnings -- -- -- --
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 135 -- -- 52,365
------- --------- ---------- ----------
Balance at December 31, 1997 34,443 233,500 -- 5,789,932
Net Earnings (unaudited) -- -- -- --
Dividends on Common Stock (unaudited) -- -- -- --
Dividends on Preferred Stock (unaudited) -- -- -- --
Accumulated other comprehensive income (unaudited) -- -- -- --
Issuance of Common Stock (unaudited) 485 -- -- 399,276
Conversion of 7% Preferred to Common Stock (unaudited) 210 (25,000) -- 24,769
------- --------- ---------- ----------
Balance at June 30, 1998 (unaudited) $35,138 $ 208,500 $ -- $6,213,977
======= ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Retained
Income Earnings Total
------------- -------- -----
<S> <C> <C> <C>
Balance December 31, 1994 $(62,501) $1,711,722 $ 6,384,886
Net Earnings -- 1,476,510 1,476,510
2% Common Stock dividend -- (155,194) (565)
Conversion of 6% Preferred to Common Stock -- -- (124)
Dividends on Common Stock -- (276,809) (276,809)
Dividends on Preferred Stock -- (102,529) (102,529)
Accumulated other comprehensive income 173,013 -- 173,013
Issuance of Common Stock for cash -- -- 382,500
Contribution by Parent to Fiduciary Services Corporation -- -- 450,000
-------- ---------- -----------
Balance at December 31, 1995 110,512 2,653,700 8,486,882
Net Earnings -- 1,480,019 1,480,019
2% Common Stock dividend -- (266,858) (959)
Conversion of 6% Preferred to Common Stock -- -- (46)
Conversion of 7% Preferred to Common Stock -- -- (110)
Dividends on Common Stock -- (383,018) (383,018)
Dividends on Preferred Stock -- (43,435) (43,435)
Accumulated other comprehensive income (64,640) -- (64,640)
Issuance of Common Stock for cash -- -- 16,962
-------- ---------- -----------
Balance at December 31, 1996 45,872 3,440,408 9,491,655
Net Earnings -- 1,409,742 1,409,742
Dividends on Common Stock -- (458,017) (458,017)
Dividends on Preferred Stock -- (16,345) (16,345)
Accumulated other comprehensive income 11,627 -- 11,627
Issuance of Common Stock for cash -- -- 52,500
-------- ---------- -----------
Balance at December 31, 1997 57,499 4,375,788 10,491,162
Net Earnings (unaudited) -- 786,113 786,113
Dividends on Common Stock (unaudited) -- (233,254) (233,254)
Dividends on Preferred Stock (unaudited) -- (8,172) (8,172)
Accumulated other comprehensive income (unaudited) 16,008 -- 16,008
Issuance of Common Stock (unaudited) -- -- 399,761
Conversion of 7% Preferred to Common Stock (unaudited) -- -- (21)
-------- ---------- -----------
Balance at June 30, 1998 (unaudited) $ 73,507 $4,920,475 $11,451,597
======== ========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE> 120
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities
Provision for loan losses 250,000 90,000 90,000 150,000 180,000
Provision for depreciation
and amortization 320,814 379,594 566,344 500,994 370,421
Gain on sale of equipment -- -- -- -- (2,703)
Writedown of investment
security -- 255,000 255,000 -- --
Write-off of leasehold
improvements -- 130,065 130,065 -- --
Accretion of securities (25,368) (20,473) (44,317) (35,062) (46,438)
discount
Amortization of unearned
loan fees (41,530) (68,990) (64,941) (104,663) (193,969)
Amortization of securities
premiums 12,637 16,329 38,874 58,804 57,168
Gain on sales of loans (197,659) (109,999) (289,720) (424,611) (339,153)
Decrease (increase) in
interest receivable 43,836 (159,414) (171,487) (25,317) (35,428)
Increase in interest payable 2,977 25,058 59,399 37,793 66,784
Increase in other assets (200,465) (534,134) (2,641,922) (118,290) (445,845)
Decrease (increase) in other
liabilities (381,394) 563,645 276,211 211,633 98,494
------------ ----------- ------------ ------------ ------------
Net cash provided by
(used in) operating
activities 569,961 1,036,825 (386,752) 1,731,300 1,185,841
Cash flows from investing activities:
Purchase of Federal Reserve Bank
stock and FHLB stock (73,650) (46,100) (46,100) (13,500) --
Net increase (decrease) in
Federal funds sold (19,326,000) 1,680,000 (380,000) (4,665,000) 10,234,000
Principal repayments of held
to maturity securities 340,484 224,201 388,715 678,419 1,395,107
Principal repayments of available
for sale securities 416,147 285,346 494,729 1,106,893 1,775,590
Proceeds from maturities of
available for sale securities 500,000 2,500,000 4,491,876 1,199,781 --
Proceeds from maturities of held
to maturity securities 2,025,761 1,190,000 4,987,969 2,840,219 975,000
Purchases of available for sale
securities (5,648,595) (3,488,828) (6,937,869) (3,518,560) (1,902,396)
Purchases of held to maturity
securities (5,915,075) (4,995,312) (6,526,492) (3,588,175) (1,369,698)
Proceeds from sales of loans 1,649,324 1,220,364 3,969,174 5,598,856 4,426,770
Net increase in loans (4,309,027) (3,495,844) (19,263,329) (10,384,509) (14,319,006)
Capital expenditures (35,300) (3,429,676) (4,185,913) (2,836,673) (2,168,104)
Proceeds from sales of fixed assets -- -- -- -- 5,406
------------ ----------- ------------ ------------ ------------
Net cash used in
investing activities (30,375,931) (8,355,849) (23,007,240) (13,582,249) (947,331)
</TABLE>
(continued)
F-8
<PAGE> 121
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Month Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Acquisition of Fiduciary
Services Corporation $ -- $ -- $ -- $ -- $ (38,782)
Acquisition of Eickhoff,
Pieper & Willoughby -- -- -- (62,819) --
Cash paid in lieu of fractional shares
- 2% stock dividend -- -- -- (565) (222)
Cash paid in lieu of fractional shares
- 6% preferred stock conversion -- -- -- (46) (124)
Net increase (decrease) in
demand deposits, NOW
accounts, money market
accounts and savings
accounts 28,954,750 (5,778,944) 10,754,834 12,994,380 (13,631,078)
Net decrease (increase) in
certificates of deposit (1,488,052) 10,574,090 11,319,353 2,316,607 12,780,217
Net increase (decrease) in
securities sold under
agreements to repurchase 3,087,673 673,134 (688,114) (995,537) 1,178,218
Increase in borrowings -- -- 2,004,202 75,000 --
Repayment of long-term debt (307,500) (132,500) (140,000) (136,250) (52,000)
Issuance of common stock 284,155 -- 52,500 16,962 382,500
Dividend paid on preferred
stock (8,172) (8,169) (16,345) (43,435) (102,529)
Dividend paid on common stock (233,254) (228,721) (458,017) (383,018) (276,809)
----------- ----------- ----------- ----------- ------------
Net cash provided by
financing activities 30,289,600 5,098,890 22,828,413 13,781,279 239,391
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents 483,630 (2,220,134) (565,579) 1,930,330 477,901
Cash and cash equivalents at
beginning of year 7,336,809 7,902,388 7,902,388 5,972,058 5,494,157
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end
of year $ 7,820,439 $ 5,682,254 $ 7,336,809 $ 7,902,388 $ 5,972,058
=========== =========== =========== =========== ============
Supplemental Disclosures of Cash
Flow Information
Cash paid during the year for:
Interest $ 2,520,590 $ 1,888,945 $ 4,041,687 $ 3,381,780 $ 3,174,457
Income taxes $ 391,251 $ 504,400 $ 927,817 $ 961,579 $ 1,102,764
</TABLE>
(continued)
F-9
<PAGE> 122
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Month Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Supplemental Disclosure of Non-Cash Activity
Reclassification of loans to
foreclosed real estate $283,015 $284,428 $408,113 $541,085 $ --
======== ======== ======== ======== ----------
Non-cash portion of the
acquisition price of Eickhoff, Pieper &
Willoughby was the issuance of
convertible subordinated
debentures $ -- $ -- $630,000 $ -- $ --
======== ======== ======== ======== ==========
Non-cash common stock issued $115,607 $ -- $ -- $ -- $ --
======== ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-10
<PAGE> 123
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies that have been
consistently applied in the preparation of the consolidated financial statements
of United Financial Holdings, Inc. and Subsidiaries.
1. Principles of Consolidation
The consolidated financial statements include the accounts of United Financial
Holdings, Inc. (the "Company") and its Subsidiaries, United Bank and Trust
Company (the "Bank"), Eickhoff, Pieper & Willoughby ("EPW"), and United Trust
Company ("Trust"), after all significant intercompany accounts and transactions
have been eliminated. United Trust was formed on November 30, 1997. On December
31, 1997, the Bank transferred all assets of the trust division to the newly
formed United Trust Company.
2. Unaudited Financial Statements
The interim financial statements and related notes thereto for June 30, 1998
and 1997, include all normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation and are prepared on the same
basis as the annual statements. The interim results are not necessarily
indicative of the results that may be expected for the full year.
3. Cash and Cash Equivalents
For the purpose of presentation in the Consolidated Statements of Cash Flows,
cash and cash equivalents includes cash on hand and non-interest bearing amounts
due from correspondent banks.
4. Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
5. Securities
The Company's investment securities are classified in the following categories
and accounted for as follows:
- - Trading Securities. Government and corporate bonds held principally for
resale in the near term are classified as trading securities and recorded at
their fair values. Unrealized gains and losses on trading securities are
included in other income. The Company had no trading securities for the six
months ended June 30, 1998 and 1997 and the years ended December 31, 1997,
1996 and 1995.
F-11
<PAGE> 124
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
- - Securities Held to Maturity. Bonds, notes and debentures for which the
Company has the positive intent and ability to hold to maturity are reported
at cost, adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income using the interest method over the
period to maturity. Such securities may be sold or transferred to the
available for sale or trading securities classification only as a result of
isolated, non-recurring, or unusual changes in circumstances which the
Company could not have reasonably anticipated, such as a change in statutory
or regulatory requirements regarding investment limitations or a significant
deterioration in a security issuer's credit-worthiness.
- - Securities Available for Sale. Securities available for sale consist of
bonds, notes, debentures, and certain equity securities not classified as
trading securities nor as securities held to maturity, which may be sold
prior to maturity as part of asset/liability management or in response to
other factors, are carried at fair value with any valuation adjustment
reported in a separate component of stockholders' equity, net of the tax
effect.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary are recognized as
writedowns of the individual securities to their fair value. Such writedowns are
included in earnings as realized losses. The Company had a writedown of one
investment security totaling $255,000 for the year ended December 31, 1997.
There were no such writedowns during 1996 and 1995.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
6. Loans and Allowance for Loan Losses
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal balance. These receivables are adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or costs on
originated loans and un-amortized premiums or discounts on purchased loans.
Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment to the related loan's yield, generally over the
contractual life of the loan.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
F-12
<PAGE> 125
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> 126
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> 127
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
14. Accounting for Impairment of Long-Lived Assets
The Company periodically reviews its long-lived assets for impairment.
Impairment losses on long-lived assets are recognized when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. The Company did not
record any impairment losses during the six-months ended June 30, 1998 and 1997,
and the years ended December 31, 1997 and 1996.
15. Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities
The FASB has issued SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, which was effective for the
Company's fiscal year beginning January 1, 1997. SFAS No. 125 provides standards
for distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings.
16. Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and display of comprehensive income.
A specific reporting format is not required, provided the financial statements
show the amount of total comprehensive income for the period. Those items which
are not included in net income are required to be shown in the financial
statements with appropriate footnote disclosure and the aggregate balance of
such items must be shown separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods is required. The Company adopted
SFAS No. 130 effective January 1, 1998.
F-15
<PAGE> 128
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
17. Disclosures About Business Segments
In June 1997, the FASB adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way the Company reports information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports. SFAS No. 131 is effective for periods
beginning after December 15, 1997. Management has implemented SFAS No. 131 in
the year ended December 31, 1997 and believes its trust operations and
investment advisory activities are immaterial to the consolidated financial
statements in terms of their respective assets, revenues, profit or loss and
other operating data.
18. Earnings per Share
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS No. 128
simplified the method for computing and presenting earnings per share ("EPS")
previously required by APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. SFAS No. 128 is effective for periods
ending after December 15, 1997, and requires restatement of all prior period EPS
data and has been implemented by the Company. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
19. Reclassifications
Certain reclassifications have been made to the June 30, 1998 balances to
conform to the December 31, 1997, 1996 and 1995 presentation.
NOTE B - ACQUISITIONS
On September 30, 1995, the Company purchased 100% of the stock of Fiduciary
Services Corp. ("FSC") for $450,000, issuing 150,000 shares at $3.00 per share
of common stock of the Company plus a contingent payment of up to 225,000
performance shares based upon net earnings of the trust department through 2001.
The acquisition of FSC was accounted for as a purchase. The purchase price was
allocated to net tangible assets acquired based upon their estimated fair market
values. The performance shares will be recorded as additional purchase price.
Included in intangible assets is $395,706 of excess of cost over net tangible
assets acquired. Pro forma information is not presented, as the effect of the
acquisition is immaterial to the financial statements.
The Company has reserved from its authorized but unissued Common Stock, 225,000
shares as performance shares and 14,013 shares have been paid out as of June 30,
1998.
F-16
<PAGE> 129
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - ACQUISITIONS - Continued
On January 31, 1996, the Company completed the acquisition of EPW, an
independent investment management firm. The acquisition was facilitated by the
issuance of $630,000, 8% convertible subordinated debentures.
NOTE C - UNITED FINANCIAL HOLDINGS, INC. (Parent Only) CONDENSED FINANCIAL
INFORMATION
The Bank, EPW and Trust are wholly owned subsidiaries of United Financial
Holdings, Inc. The majority of the Company's assets are represented by its
investment in the Bank and its primary source of income is dividends from the
Bank.
During 1989, the Company authorized the issuance of 150,000 shares of $10 par
value cumulative, convertible, 7% preferred stock. The shares are convertible
into common shares at $1.19 per share.
Following is condensed financial information of the Company.
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1996 1995
---- ---- ---- ----
Balance Sheets (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 49,162 $ 203,278 $ 245,940 $ 356,494
Due from subsidiaries Bank 150,588 197,014 144,886 151,409
Investment in Bank 11,268,972 10,428,370 9,881,984 8,911,085
Investment in EPW 129,727 102,723 70,360 --
Investment in United Trust 2,456,845 2,360,985 -- --
Goodwill 567,125 561,063 631,886 --
Other assets 154,346 125,291 83,676 87,474
----------- ----------- ----------- -----------
$14,776,765 $13,978,724 $11,058,732 $ 9,506,462
=========== =========== =========== ===========
Note payable $ 2,329,402 $ 2,629,402 $ 750,200 $ 875,200
Convertible subordinated
debentures 630,000 630,000 630,000 --
Other liabilities 365,766 228,160 186,877 144,380
Stockholders' equity 11,451,597 10,491,162 9,491,655 8,486,882
----------- ----------- ----------- -----------
$14,776,765 $13,978,724 $11,058,732 $ 9,506,462
=========== =========== =========== ===========
</TABLE>
F-17
<PAGE> 130
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - UNITED FINANCIAL HOLDINGS, INC. (Parent Only) CONDENSED FINANCIAL
INFORMATION - Continued
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
1998 1997 1996 1995
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Statements of Earnings
Equity in earnings of Bank $ 828,840 $ 1,492,207 $ 1,535,539 $ 1,528,574
Equity in earnings of EPW 42,004 107,363 65,553 --
Equity in earnings of United
Trust 19,171 -- -- --
Other income 49,525 26,611 1,470 4,837
Interest expense (127,654) (125,699) (119,407) (86,331)
Other expense (74,846) (156,235) (34,991) (1,613)
----------- ----------- ----------- -----------
Earnings before income taxes 737,040 1,344,247 1,448,164 1,445,467
Income tax benefit 49,073 65,495 31,855 31,043
----------- ----------- ----------- -----------
Net earnings $ 786,113 $ 1,409,742 $ 1,480,019 $ 1,476,510
=========== =========== =========== ===========
</TABLE>
F-18
<PAGE> 131
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES
At June 30, 1998, the carrying value and estimated market value of investments
in debt and equity securities were as follows:
<TABLE>
<CAPTION>
Carrying
Value Gross Gross
(Amortized Unrealized Unrealized Estimated
Cost) Gains Losses Market Value
----- ----- ------ ------------
JUNE 30, 1998 (unaudited)
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,380,554 $ 109,772 $ 37,714 $ 9,452,612
Obligations of State and political
subdivisions 569,188 13,033 -- 582,221
Mortgage-backed securities 1,154,816 12,584 535 1,166,865
Corporate obligations 1,502,660 1,610 -- 1,504,270
Other 100,000 -- -- 100,000
----------- ----------- ----------- -----------
Total $12,707,218 $ 136,999 $ 38,249 $12,805,968
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross Carrying
Amortized Unrealized Unrealized Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
Securities available for sale: (unaudited)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $12,602,109 $ 112,329 $ 9,405 $12,705,033
Obligations of State and political
subdivisions 1,444,647 6,945 -- 1,451,592
Mortgage-backed securities 1,866,724 15,807 4,299 1,878,232
Equity securities 1,156,140 -- 10,000 1,146,140
----------- ----------- ----------- -----------
Total $17,069,620 $ 135,081 $ 23,704 $17,180,997
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE> 132
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
At December 31, 1997 and 1996, the carrying value and estimated market value of
investments in debt and equity securities were as follows:
<TABLE>
<CAPTION>
Carrying
Value Gross Gross
(Amortized Unrealized Unrealized Estimated
Cost) Gains Losses Market Value
----- ----- ------ ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 6,903,071 $ 57,023 $ 39,655 $ 6,920,439
Obligations of State and political
subdivisions 628,967 17,987 464 646,490
Mortgage-backed securities 1,428,889 9,016 1,588 1,436,317
Corporate obligations 1,036,331 72,849 -- 1,109,180
Other 100,000 -- -- 100,000
----------- ----------- ----------- -----------
Total $10,097,258 $ 156,875 $ 41,707 $10,212,426
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross
Amortized Unrealized Unrealized Carrying Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,436,599 $ 76,140 $ 1,714 $ 9,511,025
Mortgage-backed securities 1,792,192 13,899 1,204 1,804,887
Equity securities 156,140 -- -- 156,140
----------- ----------- ----------- -----------
Total $11,384,931 $ 90,039 $ 2,918 $11,472,052
=========== =========== =========== ===========
</TABLE>
F-20
<PAGE> 133
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
<TABLE>
<CAPTION>
Carrying
Value Gross Gross Estimated
(Amortized Unrealized Unrealized Market
Cost) Gains Losses Value
----- ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $5,166,949 $ 21,811 $ 59,995 $5,128,765
Obligations of state and political
subdivisions 833,526 20,006 851 852,681
Mortgage-backed securities 1,781,848 4,698 4,482 1,782,064
Corporate obligations 1,313,640 3,224 172,469 1,144,395
Other 100,000 -- -- 100,000
---------- ---------- ---------- ----------
Total $9,195,963 $ 49,739 $ 237,797 $9,007,905
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross
Amortized Unrealized Unrealized Carrying Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $6,422,592 $ 64,977 $ 4,056 $6,483,513
Mortgage-backed securities 2,861,970 26,612 18,030 2,870,552
Equity securities 156,140 -- -- 156,140
---------- ---------- ---------- ----------
Total $9,440,702 $ 91,589 $ 22,086 $9,510,205
========== ========== ========== ==========
</TABLE>
There were no proceeds from sales of investments in debt securities for the six
months ended June 30, 1998 and 1997, and the years ended December 31, 1997,
1996, and 1995.
The amortized cost and estimated market value of debt securities at June 30,
1998, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities due to borrowers having the right to call or prepay
obligations with or without call or prepayment penalties.
F-21
<PAGE> 134
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
<TABLE>
<CAPTION>
Securities held to maturity Securities available for sale
Carrying Carrying
Value Estimated Historical Value
(Amortized Market Average Amortized (Market Average
Cost) Value Yield Cost Value) Yield
----- ----- ----- ---- ------ -----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Due in one year
or less $ 749,407 $ 749,552 5.80% $ 2,988,584 $ 3,005,435 6.51%
Due after one
year through
five years 4,429,271 4,475,639 6.41% 6,935,753 7,018,039 6.49%
Due after five
years through
ten years 4,467,497 4,508,127 6.34% 2,940,929 2,943,468 6.40%
Due after ten
years 1,906,226 1,905,785 7.40% 1,181,491 1,189,683 6.45%
Mortgage-
backed
securities 1,154,817 1,166,865 7.07% 1,866,723 1,878,232 7.16%
Equity securities -- -- -- 1,156,140 1,146,140 --
----------- ----------- ----------- -----------
Total $12,707,218 $12,805,968 $17,069,620 $17,180,997
=========== =========== =========== ===========
</TABLE>
Investment securities with a carrying value (which approximates market value) of
approximately $4,282,000, $2,809,000 and $4,226,000 at June 30, 1998, December
31, 1997 and 1996, respectively, were pledged to secure public funds and
securities sold under agreements to repurchase.
F-22
<PAGE> 135
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LOANS
Major classifications of loans were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- ------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Real estate mortgage $64,511,021 $60,583,746 $49,483,289
Commercial 29,310,461 30,536,261 25,239,534
Installment and other 5,626,244 5,869,534 6,490,909
----------- ----------- -----------
99,447,726 96,989,541 81,213,732
Less: Allowance for loan losses 1,759,340 1,647,355 1,609,785
Unearned fees 576,531 520,862 341,439
----------- ----------- -----------
Loans, net $97,111,855 $94,821,324 $79,262,508
=========== =========== ===========
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
----------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 1,647,355 $ 1,609,785 $ 1,609,785 $ 1,526,695 $ 1,335,154
Provision charged to operating
expenses 250,000 90,000 90,000 150,000 180,000
Recoveries on loans previously
charged off 8,446 12,034 38,510 1,600 13,001
Loans charged off (146,461) (34,093) (90,940) (68,510) (1,460)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 1,759,340 $ 1,677,726 $ 1,647,355 $ 1,609,785 $ 1,526,695
=========== =========== =========== =========== ===========
Changes in unearned fees were as follows:
Balance at beginning of year $ 520,862 $ 341,439 $ 341,439 $ 279,206 $ 304,972
Points deferred on loans 97,199 94,558 244,364 166,896 168,202
Points recognized in income (41,530) (68,991) (64,941) (104,663) (193,968)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 576,531 $ 367,006 $ 520,862 $ 341,439 $ 279,206
=========== =========== =========== =========== ===========
</TABLE>
F-23
<PAGE> 136
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LOANS - Continued
Impaired loans were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
---------- ----------------------
1998 1997 1996
---------- -------- --------
(unaudited)
<S> <C> <C> <C>
Balance at end of period $3,929,618 $400,049 $372,352
Average balance during period 2,368,174 440,927 224,119
Total related allowance for losses 374,000 13,000 --
Interest income recognized on impaired loans 13,359 -- --
</TABLE>
Loans converted to ORE through foreclosure proceedings totaled approximately
$283,000, $408,000 and $541,000 for the six months ended June 30, 1998 and the
years ended December 31, 1997 and 1996, respectively. Sales of ORE that were
financed by the Company totaled $-0-, $124,000 and $369,000 for the six months
ended June 30, 1998 and the years ended December 31, 1997 and 1996,
respectively.
The only loans sold by the Bank during 1996 and 1997 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 June 30,
1997, December 31, 1997, and June 30, 1998 was $23,000, $78,000 and $107,000,
respectively. Amortization expense relating to such servicing assets of $2,000
and $6,000 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.
F-24
<PAGE> 137
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>
June 30, December 31,
----------- ---------------------------
1998 1997 1996
----------- ----------- ----------
(unaudited)
<S> <C> <C> <C>
Land $ 1,396,779 $ 1,396,779 $1,380,272
Land improvements 59,673 59,673 59,673
Leasehold improvements 117,713 113,998 359,839
Building and building improvements 7,404,878 7,392,139 1,573,206
Furniture, fixtures and equipment 2,426,252 2,460,523 1,942,550
Construction in progress -- 1,294 2,351,755
----------- ----------- ----------
11,405,295 11,424,406 7,667,295
Less accumulated depreciation and amortization 2,114,379 1,882,605 1,679,867
----------- ----------- ----------
$ 9,290,916 $ 9,541,801 $5,987,428
=========== =========== ==========
</TABLE>
Depreciation of premises and equipment and amortization of leaseholds was
$286,188 and $215,717 for the six-months ended June 30, 1998 and 1997, and
$501,475, $390,680 and $249,373 for the years ended December 31, 1997, 1996 and
1995, respectively.
NOTE G - INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities, consist of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ----------------------
1998 1997 1996
-------- -------- --------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets
Allowance for loan losses $629,000 $543,000 $527,000
Deferred loan fees 139,000 120,000 85,000
Deferred compensation 97,000 75,000 59,000
Net operating loss carryforward (1) 42,000 59,000 36,000
-------- -------- --------
907,000 797,000 707,000
Deferred tax liabilities
Fixed assets 143,000 36,000 79,000
Securities available for sale 39,000 30,000 24,000
-------- -------- --------
182,000 66,000 103,000
-------- -------- --------
Net deferred tax asset, included with other assets $725,000 $731,000 $604,000
======== ======== ========
</TABLE>
F-25
<PAGE> 138
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - INCOME TAXES - Continued
(1) Relates to approximately $95,000 of net operating losses of two acquired
subsidiaries. The acquisitions resulted in ownership changes for
purposes of Section 382 of the Internal Revenue Code of 1986, as
amended. Consequently, the net operating loss carryforwards are subject
to a yearly limitation on their utilization and can only be applied
against future income of the acquired subsidiaries. The net operating
loss carryforwards at June 30, 1998 are approximately $110,000 and begin
to expire in 2010. The Company believes that it will obtain the future
income to fully utilize the net operating loss carryforwards, thus no
valuation allowance has been recorded.
Management believes that it is more likely than not that the net deferred tax
asset will be realized and, therefore, a valuation allowance has not been
recorded against the deferred asset at June 30, 1998, December 31, 1997 and
1996.
The Company's effective tax rate varies from the statutory rate of 34%. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, For the Years Ended December 31,
------------------------- -----------------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Computed "expected" tax
provision $ 441,500 $ 258,600 $ 771,700 $ 806,300 $ 798,200
Tax exempt interest income (4,300) (2,500) (7,500) (9,300) (9,100)
Goodwill amortization 11,700 7,400 22,100 23,100 6,900
State taxes net of federal
benefit 39,900 19,600 58,600 60,100 68,100
Other, net 23,600 7,350 15,046 11,248 7,172
--------- --------- --------- --------- ---------
Total $ 512,400 $ 290,450 $ 859,946 $ 891,448 $ 871,272
========= ========= ========= ========= =========
</TABLE>
NOTE H - DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
1998 $47,298,764
1999 9,027,361
2000 1,269,587
2001 423,196
2002 2,539,174
-----------
$60,558,082
===========
</TABLE>
F-26
<PAGE> 139
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>
Six Months Ended
June 30, Year Ended December 31,
------------------------- -----------------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Average balance $3,102,880 $2,495,938 $2,029,453 $3,291,662 $6,451,536
Average interest rate 3.53% 2.46% 2.49% 2.62% 2.80%
Maximum month-end balance $4,267,204 $2,686,595 $2,860,141 $6,977,300 $6,977,300
</TABLE>
The average rate was determined by dividing the total interest paid by the
average outstanding borrowings.
Securities underlying the agreements are as follows:
<TABLE>
<CAPTION>
At December 31,
At June 30 ------------------------------
1998 1997 1996
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Carrying value $4,242,000 $2,809,000 $4,226,000
Estimated fair value 4,242,000 2,809,000 4,226,000
</TABLE>
NOTE J - LONG-TERM DEBT
Long-term debt of the Company consists of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------
1998 1997 1996
---------- ---------- --------
(unaudited)
<S> <C> <C> <C>
Note payable to an unrelated bank providing for quarterly principal
payments of $3,750 and quarterly interest payments at 8.5% fixed, due in
2001. The note is collateralized by certain pieces of data processing
equipment. $ 41,250 $ 48,750 $ 63,750
</TABLE>
F-27
<PAGE> 140
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - LONG-TERM DEBT - Continued
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------
1998 1997 1996
---------- ---------- --------
(unaudited)
<S> <C> <C> <C>
Note payable to an unrelated bank providing for monthly interest payments
at prime (8.5% at June 30, 1998 and December 31, 1997) and ninety-five
(95) consecutive monthly principal payments are due beginning on December
1, 1999. The loan agreement requires a security interest in the Bank's
common stock and contains certain restrictive covenants. The Company may
borrow a maximum of $3 million under this note payable. 2,329,402 2,629,402 750,200
8% Convertible Subordinated Debentures issued in conjunction with
the acquisition of EPW. The holder can convert to common stock at
$4.12 per share at any time. Interest is payable semi-annually and
the debentures mature January 31, 2006. The debentures are callable
by the Company, in whole or part, as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Price
---- -----
<S> <C> <C> <C> <C>
2001 103%
2002 102%
2003 101%
2004 and thereafter 100% 630,000 630,000 630,000
---------- ---------- ----------
$3,000,652 $3,308,152 $1,443,950
========== ========== ==========
</TABLE>
The annual principal reductions of the long-term debt during each of the next
five years ended December 31, are as follows:
<TABLE>
<S> <C>
1998 $ 15,000
1999 46,250
2000 390,000
2001 378,750
2002 375,000
Thereafter 2,103,152
----------
$3,308,152
==========
</TABLE>
F-28
<PAGE> 141
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 June 30, 1998, the Bank's Tier One Leverage Ratio was 6.87%,
slightly below the minimum agreed to by the Department. The Bank has ninety days
to increase its Tier One Ratio back to the 7% minimum. The Company intends to
contribute a portion of the proceeds of the public offering as additional Bank
Capital or, in the event that the offering is delayed, the Bank has several
viable alternatives to correct the deficiency.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) to total and Tier I capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of June 30, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.
As of June 30, 1998 and December 31, 1997, the most recent notification from the
Federal Reserve categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.
F-29
<PAGE> 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 June 30, 1998 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity and
ratio to total assets $ 11,269 6.43%
Intangible assets (411)
---------
Tangible capital and ratio
to adjusted total assets $ 10,858 6.20% $2,628 1.5%
========= ======
Tier I (core) capital and
ratio to adjusted total
assets $ 10,779 6.15% $5,256 3.0% $ 8,761 5.0%
========= ====== =======
Tier I capital and ratio to
risk-weighted assets $ 10,779 8.94% $3,619 3.0% $ 7,238 6.0%
====== =======
Tier II capital - allowance
for loan and lease losses 1,511
---------
Total risk-based capital and
ratio to risk-weighted
assets $ 12,290 10.19% $9,650 8.0% $12,063 10.0%
========= ====== =======
Total assets $ 175,242
=========
Adjusted total assets $ 175,221
=========
Risk-weighted assets $ 120,626
=========
</TABLE>
F-30
<PAGE> 143
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> 144
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> 145
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - CONCENTRATIONS OF RISK
All of the Company's loans, commitments, and commercial and standby letters of
credit have been granted to customers who are substantially all located in the
Company's market area. The majority of customers are depositors of the Company.
The concentrations of credit by type of loan are set forth in Note D. The
distribution of commitments to extend credit approximates the distribution of
loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers. The Company, as a matter of policy, does not
extend credit to any single borrower or group of related borrowers in excess of
its legal lending limit. At June 30, 1998 and December 31, 1997, less than 3% of
the Company's loans are unsecured.
At June 30, 1998, the Company held deposits for a customer equal to
approximately 23% of total deposits. Such deposits were invested in short-term
investments. At December 31, 1997 and 1996, no single customer represented more
than 10% of total deposits.
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES
Off balance-sheet risk
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable. Those instruments involve, to varying
degrees, elements of credit and interest rate risks in excess of the amount
recognized in the balance sheet. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
The Company's exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with off-balance-sheet credit risk.
The contract or notional amounts are as follows:
<TABLE>
<CAPTION>
December 31,
June 30, -------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Commitments to extend credit $18,142,093 $16,644,892 $14,939,490
Standby letters of credit and financial guarantees
written $ 1,396,078 $ 1,663,578 $ 2,334,992
</TABLE>
F-33
<PAGE> 146
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES - Continued
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
credit-worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company generally holds
residential or commercial real estate, accounts receivable, inventory and
equipment as collateral supporting those commitments for which collateral is
deemed necessary.
Litigation
The Company is party to certain litigation encountered in the course of its
normal operations, a portion of which involves actions brought against
borrowers, generally involving foreclosure proceedings. In some instances,
borrowers or interested parties have filed or threatened suit in retaliation.
Management, after consulting with legal counsel, believes that it has valid
defenses and intends to vigorously defend these matters. Management is of the
opinion that an unfavorable outcome, if any, would not have a material effect
upon the consolidated financial statements.
Operating Leases
The Company also has operating leases covering certain office equipment and
office facilities expiring at various times through 2002.
The minimum annual rentals under these leases as of December 31, 1997, are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 70,686
1999 71,592
2000 64,499
2001 65,478
2002 66,500
Thereafter 29,568
--------
Total minimum lease payments $368,323
========
</TABLE>
F-34
<PAGE> 147
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES - Continued
The Company's rent expense was $77,343, $112,500, $189,096, $232,325 and
$143,891 for the six months ended June 30, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995, respectively.
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS
The assumptions used in the estimation of the fair value of the Company's
financial instruments are detailed below. Where quoted prices are not available,
fair values are based on estimates using discounted cash flows and other
valuation techniques. The use of discounted cash flows can be significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. The following disclosures should not be considered a
surrogate of the liquidation value of the Company, but rather represent a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination or issuance.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and due from banks and interest bearing deposits with other banks: Fair
value equals the carrying value of such assets.
Investment securities and investment securities available for sale: Fair
values for investment securities are based on quoted market prices.
Federal funds sold: Due to the short-term nature of these assets, the
carrying values of these assets approximate their fair value.
Loans: For variable rate loans, those repricing within six months or less,
fair values are based on carrying values. Fixed rate commercial loans, other
installment loans, and certain real estate mortgage loans were valued using
discounted cash flows. The discount rate used to determine the present value
of these loans was based on interest rates currently being charged by the
Company on comparable loans as to credit risk and term.
Off-balance-sheet instruments: The Company's loan commitments, which
approximate $19,500,000, $18,300,000, and $17,300,000 at June 30, 1998,
December 31, 1997 and 1996, respectively, are negotiated at current market
rates and are relatively short-term in nature and, as a matter of policy,
the Company generally makes commitments for fixed rate loans for relatively
short periods of time. Therefore, the estimated value of the Company's loan
commitments approximates the fees charged for entering into the commitments.
F-35
<PAGE> 148
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
Deposit liabilities: The fair values of demand deposits are, as required by
SFAS 107, equal to the carrying value of such deposits. Demand deposits
include non-interest-bearing demand deposits, savings accounts, NOW accounts
and money market demand accounts. Discounted cash flows have been used to
value fixed rate term deposits. The discount rate used is based on interest
rates currently being offered by the Company on comparable deposits as to
amount and term.
Short-term borrowings: The carrying value of Federal funds purchased,
securities sold under agreements to repurchase and other short-term
borrowings approximate their carrying values.
Long-term debt: The carrying value of the Company's long-term debt
approximates its fair value since the interest rates on these instruments
approximate market interest rates.
<TABLE>
<CAPTION>
Financial Instruments June 30, 1998 December 31, 1997 December 31, 1996
---------------------- ---------------------- ----------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Assets: Amount Fair Value Amount Fair Value Amount Fair Value
(in thousands) (in thousands) (in thousands)
---------------------- ---------------------- ----------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 7,820 $ 7,820 $ 7,337 $ 7,337 $ 7,902 $ 7,902
Federal funds sold 26,767 26,767 7,441 7,441 7,061 7,061
Securities held to maturity 12,707 12,806 10,097 10,212 9,196 9,196
Securities available for sale 17,181 17,181 11,472 11,472 9,759 9,759
Loans 99,455 99,511 96,989 97,042 81,214 81,300
Federal Home Loan Bank stock 434 434 365 365 - -
Federal Reserve Bank stock 159 159 154 154 154 154
Liabilities:
Demand deposits 25,562 25,562 28,385 28,385 26,647 26,647
NOW and money market 68,605 68,605 36,031 36,031 27,990 27,990
Savings 4,449 4,449 5,245 5,245 4,688 4,688
Time, $100,000 and over 9,925 9,986 9,692 9,752 4,735 4,771
Other time 49,145 49,346 50,866 51,074 44,504 44,731
Securities sold under
agreements to repurchase 4,168 4,168 1,081 1,081 1,769 1,769
Long-term debt 2,371 2,371 2,678 2,678 1,444 1,444
Off balance sheet items - 195 - 183 - 173
</TABLE>
F-36
<PAGE> 149
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE O - RELATED PARTIES
The Bank has entered into transactions with its directors, significant
stockholders and their affiliates ("related parties"). Such transactions were
made in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers and did not, in the
opinion of management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such related parties
approximated $5,015,000, at June 30, 1998 and $4,462,400 and $4,952,000 at
December 31, 1997 and 1996, respectively.
During November 1997, an affiliate of one of the Company's directors entered
into an exclusive right to a lease agreement (the "Lease Agreement") with
Imaginative Investments, Inc., a subsidiary of the Company and the owner of the
real property covering the Company's principal executive office (the "Owner").
Pursuant to the Lease Agreement, the Owner granted to such entity the exclusive
right to lease 17,918 square feet of the Company's principal executive office
for a total of $246,373 or $13.75 per rental square foot with annual escalations
of 3%, and three to five year lease terms in return for a commission of 3% if no
outside broker is used and 6% in the event an outside broker is used. The Lease
Agreement commenced July 14, 1997 and terminated at midnight on July 14, 1998.
As of June 30, 1998, the space was 100% leased.
During March 1997, an affiliate of one of the Company's directors (the
"Manager") entered into a property Management Agreement with Imaginative
Investments, Inc., a subsidiary of the Company, pursuant to which the Manager is
employed to act as the sole and exclusive manager in the leasing, operation and
management of the Company's principal executive offices for total consideration
of approximately $17,000. The Owner is required to maintain comprehensive
general public liability insurance in the amount of $2,000,000 naming as insured
parties the Owner, Manager and such other parties as the Owner may direct. The
Manager must maintain its own insurance to protect itself from any and all
claims under any workers' compensation laws or other employer's liability laws.
NOTE P - PROFIT-SHARING PLAN
The Company has a defined contribution profit-sharing plan covering
substantially all employees. Contributions are determined annually by the Board
of Directors. The Company contributed $53,202 and $49,998 during the six months
ended June 30, 1998 and 1997, respectively, and $99,996, $75,000 and $75,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The plan was
amended in 1993 to include an Employee Stock Ownership Plan (ESOP) provision. As
of December 31, 1997, the ESOP owned 85,863 shares of the Company's common
stock. During 1998, the ESOP purchased an additional 34,443 newly issued shares
from the Company and 15,300 shares from existing shareholders. The purchase
price of the newly issued stock was $8.25 as determined by an outside
independent appraisal.
F-37
<PAGE> 150
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE P - PROFIT-SHARING PLAN - Continued
The Company sponsors a deferred compensation 401(k) Plan for the benefit of
eligible full-time employees. The 401(k) Plan, which is voluntary, allows
employees to contribute up to 10 percent of their total compensation (or a
maximum of $10,000 as limited by federal regulations) on a pre-tax basis. The
Company makes a matching contribution of 100 percent of the first $500 and 40
percent thereafter, up to the maximum amount allowed by the 401(k) Plan.
Employee contributions to the 401(k) Plan were $92,139 and $86,871 for the six
months ended June 30, 1998 and 1997, respectively, and $173,262, $135,472 and
$79,503 for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company's matching contribution was $52,968 and $49,997 for the six months ended
June 30, 1998 and 1997, respectively, and $86,927, $74,207 and $42,514 for the
years ended December 31, 1997, 1996 and 1995, respectively.
NOTE Q - STOCKHOLDERS' EQUITY
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share (EPS) computations. Options to purchase
13,500 shares of common stock at $8.25 a share at June 30, 1997 and 495,000
shares at $7.96 and 27,000 shares at $4.49 at December 31, 1997 and 1996,
respectively, were not included in the computation of diluted EPS because the
options exercise price was not less than the value of the common shares based on
an independent appraisal. These options expire during 1999, 2007 and 2000,
respectively.
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-------------------------------------------------------------------------------------
1998 1997
--------------------------------------- -----------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amount Earnings Shares Amount
-------- --------- ------ -------- --------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings available to
common stockholders $777,941 3,481,947 $ .22 $461,972 3,430,818 $ .13
====== =======
Effective of dilutive securities
Incremental shares from
assumed exercise or
conversion of:
Convertible debt 15,717 152,790 15,717 152,790
Preferred Stock 8,172 195,318 8,172 196,947
Stock options -- 34,824 -- 15,183
-------- --------- -------- ---------
Diluted EPS
Net earnings available to
common stockholders and
assumed conversions $801,830 3,864,879 $ .21 $485,861 3,795,738 $ .13
======== ========= ====== ======== ========= =======
</TABLE>
F-38
<PAGE> 151
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------ ------------------------------- ------------------------------
Weighted Per Weighted Per Weighted Per
Average Share Average Share Average Share
Earnings Shares Amount Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings
available to
common
stockholders $1,393,397 3,432,768 $ .41 $1,436,584 3,026,619 $ .47 $1,373,981 2,163,117 $ .64
====== ======= ======
Effect of dilutive
securities
Incremental
shares from
assumed
exercise or
conversion of:
Convertible
debt 31,434 152,790 28,815 140,652 -- --
Preferred
stock 16,345 196,947 43,435 592,236 102,529 1,275,192
Stock
options -- 3,207 -- 1,899 -- 3,936
---------- --------- ---------- --------- ---------- ---------
Diluted EPS
Net earnings
available to
common
stockholders
and assumed
conversions $1,441,176 3,785,712 $ .38 $1,508,834 3,761,406 $ .40 $1,476,510 3,442,245 $ .43
========== ========= ====== ========== ========= ======= ========== ========= ======
</TABLE>
During the year ended December 31, 1997, the Company adopted the United
Financial Holdings, Inc. Stock Option and Incentive Compensation Plan ("Plan")
under which 468,000 shares of common stock were reserved. Under the Plan, the
Company may grant its Board of Directors and certain officers incentive stock
options or non-qualified stock options to purchase a specified number of shares
of common stock at a price not less than fair market value on the date of grant
and for a term not to exceed 10 years. The options granted to the Board of
Directors are 100% vested and the remaining options vest and become exercisable
at 20% increments after each anniversary date beginning after the second
anniversary date. During 1997, 156,000 and 312,000 options were granted to the
Company's Board of Directors and eligible executive officers, respectively, at
$7.94 per share, the estimated fair value of the Company's common stock at the
grant date. As such, no compensation expense was recorded in connection with the
grant of such options. No options under this plan were granted during the six
months ended June 30, 1998.
F-39
<PAGE> 152
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
Range
of Per Weighted
Share Average Aggregate
Number of Option Per Share Option
Shares Price Price Price
------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1995
and 1994 9,000 $ 1.96 $ 1.96 $ 17,640
Options granted 54,000 3.89-8.25 6.37 343,980
Options exercised (9,000) - (1.96) (17,640)
------- ---------- ------ ----------
Outstanding at December 31, 1996 54,000 3.89-8.25 6.37 343,980
Options granted 468,000 7.94 7.94 3,715,920
Options exercised (13,500) - (3.89) (52,515)
Options forfeited - - - -
------- ---------- ------ ----------
Outstanding at December 31, 1997 508,500 3.89-8.25 7.88 4,007,385
Options granted - - - -
Options exercised - - - -
Options forfeited - - - -
------- ---------- ------ ----------
Outstanding at June 30, 1998 508,500 $3.89-8.25 $ 7.88 $4,007,385
======= ========== ===== ==========
</TABLE>
The weighted-average remaining contractual life of the outstanding stock options
at June 30, 1998, December 31, 1997, 1996 and 1995 was 171 months, 177 months,
30 months and 13 months, respectively.
These options are exercisable as follows:
<TABLE>
<CAPTION>
Weighted
Average
Year Ending Number of Exercise
December 31, Shares Price
------------ ------- -----
<S> <C> <C>
1998 466,200 $ 7.86
1999 18,600 8.16
2000 18,600 8.16
2001 4,200 7.94
2002 900 7.94
------- --------
508,500 $ 7.88
======= ========
</TABLE>
F-40
<PAGE> 153
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
In order to calculate the fair value of the options, it was assumed that the
risk-free interest rate was 6.0%, the dividend yield would be 1.68% over the
exercise period, the expected life of the options would be the entire exercise
period and stock volatility would be zero due to the lack of an active market
for the stock. The following information pertains to the fair value of the
options at June 30, 1998 and 1997, and December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Six Months Ended
June 30, For the Years Ended December 31,
---------------------------- -------------------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------- ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Weighted average-grant-date
Fair value of options
issued during the year $ -- $ -- $ 705,120 $ NIL $ --
=========== ============ ============= ============= ============
Pro forma net earnings $ 741,637 $ 470,144 $ 1,402,329 $ 1,480,019 $ 1,476,510
=========== ============ ============= ============= ============
Pro forma basic earnings per
share $ .21 $ .13 $ .41 $ .47 $ .64
=========== ============ ============= ============= ============
</TABLE>
NOTE R - EXECUTIVE COMPENSATION
The Company has employment contracts with certain executive officers of the
Company, providing for a total annual payment equal to their annual base salary
plus bonuses. These contracts are in effect until termination (as defined) of
the related employee. If the Company, for other than just cause (as defined)
terminates the employee, the affected employee shall receive, for a period of
twelve months, continuing compensation equal to his compensation for the twelve
month period immediately prior to termination.
The Company has established a non-qualified defined benefit plan covering
certain executive employees. The Plan specifies that upon reaching age 65, the
employee will receive an annual benefit (paid monthly) ranging from 40 percent
to 60 percent of their annual salary, for 240 months. The Company will accrue
the present value of the estimated future retirement payments over the period
from the date of each agreement to the retirement date of the respective
executive officer. To fund these benefit plans, the Company purchased single
premium cash value life insurance policies with cash surrender values of $2.32
million, which have been capitalized and included in other assets.
NOTE S - SUBSEQUENT EVENT
The Board of Directors declared a three-for-one common stock split effective
July 1, 1998 to be issued on July 31, 1998. All amounts have been restated to
reflect this stock split.
F-41
<PAGE> 154
==============================================================================
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.............................. 42
Management............................ 58
Certain Relationships and Related
Transactions........................ 69
Principal Stockholders................ 70
Description of the Capital Stock...... 72
Description of the Preferred
Securities.......................... 76
Description of the Junior Subordinated
Debentures.......................... 87
Description of the Guarantee.......... 95
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 97
Material Federal Income Tax
Considerations...................... 98
ERISA Considerations.................. 102
Underwriting.......................... 103
Legal Matters......................... 105
Experts............................... 105
Available Information................. 106
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)
600,000 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> 155
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>
<CAPTION>
<S> <C>
SEC Registration Fee...................................................................................... $ 4,762.00
-----------------
NASD Filing Fee........................................................................................... +
-----------------
NASDAQ Small-Cap Market Listing Fee....................................................................... +
-----------------
Legal Fees and Expenses................................................................................... +
-----------------
Trustee Fees and Expenses................................................................................. +
-----------------
Accounting Fees and Expenses.............................................................................. +
-----------------
Printing and Mailing Expenses............................................................................. +
-----------------
Blue Sky Fees and Expenses................................................................................ +
-----------------
Miscellaneous Expenses.................................................................................... +
-----------------
Total Fees and Expenses................................................................................ $ 400,000.00
=================
</TABLE>
- -----------------
+ To be filed by amendment.
The Company is paying all of the foregoing expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The securities issued or sold by the Company from June 1995 through
June 1998, which were not registered under the Securities Act, are listed below:
(i) The sale of 127,500 shares of Common Stock to Ward J.
Curtis, Jr. and Charles O. Lowe to join the Board of Directors for a
total of $382,500 on June 30, 1995;
(ii) 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;
(iii) The distribution of 51,483 shares of Common Stock
representing a 2% stock dividend to shareholders on December 31, 1995;
II-1
<PAGE> 156
(iv) The conversion of previously issued 6% Preferred Stock
for 99,588 shares of Common Stock on March 31, 1996;
(v) The conversion of previously issued 7% Preferred Stock for
598,662 shares of Common Stock on July 31, 1996;
(vi) The conversion of previously issued 7% Preferred Stock
for 20,670 shares of Common Stock on October 31, 1996;
(vii) The distribution of 67,086 shares of Common Stock
representing a 2% stock dividend to shareholders on December 31, 1996;
(viii) 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;
(ix) 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;
(x) 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;
(xi) 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;
(xii) 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;
(xiii) The issuance of 5,013 shares of Common Stock to
participants under the Trust Plan and the EPW Plan on January 31, 1998;
(xiv) The issuance of 9,000 shares of Common Stock to
participants under the Trust Plan and the EPW Plan on April 30, 1998;
and
(xv) 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> 157
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*
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated Debentures
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, regarding the Cumulative
Trust Preferred Securities to be issued by UFH Capital Trust I+
8.1 Tax Opinion of Holland & Knight LLP
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+
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee
and Restated Trust Agreement+
25.3 Form T-1: Statement of Eligibility of Wilmington Trust
Company to act as Trustee and Agreement for UFH Capital
Trust I+
27.1 Financial Data Schedule (FDS use only)*
27.2 Financial Data Schedule (FDS use only)*
</TABLE>
II-3
<PAGE> 158
- ------------------------------
+ To be filed by amendment.
* Previously filed.
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> 159
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. 2
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of St. Petersburg, State of Florida on October 5, 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.
2 to the Registration Statement to be signed on its behalf by the undersigned,
in the City of St. Petersburg, State of Florida on October 5, 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. 2 to the Registration Statement was signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE DATE TITLE
- --------- ---- -----
/s/ Neil W. Savage October 5, 1998 Chief Executive Officer, President and
- ----------------------------- Director (principal executive officer)
Neil W. Savage
/s/ C. Peter Bardin October 5, 1998 Chief Financial Officer (principal financial
- ----------------------------- and accounting officer)
C. Peter Bardin
* October 5, 1998 Director
- -----------------------------
Ronald E. Clampitt
* October 5, 1998 Director
- -----------------------------
David K. Davis, M.D.
* October 5, 1998 Director
- -----------------------------
Edward D. Foreman
Director
- -----------------------------
Charles O. Lowe
* October 5, 1998 Director
- -----------------------------
John B. Norrie
</TABLE>
<PAGE> 160
<TABLE>
<S> <C> <C>
Director
- -----------------------------
Harold J. Winner
* October 5, 1998 Director
- -----------------------------
Ward J. Curtis, Jr.
October 5, 1998 Director
- -----------------------------
Jack A. MaCris, M.D.
* October 5, 1998 Director
- -----------------------------
Ronald R. Petrini
* October 5, 1998 Director
- -----------------------------
John B. Wier, Jr.
Director
- -----------------------------
Henry Esteva
* October 5, 1998 Director
- -----------------------------
Ian F. Irwin
Director
- -----------------------------
William A. Eickhoff
*By: /s/ Neil W. Savage
-----------------------
Neil W. Savage
Attorney-in-Fact
</TABLE>
<PAGE> 161
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*
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated Debentures
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, regarding the Cumulative
Trust Preferred Securities to be issued by UFH Capital Trust I+
8.1 Tax Opinion of Holland & Knight LLP
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+
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and Restated
Trust Agreement+
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and Agreement
for UFH Capital Trust I+
27.1 Financial Data Schedule (FDS use only)*
27.2 Financial Data Schedule (FDS use only)*
</TABLE>
- -----------------------
+ To be filed by amendment.
* Previously filed.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
UNITED FINANCIAL HOLDINGS, INC.
In accordance with Section 607.1007 of the Florida Statutes, the Board
of Directors of United Financial Holdings, Inc. (the "Corporation"), hereby
amends and restates in its entirety the Articles of Incorporation.
ARTICLE ONE: NAME
The name of the Corporation is United Financial Holdings, Inc.
ARTICLE TWO: DURATION
The Corporation's period of duration is perpetual.
ARTICLE THREE: PURPOSE
The purpose or purposes for which the Corporation is organized are:
(a) To act as a bank holding company;
(b) To transact any and all lawful business for which corporations
may be incorporated under the Florida General Corporation Act;
(c) To buy, sell, lease, and deal in services, personal property,
and real property; and
(d) To do each and every thing necessary, suitable, or proper for
the accomplishment of any of the purposes or for the
attainment of any one or more of the objects herein enumerated
or which at any time appear conducive to or expedient for the
protection or benefit of the Corporation.
The foregoing clauses shall be construed as powers as well as objects
and purposes, and the matter expressed in each clause shall, unless herein
otherwise expressly provided, be in nowise limited by reference to or inference
from the terms of any other clause, but shall be regarded as independent
objects, purposes and powers, and shall not be construed to limit or restrict in
any manner the meaning of the general terms or the general powers of the
Corporation.
<PAGE> 2
ARTICLE FOUR: STOCK
The stock of the Corporation shall be divided as follows:
(a) 20,000,000 shares of common stock having a par value of $.01.
(b) 150,000 shares of preferred stock having a par value of $10.00 and
bearing a dividend commitment of 7% per annum, payable out of the surplus or net
profits of the Corporation, payable semi-annually. The dividends are cumulative
and shall bear no interest. No dividends to common shareholders shall be
declared before preferred shareholders have been paid all due dividends. All
shares of preferred stock shall be convertible at any time after January 11,
1990 to common stock at 110% of the book value of the common stock as of
December 31, 1989.
(c) 70,000 shares of preferred stock having a par value of $10.00 and
bearing a dividend commitment of 6% per annum, payable out of the surplus or net
profits of the Corporation, payable semi-annually on March 31 and September 30
of each year, commencing on March 31, 1993. The dividends are cumulative and
shall bear no interest. No dividends to common shareholders shall be declared
before preferred shareholders have been paid all due dividends. This issue shall
be on a parity with the issued under (b) above as to dividends and stockholders
equity in the event of a liquidation. The stock under this issue is convertible
at any time to common stock at $4.00 per share and the issue is callable any
time after January 1, 1996, at $10.50 per share.
(d) 10,000,000 shares of preferred stock having a par value of $.01 per
share. These preferred shares may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares in each
series, the designation thereof, and the relative rights, preferences, and
limitations of each series, and specifically the Board of Directors is
authorized to fix with respect to each series (a) the dividend rate; (b)
redeemable features, if any; (c) rights upon liquidation; (d) whether or not the
shares of such series shall be subject to a purchase, retirement, or sinking
fund provisions; (e) 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; (f) restrictions, if any, upon the payment of
dividends on common stock, (g) restrictions, if any, upon the creation of
indebtedness; (h) voting powers, if any, of the shares of each series; and (i)
such other rights, preferences, and limitations as shall not be inconsistent
with the laws of the State of Florida.
ARTICLE FIVE: VOTING RIGHTS OF DEBENTURE HOLDERS
In addition to any voting rights and powers otherwise provided in these
Restated Articles of Incorporation or by law to holders of the Corporation's
debentures, at any time an arrearage in debenture interest payments (as
hereinafter defined) shall have
2
<PAGE> 3
existed for at least thirty days and be continuing, the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two, and the holders of the outstanding debentures shall have the exclusive and
special right, at a special meeting of holders of the Corporation's debentures
called as hereinafter provided, voting together as a single class (with each
debenture being entitled to one vote), to elect two directors of the Corporation
to fill such newly created directorships, provided that such right shall not
apply at any such meeting if or to the extent that two members of the Board of
Directors whose terms of office do not expire at the meeting have previously
been elected by the holders of outstanding debentures as aforesaid. Such right
to elect two directors shall continue until such time as there shall not exist
any arrearage in debenture interest payments. Each director so elected (a
"Debenture Director") shall continue to serve as such director for the lesser of
(i) a period of six months following the date on which there is no longer an
arrearage in debenture interest payments, or (ii) the full term for which such
director has been elected. Any Debenture Director may be removed by, and shall
not be removed except by, the vote of the holders of the outstanding debentures,
voting together as a single class, at any special meeting called for that
purpose. So long as any arrearage in debenture interest payments shall exist (i)
any vacancy in the office of a Debenture Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by the
remaining Debenture Director and filed with the secretary of the Corporation,
and (ii) in case two such vacancies exist or in the case of the removal of any
Debenture Director, the vacancy may be filled by the vote of the holders of the
outstanding debentures, voting together as a single class, at any special
meeting called for that purpose. Each director elected as aforesaid by the
remaining Debenture Director shall be deemed, for all purposes hereof, to be a
Debenture Director. Whenever the term of office of the Debenture Directors shall
end and no arrearage in debenture interest payments shall exist, the number of
directors constituting the Board of Directors of the Corporation shall be
reduced by two. For purposes of this Article an "arrearage in debenture interest
payments" shall be deemed to have occurred whenever interest on the
Corporation's debentures for two or more interest periods shall be in arrears
and unpaid, in whole or in part, and, having so occurred, such arrearage shall
be deemed to exist thereafter until, but only until, full interest on all
outstanding debentures shall have been paid, or a sufficient sum set apart for
the payment of such interest, to and including the end of the last preceding
interest period.
At any time when such special voting power has vested in the holders of
debentures, a proper officer of the Corporation will, upon the written request
of the holders of record of at least 5% of the principal amount of debentures at
the time outstanding, addressed to the secretary of the Corporation, call a
special meeting of the holders of debentures for the purpose of electing
directors. Such meeting will be held at the earliest legally permissible date at
the principal office of the Corporation. If such meeting has not been called by
a proper officer of the Corporation within ten days after personal service of
said written request upon the secretary of the Corporation at its principal
office, then the holders of record of at least 5% of the principal amount of
3
<PAGE> 4
debentures at the time outstanding may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for annual meetings
of shareholders and will be held at the Corporation's principal office. Any
holder of debentures so designated will be given access to the record books of
the Corporation for the purpose of causing meetings of debenture holders to be
called pursuant to these provisions.
At any meeting or at any adjournment or adjournments thereof held for
the purpose of electing directors at which the holders of debentures have the
special right, voting separately as a class, to elect directors as provided in
this Article, the presence, in person or by proxy, of the holders of 50% of the
principal amount of debentures at the time outstanding will be required to
constitute a quorum for the election of any director by the holders of
debentures exercising such special right. The election of directors at any such
meeting shall be by plurality vote.
ARTICLE SIX: PREEMPTIVE RIGHTS DENIED
Neither the holders of the common shares nor the holders of preferred
shares shall have preemptive rights to purchase or subscribe to (a) any unissued
shares of any common stock of the Corporation or (b) any right of subscription
to or to receive, or any warrant or option for the purchase of, any of the
foregoing securities that may be sold by the Corporation.
ARTICLE SEVEN: CUMULATIVE VOTING
Cumulative voting for the election of directors is prohibited.
ARTICLE EIGHT: ADOPTION OF BYLAWS
The Board of Directors of the Corporation may adopt the initial Bylaws
of the Corporation and may thereafter alter, amend, or repeal the Bylaws of the
Corporation or may adopt new Bylaws, subject to the shareholders' concurrent
right to alter, amend, or repeal the Bylaws or to adopt new Bylaws. The
shareholders may provide that any or all Bylaws altered, amended, repealed, or
adopted by the shareholders shall not be altered, amended, re-enacted, or
repealed by the Board of Directors of the Corporation.
ARTICLE NINE: INTERESTED PARTIES
A contract or transaction between the Corporation and any other Person
(as used herein the term "Person" means an individual, firm, trust, partnership,
joint venture, association, corporation, political subdivision or
instrumentality, or other entity) shall not be affected or invalidated by the
fact that (a) any director, officer, or security holder of the Corporation is
also a party to, or has a direct or indirect interest in, such contract or
transaction; or (b) any director, officer, or security holder of the
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<PAGE> 5
Corporation is in any way connected with such other Person or with any of its
officers or directors.
Every person who may become a director of the Corporation is hereby
relieved from any liability that might otherwise exist from contracting with the
Corporation for the benefit of himself or of any Person in which he has any
interest, whether or not the interested director's presence at a meeting or his
vote or votes were necessary to obligate the Corporation in such transaction, if
such interest shall have been disclosed to, or known to, the Corporation's
directors or shareholders who shall have approved such transaction and the
contract or transaction was fair as to the Corporation as of the time it was
authorized, approved or ratified by the Board of Directors.
ARTICLE TEN: INDEMNIFICATION
Section A. The Corporation may indemnify any person who was or is a
party or is threatened with being made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (all such actions, suits, and proceedings and accompanying
modifiers being comprehended by the term "Proceeding") (excluding actions by, or
in the right of, the Corporation), by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another Person.
Such indemnification may be made only against those expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such Proceeding if (i) he
is successful on the merits or otherwise; or (ii) he acted in the transaction
which is the subject of the Proceeding in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal Proceeding, he had no reasonable
cause to believe his conduct was unlawful. The termination of any Proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the Corporation, nor, with respect to any
criminal Proceeding, that he had reasonable cause to believe that his conduct
was unlawful.
Section B. The Corporation may indemnify any person who was or is a
party or is threatened with being made a party to a Proceeding by or in the
right of the Corporation by reason of the fact that he is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another Person. Such
indemnification may be made against expenses (including attorneys' fees, and
amounts paid in settlement not exceeding, in the judgment of the Board of
Directors, the estimated expense of litigating the action to conclusion)
actually and reasonably incurred by such person in connection with the defense
or settlement of such Proceeding if (i) he is successful on the merits or
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<PAGE> 6
otherwise; or (ii) he acted in the transaction which is the subject of the
Proceeding in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the Corporation. However, no indemnification may
be made in respect of any claim, issue or matter in relation to which such
person shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation. Notwithstanding the foregoing
exception, indemnification may be made to the extent that the court in which
such Proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses as
the court of appropriate jurisdiction shall deem proper.
Section C. Any indemnification under Section A or Section B of this
Article Ten (other than one ordered by a court) may be made by the Corporation
only upon a determination that indemnification of such person is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such Section. Such determination shall be made by the Board of Directors by a
majority vole of a quorum consisting of directors who were not parties to such
Proceeding; or, if such a quorum is not obtainable (or, even if obtainable, if a
quorum of disinterested directors so directs), by independent legal counsel in a
written opinion, or by the shareholders of the Corporation; or through such
procedures as shall be authorized in the Bylaws of the Corporation.
Section D. Expenses incurred in defending a civil or criminal
Proceeding may be paid by the Corporation in advance of the final disposition of
such Proceeding as authorized by the Board of Directors or other appropriate
body or party in the manner provided in Section C of this Article Ten only when
the Corporation has received an undertaking by or on behalf of the person who is
to receive such payment to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article Ten.
Section E. In determining whether the standard of conduct set forth in
Section A or Section B has been met, it may be determined that a person has met
the standard as to some matters but not as to others, and the amount of
indemnification may be accordingly prorated.
Section F. The indemnification provided by Sections A through E shall
not be exclusive of any other rights to which a person may be entitled by law,
bylaw, agreement, vote of shareholders, or otherwise.
Section G. The indemnification provided by Sections A through E shall
inure to the heirs, executors, and administrators of any person entitled to
indemnification under this Article Ten.
Section H. The Corporation may purchase and maintain insurance on any
person
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<PAGE> 7
who is or was a director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another Person against any liability incurred by him in any such position, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under Sections A through E.
ARTICLE ELEVEN: REPURCHASE OF STOCK
The Corporation is authorized to purchase, directly or indirectly, its
own shares to the extent of the aggregate of the unrestricted capital surplus
and unrestricted reduction surplus available therefor, without submitting such
purchase to a vote of the shareholders of the Corporation.
ARTICLE TWELVE: VOTING PERCENTAGES
Except as otherwise provided in these Restated Articles of
Incorporation, the Bylaws or by provision of law, a majority of votes actually
cast shall decide any matter properly before any shareholders' or directors'
meeting organized for the transaction of business, except that directors shall
be elected by plurality vote.
ARTICLE THIRTEEN: REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 333 Third
Avenue North, St. Petersburg, Florida, and the name of its registered agent at
that address is Neil Savage.
ARTICLE FOURTEEN: DIRECTORS
The number of directors shall be determined by the Board of Directors
or the shareholders in accordance with these Restated Articles of Incorporation
and the Bylaws. The directors shall be divided into three classes, Class I,
Class II and Class III, as nearly equal in number as possible. The term of
office for the Class I directors shall expire at the first annual meeting of the
shareholders in 1999; the term of office for the Class II directors shall expire
at the annual meeting of the shareholders in 2000; and the term of office for
the Class III directors shall expire at the annual meeting of the shareholders
in 2001. At each annual meeting of the shareholders commencing in 1999, the
successors to the directors whose term is expiring shall be elected to a term
expiring at the third succeeding annual meeting of the shareholders. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the
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<PAGE> 8
year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification, or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by this Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies, and other features of such directorships shall be governed by the
terms of these Restated Articles of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to Article Four hereof,
and such directors so elected shall not be divided into classes pursuant to this
Article Fourteen, unless expressly provided by such terms.
Newly created directorships resulting from any increase in the number
of directors or any vacancy on the Board of Directors resulting from death,
resignation, disqualification, removal, or other cause shall be filled solely by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum, or by a sole remaining director, or, if not
filled by the directors, by the shareholders. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Any or all of the directors of the Corporation may be removed from
office, with or without cause, only by the shareholders of the Corporation at
any meeting of the shareholders by the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of capital stock of the Corporation
entitled to vote for the election of directors, voting together as a single
class. Notice of any such meeting of the shareholders shall state that the
removal of a director or directors is among the purposes of the meeting.
Subject to the rights, if any, of the holders of shares of preferred
stock then outstanding, only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors at meetings of
shareholders.
Nominations of persons for election to the Board of Directors of this
Corporation may be made at a meeting of shareholders by or at the direction of:
(a) the Board of Directors; (b) by any nominating committee or person appointed
by the board; (c) or by any shareholder of this Corporation entitled to vote for
the election of directors at the meeting who complies with the notice procedures
set forth in this Article Fourteen.
Nominations by shareholders shall be made pursuant to timely notice in
writing to the Secretary of this Corporation. To be timely, a shareholder's
notice must be
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<PAGE> 9
delivered to, or mailed and received at, the principal executive offices of this
Corporation not less than 60 days prior to the date of the meeting at which the
director(s) are to be elected, 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.
A shareholder's notice to the Secretary shall set forth (a) as to each
person that the shareholder proposes to nominate for election or reelection a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of this Corporation which are
beneficially owned by the person, and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Schedule 14A under the Securities Exchange Act
of 1934, as amended; and (b) as to the shareholder giving the notice (i) the
shareholder's name and address as they appear on this Corporation's books, and
(ii) the class and number of shares of this Corporation's stock that are
beneficially owned by the shareholder on the date of such notice from the
shareholder. This Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by this Corporation to determine
the eligibility of such proposed nominee to serve as a director of this
Corporation.
The presiding officer of the meeting shall determine and declare at the
meeting whether the nomination was made in accordance with the terms of this
Article Fourteen. If the presiding officer determines that a nomination was not
made in accordance with the terms of this Article Fourteen, he shall so declare
at the meeting and any such defective nomination shall be disregarded.
The names and street addresses of the directors are:
<TABLE>
<CAPTION>
Name Address Class
---- ------- -----
<S> <C> <C>
Ronald E. Clampitt Post Office Box 10604
St. Petersburg, Fl. 33733 I
John B. Norrie
United Bank Building
333 Third Avenue North
St. Petersburg, Fl. 33733 I
Charles O. Lowe United Trust Company
P.O. Box 16508
St. Petersburg, Fl. 33733 I
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C> <C>
Henry Esteva United Financial Holdings, Inc.
P.O. Box 14517
St. Petersburg, Fl. 33733 I
William A. Eickhoff Eickhoff, Pieper & Willoughby
400 North Tampa Street, Suite 2650
Tampa, Fl. 33602 I
Edward D. Foreman Edward D. Foreman, P.A.
100 Second Avenue North
Suite 300
St. Petersburg, Fl. 33701 II
Ian F. Irwin The Southeast Companies of Tampa
Bay, Inc.
Post Office Box 429
St. Petersburg, Fl. 33731 II
Ron Petrini Great Bay Distributors, Inc.
2310 Starkey Road
Largo, Fl. 34641 II
Harold J. Winner United Bank and Trust Company
P.O. Box 14517
St. Petersburg, Fl. 33733 II
Ward J. Curtis United Trust
P.O. Box 16508
St. Petersburg, Fl. 33733 II
David K. Davis, M.D. 1680 Fairway Avenue South
St. Petersburg, Fl. 33712 III
Jack A. MaCris, M.D. 2612 Keystone Court North
St. Petersburg, Fl. 33710 III
Neil W. Savage United Bank and Trust Company
P.O. Box 14517
St. Petersburg, Fl. 33733 III
Jack Wier, Jr. Jack Wier, Jr. & Associates
4450 - 60th Avenue N.
St. Petersburg, Fl. 33714 III
</TABLE>
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<PAGE> 11
ARTICLE FIFTEEN: SHAREHOLDER MEETINGS
At an annual meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
brought before the annual meeting (a) by, or at the direction of, the Board of
Directors, or (b) by any shareholder of this Corporation who complies with the
notice procedures set forth in this Article Fifteen and the requirements of Rule
14a-8 under the Securities Exchange Act of 1934.
For a proposal to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of this Corporation. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of this
Corporation not less than 60 days prior to the scheduled annual meeting,
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 annual 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
such notice of the date of the scheduled annual meeting was given or the day on
which such public disclosure was made.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on this Corporation's books, of the shareholder
proposing such business and any other shareholders known by such shareholder to
be supporting such proposal, (c) the class and number of shares of this
Corporation's stock that are beneficially owned by the shareholder on the date
of such shareholder notice and by any other shareholders known by such
shareholder to be supporting such proposal on the date of such shareholder
notice, and (d) any financial interest of the shareholder in such proposal.
The presiding officer of the annual meeting shall determine and declare
at the annual meeting whether the shareholder proposal was made in accordance
with the terms of this Article Fifteen. If the presiding officer determines that
a shareholder proposal was not made in accordance with the terms of this Article
Fifteen, he shall so declare at the annual meeting and any such proposal shall
not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors, and
committees of the Board of
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<PAGE> 12
Directors, but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated, filed, and received as herein
provided.
Special meetings of the shareholders of this Corporation for any
purpose or purposes may be called at any time by (a) the Board of Directors; (b)
the Chairman of the Board of Directors (if one is so appointed); (c) the
President of this Corporation; or (d) by holders of not less than 50% of all the
votes entitled to be cast on any issue proposed to be considered at the proposed
special meeting, if such shareholders sign, date and deliver to this
Corporation's Secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held. Special meetings of the
shareholders of this Corporation may not be called by any other person or
persons.
At any special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been set
forth in the notice of such special meeting.
Any action required or permitted to be taken at any annual or special
meeting of the shareholders of the Corporation may be taken only upon the vote
of shareholders at a duly convened meeting of shareholders in accordance with
these Restated Articles of Incorporation and the Bylaws and may not be taken by
written consent of shareholders.
ARTICLE SIXTEEN: CERTAIN VOTING REQUIREMENTS
Section A. Higher Vote for Certain Items. Either (i) the affirmative
vote of the holders of at least 66-2/3% of the outstanding shares of capital
stock of the Corporation entitled to vote thereon, voting together as a single
class, or (ii) both (a) the affirmative vote of the holders of capital stock of
the Corporation required by law and (b) the approval of a majority of the
Continuing Directors, shall be required for:
(1) any plan of merger to which the Corporation is a party,
unless the Corporation will be the surviving corporation of the merger
and the shareholders of the Corporation would not, except for this
Article Sixteen, otherwise be entitled to vote on the merger under the
Florida Business Corporation Act;
(2) any sale or exchange (in one transaction or a series of
transactions) of all, or substantially all, of the property of the
Corporation, other than in the usual and regular course of business;
(3) any plan of share exchange to which the Corporation is a
party as the corporation the shares of which will be acquired; and
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<PAGE> 13
(4) any amendment, alteration, change or repeal of any
provision in these Restated Articles of Incorporation.
Section B. Increase in Number of Directors. Any increase in the number
of directors of the Corporation shall require either (a) the affirmative vote of
the holders of at least 66-2/3% of the outstanding shares of capital stock of
the Corporation entitled to vote thereon, voting together as a single class or
(b) the approval of a majority of the Continuing Directors.
Section B. Certain Definitions. The following definitions shall apply
with respect to this Article Sixteen:
(1) The term "person" means any individual, firm, company, or
other entity and shall include any group comprised of any person and
any other person with whom such person or any Affiliate or Associate of
such person has any agreement, arrangement, or understanding, directly
or indirectly, for the purpose of acquiring, holding, voting, or
disposing of the capital stock of the Corporation.
(2) The term "Interested Shareholder" means any person (other
than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit or
dividend reinvestment plan of the Corporation or any Subsidiary or any
trustee of or fiduciary with respect to any such plan when acting in
such capacity) who (a) is the beneficial owner of capital stock of the
Corporation representing five percent (5%) or more of the votes
entitled to be cast by the holders of all then outstanding shares of
capital stock of the Corporation; or (b) is an Affiliate or Associate
of the Corporation and at any time within the two-year period
immediately prior to the date of determination was the beneficial owner
of capital stock of the Corporation representing five percent (5%) or
more of the votes entitled to be cast by the holders of all then
outstanding shares of capital stock of the Corporation.
(3) A person is a "beneficial owner" of any capital stock of
the Corporation (a) that such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly, (b) that such
person or any of its Affiliates or Associates beneficially owns,
directly or indirectly, (i) the right to acquire (whether such right is
exercisable immediately or subject only to 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) that is beneficially owned,
directly or indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement, arrangement, or
understanding. For the purposes of determining whether a person is an
Interested Shareholder pursuant to Paragraph 2 of this Section C, the
number of shares of capital stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through
application of
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<PAGE> 14
Paragraph 4 of this Section C, but shall not include any
other shares of capital stock that may be issuable pursuant to any
agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants, or options, or otherwise.
(4) An "Affiliate" of a specified person is a person that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, the person
specified. The term "Associate," used to indicate a relationship with
any person, means (a) any company (other than the Corporation or any
Subsidiary) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or
more of any class of equity securities, (b) any trust or other estate
in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar fiduciary capacity,
and (c) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the Corporation or any of its parent corporations or
Subsidiaries.
(5) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition
of Interested Shareholder set forth in Paragraph 2 of this Section C,
the term "Subsidiary" shall mean only a company of which a majority of
each class of equity security is beneficially owned by the Corporation.
(6) The term "Continuing Director" means any member of the
Board of Directors of the Corporation who, while such person is a
member of the Board of Directors, is not an Affiliate or Associate or
representative of any Interested Shareholder and who was a member of
the Board of Directors prior to the time that any Interested
Shareholder became an Interested Shareholder, and any successor of a
Continuing Director, who, while such successor is a member of the Board
of Directors, is not an Affiliate or Associate or representative of any
Interested Shareholder and who is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors.
ARTICLE SEVENTEEN: AMENDMENTS
Subject to the provisions of Article Sixteen, the Corporation reserves
the right to amend, alter, change, or repeal any provision in these Restated
Articles of Incorporation in the manner now or hereafter prescribed by statute,
and all rights conferred upon the shareholders herein are subject to this
reservation.
14
<PAGE> 15
The foregoing Amended and Restated Articles of Incorporation were
adopted and approved by the Board of Directors and by the shareholders, in
accordance with Section 607.1003 of the Florida Statutes, on ____________ ___,
1998. The number of votes for the amendments contained herein were sufficient
for shareholder approval of such amendments.
The undersigned officer of the Corporation has executed these Amended
and Restated Articles of Incorporation as of the _____ day of _________, 1998.
UNITED FINANCIAL HOLDINGS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
15
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS OF
UNITED FINANCIAL HOLDINGS, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
shareholders of the Corporation for the election of directors and the
transaction of other business shall be held on the date and at the time and
place that the board of directors determines, in compliance with Article Fifteen
of the Articles of Incorporation. If any annual meeting is not held, by
oversight or otherwise, a special meeting shall be held as soon as practical,
and any business transacted or election held at that meeting shall be as valid
as if transacted or held at the annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders for any purpose shall be held when called in accordance with
Article Fifteen of the Articles of Incorporation.
SECTION 3. PLACE. Meetings of shareholders may be held
either within or outside the State of Florida.
SECTION 4. NOTICE. A written notice of each meeting of
shareholders, stating the place, day, and time of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered to each shareholder of record entitled to vote at the
meeting, not less than ten nor more than sixty days before the date set for the
meeting, either personally or by first-class mail, by or at the direction of the
president, the secretary, or the officer or other persons calling the meeting.
SECTION 5. WAIVERS OF NOTICE. Whenever any notice is required
to be given to any shareholder of the Corporation under these bylaws, the
Articles of Incorporation, or the Florida Business Corporation Act, a written
waiver of notice, signed anytime by the person entitled to notice shall be
equivalent to giving notice. Attendance by a shareholder entitled to vote at a
meeting, in person or by proxy, shall constitute a waiver of (a) notice of the
meeting, except when the shareholder attends a meeting solely for the purpose,
expressed at the beginning of the meeting, of objecting to the transaction of
any business because the meeting is not lawfully called or convened, and (b) an
objection to consideration of a particular matter at the meeting that is not
within the purpose of the meeting unless the shareholders object to considering
the matter when it is presented.
SECTION 6. RECORD DATE. For the purpose of determining the
shareholders for any purpose, the board of directors may either require the
stock transfer books to be closed for up to seventy days or fix a record date,
which shall be not more than seventy days before the date on which the action
requiring the determination is to be taken. However, a record date shall not
precede the date upon which the resolution fixing the record date is adopted. If
the transfer books are not closed and no record date is set by the board of
directors, the record date
<PAGE> 2
shall be determined as follows: (i) for determining shareholders entitled to
demand a special meeting, the record date is the date the first such demand is
delivered to the Corporation; (ii) for determining shareholders entitled to a
share dividend, the record date is the date the board of directors authorizes
the dividend; and (iii) for determining shareholders entitled to notice of and
to vote at an annual or special shareholders meeting, the record date is as of
the close of business on the day before the first notice is delivered to the
shareholders. When a determination of the shareholders entitled to vote at any
meeting has been made, that determination shall apply to any adjournment of the
meeting, unless the board of directors fixes a new record date. The board of
directors shall fix a new record date if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
SECTION 7. SHAREHOLDER'S LIST FOR MEETING. A complete
alphabetical list of the names of the shareholders entitled to receive notice of
and to vote at the meeting shall be prepared by the secretary or other
authorized agent having charge of the stock transfer book. The list shall be
arranged by voting group and include each shareholder's address, and the number,
series, and class of shares held. The list must be made available at least ten
days before and throughout each meeting of shareholders, or such shorter time as
exists between the record date and the meeting. The list must be made available
at the Corporation's principal office, registered agent's office, transfer
agent's office or at a place identified in the meeting notice in the city where
the meeting will be held. Any shareholder, his agent or attorney, upon written
demand and at his own expense may inspect the list during regular business hours
for any purpose germane to the meeting. The list shall be available at the
meeting and any shareholder, his agent or attorney is entitled to inspect the
list at any time during the meeting or its adjournment.
If the requirements of this section have not been
substantially complied with, the meeting, on the demand of any shareholder in
person or by proxy, shall be adjourned until the requirements of this section
are met. If no demand for adjournment is made, failure to comply with the
requirements of this section does not affect the validity of any action taken at
the meeting.
SECTION 8. PROXIES. Any shareholder entitled to vote at any
meeting of stockholders may vote either in person or by his attorney-in-fact.
Every proxy shall be in writing, subscribed by the shareholder or his duly
authorized attorney-in-fact, but need not be dated, sealed, witnessed or
acknowledged.
SECTION 9. SHAREHOLDER QUORUM AND VOTING. A majority of the
shares entitled to vote, represented in person or by proxy, constitutes a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares entitled to vote on the matter is the act of the
shareholders unless otherwise provided in the Articles of Incorporation or by
law. Each shareholder shall be entitled to one vote for each share of stock
standing in his name on the books of the corporation and may vote either in
person or by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. After a quorum has been established at a shareholders'
meeting, a withdrawal of shareholders that reduces the number of
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<PAGE> 3
shareholders entitled to vote at the meeting below the number required for a
quorum does not affect the validity of an adjournment of the meeting or an
action taken at the meeting prior to the shareholders' withdrawal.
Authorized but unissued shares including those redeemed or
otherwise reacquired by the Corporation, and shares of stock of this Corporation
owned by another corporation the majority of the voting stock of which is owned
or controlled by this Corporation, directly or indirectly, at any meeting shall
not be counted in determining the total number of outstanding shares at any
time. The president, any vice president, the secretary, and the treasurer of a
corporate shareholder are presumed to possess, in that order, authority to vote
shares standing in the name of a corporate shareholder, absent a bylaw or other
instrument of the corporate shareholder designating some other officer, agent,
or proxy to vote the shares. Shares held by an administrator, executor,
guardian, or conservator may be voted by him without a transfer of the shares
into his name. A trustee may vote shares standing in his name, but no trustee
may vote shares that are not transferred into his name. If he is authorized to
do so by an appropriate order of the court by which he was appointed, a receiver
may vote shares standing in his name or held by or under his control, without
transferring the shares into his name. A shareholder whose shares are pledged
may vote the shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the
shares unless the instrument creating the pledge provides otherwise.
SECTION 10. ADJOURNMENT. Any meeting of shareholders, annual or
special, may be adjourned from time to time by the presiding officer or
chairperson of such meeting, to reconvene at the same or some other place, 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 Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. The business of this Corporation shall
be managed and its corporate powers exercised by the board of directors.
SECTION 2. NUMBER. The Corporation shall have fourteen
directors initially upon adoption of these bylaws. The number of directors may
be increased or diminished from time to time by action of the board of directors
or shareholders in accordance with these bylaws and the Articles of
Incorporation, but no decrease shall have the effect of shortening the term of
any incumbent director, unless the shareholders remove the director.
SECTION 3. QUALIFICATION. Each member of the board of
directors must be a natural person who is eighteen years of age or older. A
director need not be a resident of
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<PAGE> 4
Florida or a shareholder of the Corporation.
SECTION 4. ELECTION AND TERM. The persons named in the
Articles of Incorporation as members of the initial board of directors shall
hold office for the term provided therein or until their earlier resignation,
removal from office, or death. In accordance with the Articles of Incorporation,
the shareholders shall elect successors to the directors at each annual meeting
to replace the class of directors whose terms are expiring. The new class of
directors shall hold office for the term expiring at the third succeeding annual
meeting. Each director shall hold office for the term for which he is elected
and until his successor is elected and qualifies or until his earlier
resignation, removal from office, or death.
SECTION 5. COMPENSATION. The board of directors has
authority to fix the compensation of the directors, as directors and as
officers.
SECTION 6. DUTIES OF DIRECTORS. A director shall perform his
duties as a director, including his duties as a member of any committee of the
board upon which he serves, in good faith, in a manner he reasonably believes to
be in the best interests of the Corporation.
SECTION 7. PRESUMPTION OF ASSENT. A director of the
Corporation who is present at a meeting of the board of directors or a committee
of the board of directors when corporate action is taken is presumed to have
assented to the action unless he votes against it or expressly abstains from
voting on the action taken, or, he objects at the beginning of the meeting to
the holding of the meeting or transacting specific business at the meeting.
SECTION 8. VACANCIES. Any vacancy occurring in the board of
directors resulting from death, resignation, disqualification, removal or other
cause, including any vacancy created because of an increase in the number of
directors, shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even if the number of remaining directors
does not constitute a quorum of the board of directors. A director elected to
fill a vacancy shall hold office only until the next election of directors by
the shareholders.
SECTION 9. RESIGNATION OF DIRECTORS. A director may resign at
any time by delivering written notice to the board of directors or its chairman
or the Corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date. If a resignation is made
effective at a later date, the board of directors may fill the pending vacancy
before the effective date provided that the successor does not take office until
the effective date.
SECTION 10. QUORUM AND VOTING. A majority of the board of
directors constitutes a quorum for the transaction of business. The act of the
majority of the directors at a meeting at which a quorum is present is the act
of the board of directors.
SECTION 11. PLACE OF MEETINGS. Regular and special meetings
by the board of directors may be held within or outside the State of Florida.
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<PAGE> 5
SECTION 12. REGULAR MEETINGS. A regular meeting of the board
of directors shall be held without notice, other than this bylaw, immediately
after and at the same place as the annual meeting of shareholders. The board of
directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than the resolution.
SECTION 13. SPECIAL MEETINGS. Special meetings of the board
of directors may be called by or at the request of the president or any
directors.
SECTION 14. NOTICE OF MEETINGS. Written notice of the time and
place of special meetings of the board of directors shall be given to each
director by either personal delivery or by first class United States mail,
telegram, or cablegram at least two days before the meeting. Notice of a meeting
of the board of directors need not be given to any director who signs a waiver
of notice either before or after the meeting. Attendance of a director at a
meeting constitutes a waiver of notice of the meeting and all objections to the
time and place of the meeting, or the manner in which it has been called or
convened, except when the director states, at the beginning of the meeting, or
promptly upon arrival at the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need be specified in the notice or waiver of notice of
the meeting.
A majority of the directors present, whether or not a quorum
exists, may adjourn any meeting of the board of directors to another time and
place. Notice of any adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
ARTICLE III. COMMITTEES
SECTION 1. APPOINTMENT. The board of directors, by resolution adopted
by a majority of the full board, may designate two or more of the directors to
constitute a committee and prescribe the duties, constitution and procedures
thereof. The designation of any committee pursuant to this Article III and the
delegation of authority thereto shall not operate to relieve the board of
directors, or any director, of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. If elected, the executive committee shall have
and may exercise all of the authority of the board of directors, when the board
of directors is not in session, except to the extent, if any, that such
authority shall be limited by the resolution appointing the executive committee.
In addition, no committee shall have the authority to (a) approve or recommend
to the members actions or proposals which by law must be approved by the
members or the board of directors; (b) designate candidates for the office of
director; (c) fill vacancies on the board of directors or any committee thereof;
or (d) amend the bylaws.
SECTION 3. TENURE. Subject to the provision of Section 8 of this
Article III, each member
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<PAGE> 6
of the executive committee, or any other committee, shall hold office until the
next regular annual meeting of the board of directors following his designation
and until his successor is designated as a member of the committee.
SECTION 4. MEETINGS. Regular meetings of any committee may be held
without notice at such times and places as the committee may fix from time to
time by resolution. Special meetings of committees may be called by any member
thereof upon not less than two day's notice stating the place, date and hour of
the meeting, which notice maybe be written or oral. Any member of a committee
may waive notice of any meeting and no notice of any meeting need by given to
any member thereof who attends in person. The notice of a meeting of a committee
need not state the business proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of any committee shall
constitute a quorum for the transaction of business at any meeting thereof, and
action of a committee must be authorized by the affirmative vote of a majority
of the members present at a meeting at which a quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by any committee at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the members of that committee.
SECTION 7. VACANCIES. Any vacancy on a committee may be filled by a
resolution adopted by a majority of the full board of directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of any committee may be
removed at any time with or without cause by resolution adopted by a majority of
the full board of directors. Any member of the any committee may resign from the
committee at any time by giving written notice to the president or secretary of
the Corporation. Unless otherwise specified therein, such resignation shall take
effect upon receipt. The acceptance of such resignation shall not be necessary
to make it effective.
ARTICLE IV. OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall
consist of a president, a secretary, and a treasurer, and may include one or
more presidents of divisions, vice presidents, one or more assistant
secretaries, and one or more assistant treasurers. The officers shall be elected
initially by the board of directors at the organizational meeting of board of
directors and thereafter at the first meeting of the board following the annual
meeting of the shareholders in each year. The board from time to time may elect
or appoint other officers, assistant officers, and agents, who shall have the
authority and perform the duties prescribed by the board. An elected or duly
appointed officer may, in turn, appoint one or more officers or assistant
officers, unless the board of directors disapproves or rejects the appointment.
All officers shall hold office until their successors have been appointed and
have qualified or until
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<PAGE> 7
their earlier resignation, removal from office, or death. One person may
simultaneously hold any two or more offices. The failure to elect a president,
secretary, or treasurer shall not affect the existence of the Corporation.
SECTION 2. CHAIRMAN OF THE BOARD. The chairman of the board,
if any, shall be an officer of the Corporation and, subject to the direction of
the board of directors, shall perform such executive, supervisory, and
management functions and duties as may be assigned to him from time to time by
the board of directors.
SECTION 3. PRESIDENT. The president, subject to the directions
of the board of directors, shall be the chief executive officer and be
responsible for the general and active management of the business and affairs of
the Corporation, has the power to sign certificates of stock, bonds, deeds, and
contracts for the Corporation, and shall preside as chairman at all meetings of
the shareholders.
SECTION 4. VICE PRESIDENTS. Each vice president has the power
to sign bonds, deeds, and contracts for the Corporation and shall have the other
powers and perform the other duties prescribed by the board of directors or the
president. Unless the board otherwise provides, if the president is absent or
unable to act, the vice president who has served in that capacity for the
longest time and who is present and able to act shall perform all the duties and
may exercise any of the powers of the president. Any vice president may sign,
with the secretary or assistant secretary, certificates for stock of the
Corporation.
SECTION 5. SECRETARY. The secretary shall have the power to
sign contracts and other instruments for the Corporation and shall (a) keep the
minutes of the proceedings of the shareholders and the board of directors in one
or more books provided for that purpose, (b) see that all notices are duly given
in accordance with the provisions of these bylaws or as required by law, (c)
maintain custody of the corporate records and the corporate seal, attest the
signatures of officers who execute documents on behalf of the Corporation,
authenticate records of the Corporation, and assure that the seal is affixed to
all documents of which execution on behalf of the Corporation under its seal is
duly authorized, (d) keep a register of the post office address of each
shareholder that shall be furnished to the secretary by the shareholder, (e)
sign with the president, or a vice president, certificates for shares of stock
of the Corporation, the issuance of which have been authorized by resolution of
the board of directors, (f) have general charge of the stock transfer books of
the Corporation, and (g) in general perform all duties incident to the office of
secretary and other duties as from time to time may be prescribed by the
president or the board of directors.
SECTION 6. TREASURER. The treasurer shall (a) have charge
and custody of and be responsible for all funds and securities of the
Corporation, (b) receive and give receipts for monies due and payable to the
Corporation from any source whatsoever, and deposit monies in the name of the
Corporation in the banks, trust companies, or other depositaries as shall be
selected by the board of directors, and (c) in general perform all the duties
incident to the office of treasurer and other duties as from time to time may be
assigned to him by the president or
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<PAGE> 8
the board of directors. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his duties in the sum and with
the surety or sureties that the board of directors determines.
SECTION 7. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the board of directors or appointed by another officer may be
removed by the board whenever in its judgment the removal of the officer or
agent will serve the best interests of the Corporation. Any officer or assistant
officer, if appointed by another officer, may likewise be removed by such
officer. Removal shall be without prejudice to any contract rights of the person
removed. The appointment of any person as an officer, agent, or employee of the
Corporation does not create any contract rights. The board of directors may fill
a vacancy, however occurring, in any office.
An officer may resign at any time by delivering notice to the
Corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date, its board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date. An officer's resignation does not affect
the officer's contract rights, if any, with the Corporation.
SECTION 8. SALARIES. The board of directors from time to time
shall fix the salaries of the officers, and no officer shall be prevented from
receiving his salary merely because he is also a director of the Corporation.
ARTICLE V. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Shares may but need not be represented
by certificates. The board of directors may authorize the issuance of some or
all of the shares of the Corporation of any or all of its classes or series
without certificates. If certificates are to be issued, the share must first be
fully paid.
SECTION 2. FORM. Certificates evidencing shares in this
Corporation shall be signed by the president or a vice president and the
secretary, assistant secretary or any other officer authorized by the board of
directors, and may be sealed with the seal of this Corporation or a facsimile of
the seal. Unless the Corporation's stock is registered pursuant to every
applicable securities law, each certificate shall bear an appropriate legend
restricting the transfer of the shares evidenced by that certificate.
SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The
Corporation may issue a new certificate in the place of any certificate
previously issued if the shareholder of record (a) makes proof in affidavit form
that the certificate has been lost, destroyed, or wrongfully taken, (b) requests
the issue of a new certificate before the Corporation has notice that the
certificate has been acquired by the purchaser for value in good faith and
without notice of any adverse
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<PAGE> 9
claim, (c) if requested by the Corporation, gives bond in the form that the
Corporation directs, to indemnify the Corporation, the transfer agent, and the
registrar against any claim that may be made concerning the alleged loss,
destruction, or theft of a certificate, and (d) satisfies any other reasonable
requirements imposed by the Corporation.
SECTION 4. RESTRICTIVE LEGEND. Every certificate evidencing
shares that are restricted as to sale, disposition, or other transfer shall bear
a legend summarizing the restriction or stating that the Corporation will
furnish to any shareholder, upon request and without charge, a full statement of
the restriction.
ARTICLE VI. DIVIDENDS
The board of directors from time to time may declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law.
ARTICLE VII. SEAL
The corporate seal shall have the name of the Corporation and
the word "seal" inscribed on it, and may be a facsimile, engraved, printed, or
an impression seal.
ARTICLE VIII. AMENDMENT
These bylaws may be repealed or amended, and additional bylaws
may be adopted, by either a vote of a majority of the full board of directors or
by vote of the holders of a majority of the issued and outstanding shares
entitled to vote, but the board of directors may not amend or repeal any bylaw
adopted by the shareholders if the shareholders specifically provide that the
bylaw is not subject to amendment or repeal by the directors. In order to be
effective, any amendment approved hereby must be in writing and attached to
these bylaws.
9
<PAGE> 1
Exhibit 4.3
CERTIFICATE OF TRUST
OF
UFH CAPITAL TRUST I
This Certificate of Trust of UFH Capital Trust I (the "Trust"), dated
July 30, 1998, is being duly executed and filed by Wilmington Trust Company, a
Delaware corporation, Neil W. Savage and C. Peter Bardin, as trustees, with the
Secretary of State of the State of Delaware to form a business trust under the
Delaware Business Trust Act (12 De.C. ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is UFH
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington.
3. Effective Date. This Certificate of Trust shall be effective upon
filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By:/s/ Debra Eberly
------------------------------------
Name: Debra Eberly
----------------------------------
Title: Administrative Account Manager
---------------------------------
/s/ Neil W. Savage
---------------------------------------
Neil W. Savage, as trustee
/s/ C. Peter Bardin
---------------------------------------
C. Peter Bardin, as trustee
<PAGE> 1
EXHIBIT 4.6
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITOR TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
Certificate Number Number of Preferred Securities
P-
CUSIP No. _________
Certificate Evidencing Preferred Securities
of UFH Capital Trust I
% Cumulative Trust Preferred Securities
(Liquidation Amount $5 per Preferred Security)
UFH CAPITAL TRUST I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that _______________
(the "Holder") is the registered owner of ____ preferred securities of the
Trust representing undivided beneficial interests in the assets of the Trust
and designated the ___% Cumulative Trust Preferred Securities (Liquidation
Amount $5 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 504 of the Trust
Agreement. The designations, rights, privileges, restrictions, preferences, and
other terms and provisions of the Preferred Securities are set forth in, and
this certificate and the Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended
and Restated Trust Agreement of the Trust, dated as of _______, 1998, as the
same may be amended from time to time (the "Trust Agreement"), including the
designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Preferred Securities Guarantee
Agreement entered into by United Financial Holdings, Inc., a Florida
corporation, and Wilmington Trust Company, as guarantee trustee, dated as of
__________, 1998 (the "Guarantee"), to the extent provided herein. The Trust
shall furnish a copy of the Trust Agreement and the Guarantee to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this __ day of _______________, 1998.
UFH CAPITAL TRUST I
By: ___________________________
_______________, Trustee
COUNTERSIGNED AND REGISTERED
WILMINGTON TRUST COMPANY,
as Securities Registrar
By:___________________________
Authorized Signature
<PAGE> 1
EXHIBIT 5.1
[ LETTERHEAD OF HOLLAND & KNIGHT LLP ]
October 6, 1998
United Financial Holdings, Inc.
333 Third Avenue North
St. Petersburg, Florida 33701
Attention: Chief Executive Officer
UFH Capital Trust I
United Financial Holdings, Inc.
333 Third Avenue North
St. Petersburg, Florida 33701
Attention: Chief Executive Officer
Re: Registration Statement on Form SB-2
(File Nos. 333-60431 and 333-60431-01)
Gentlemen:
We have acted as counsel to United Financial Holdings, Inc., a Florida
corporation (the "Company"), and UFH Capital Trust I, a Delaware statutory
business trust ("UFH Capital"), in connection with the preparation of the above
referenced Registration Statement on Form SB-2 (together with any amendments
thereto, the "Registration Statement") filed by the Company and UFH Capital with
the Securities and Exchange Commission (the "SEC") for the purpose of
registering under the Securities Act of 1933, as amended (the "Act"), certain
preferred securities (the "Preferred Securities") of UFH Capital, junior
subordinated debentures (the "Junior Subordinated Debentures") of the Company,
the guarantee of the Company with respect to the Preferred Securities (the
"Guarantee"), and up to 690,000 shares (the "Shares") of the authorized common
stock, par value $.01 per share, of the Company to be offered to the public by
the Company pursuant to an underwriting agreement (the "Underwriting Agreement")
to be entered into between the Company and William R. Hough & Co. as
representatives of the underwriters.
In connection with the registration and this opinion, we have examined
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the certificate of trust (the "Certificate of Trust") filed by UFH Capital
with the Secretary of State of the State of Delaware on _____________, 1998;
(ii) the Trust Agreement, dated as of
<PAGE> 2
United Financial Holdings, Inc.
UFH Capital Trust I
October 6, 1998
Page 2
_________, 1998, with respect to UFH Capital; (iii) the form of the Amended and
Restated Trust Agreement with respect to UFH Capital; (iv) the form of the
Preferred Securities of UFH Capital; (v) the form of the Guarantee between the
Company and Wilmington Trust Company, as trustee; (vi) the form of the Junior
Subordinated Debentures; (vii) the form of the indenture (the "Indenture"),
between the Company and Wilmington Trust Company, as trustee, in each case in
the form filed as an exhibit to the Registration Statement; and (viii) the
Registration Statement. We have also examined originals or copies, certified, or
otherwise identified to our satisfaction, of such other documents, certificates,
and corporate records of the Company as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies and the authenticity of the originals of
such copies. In examining documents executed by parties other than the Company
or UFH Capital, we have assumed that such parties had the power, corporate or
otherwise, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or otherwise,
and execution and delivery by such parties of such documents and that, except as
set forth in paragraph (1) and (2) below, such documents constitute valid and
binding obligations of such parties. In addition, we have assumed that the
Amended and Restated Trust Agreement of UFH Capital, the Preferred Securities of
UFH Capital, the Guarantee, the Junior Subordinated Debentures and the
Indenture, when executed, will be executed in substantially the form reviewed by
us. As to any facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon oral or written
statements and representations of officers, trustees, and other representatives
of the Company, UFH Capital and others.
We are qualified to practice law only in the State of Florida (the
"State"), and we do not purport to be experts on, or to express any opinion
herein concerning, any law other than the laws of the State and the federal law
of the United States. Accordingly, the opinions contained herein are expressly
limited to the matters of the laws of the State and the federal law of the
United States.
Based upon and subject to the foregoing and other qualifications and
limitations set forth herein, we are of the opinion that:
1. After the Indenture has been duly executed and delivered, the Junior
Subordinated Debentures, when duly executed, delivered, authenticated and issued
in
<PAGE> 3
United Financial Holdings, Inc.
UFH Capital Trust I
October 6, 1998
Page 3
accordance with the Indenture and delivered and paid for as contemplated by the
Registration Statement, 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 to the extent that enforcement thereof may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity regardless of whether enforceability is
considered in a proceeding at law or in equity.
2. The Guarantee, when duly executed and delivered by the parties
thereto, will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding at law or in
equity.
3. The Shares will be, when and if sold in accordance with the
Underwriting Agreement, duly authorized, legally issued and fully paid and
non-assessable.
We consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the prospectus filed as part of the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of person whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission promulgated thereunder.
This opinion letter speaks only as of its date. We undertake no
obligation to advise the addressees (or any third party) of changes in law or
fact that occur after the date hereof, even though the change may affect the
legal analysis, a legal conclusion, or an informational confirmation in the
opinion. This opinion is furnished solely to the Company and UFH Capital, and
may not be delivered to or relied upon by any other person without our prior
written consent.
Very truly yours,
HOLLAND & KNIGHT LLP
<PAGE> 1
October 6, 1998 Exhibit 8.1
United Financial Holdings, Inc. UFH Capital Trust I
333 Third Avenue North 333 Third Avenue North
St. Petersburg, Florida 33733 St. Petersburg, Florida 33733
Re: Registration Statement on Form SB-2
Registration Nos. 333-60431 and 333-60431-01
Ladies and Gentlemen:
We have acted as special United States tax counsel for United
Financial Holdings, Inc., a Florida corporation (the "Company"), and UFH
Capital Trust I, a statutory business trust formed under the laws of the State
of Delaware (the "Trust"), in connection with the above-captioned registration
statement on Form SB-2 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") for the purpose of registering (a)
the guarantee by the Company of ________ of the Trust's ___% cumulative trust
preferred pass-through securities, liquidation amount of $10.00 per preferred
security (the "Preferred Securities") with respect to distributions and
payments upon liquidation, redemption and otherwise, (b) _______ principal
amount of ___% Junior Subordinated Debentures due ______________, 2028, to
be issued by the Company and (c) an aggregate of _______________ of the Trust's
Preferred Securities.
We hereby confirm our opinion that the statements as to matters of law
and legal conclusions under the caption "MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS" in the Registration Statement are correct in all material
respects based upon current law. It is possible that contrary positions may be
taken by the Internal Revenue Service and that a court may agree with such
contrary positions.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Commission promulgated thereunder. This opinion is
expressed as of the date hereof
<PAGE> 2
unless otherwise expressly stated. Our opinion is expressly limited to the
statements as to matters of law and legal conclusions under the caption
"MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" set forth in the Registration
Statement and is subject to the same assumptions, limitations and
qualifications set forth under such caption. We disclaim any undertaking to
advise you of any subsequent changes of the facts stated or assumed herein or
any subsequent changes in applicable law.
Sincerely,
HOLLAND & KNIGHT LLP
<PAGE> 1
EXHIBIT 10.1
UNITED FINANCIAL HOLDINGS, INC.
STOCK OPTION AND INCENTIVE COMPENSATION PLAN
Article I. - General
A. Background. The shareholders of United Financial Holdings, Inc. the
"Company") have determined that it is in the best interests of the Company and
its shareholders for the Company to reward Executives as well as members of its
board of directors many of whom have, for much of the past ten years, been
compensated at less than market rates. However, through the individual and
combined efforts of the Executives and directors, the Company has achieved a
high level of performance and outstanding market position.
B. Purpose. The purpose of this Plan is to further align the interests
of Executives and Board Members of the Company and its Subsidiaries with that of
the Company shareholders, provide for an enhanced equity interest of management,
including Board Members, in the Company commensurate with its performance and
provide an incentive for continuous service with the Company.
C. Effective Date of the Plan. This Plan is effective on the date
approved by the Board, as noted herein. This Plan is further subject to the
approval by the shareholders of the Company at a meeting duly called, a quorum
being present. If the shareholders do not approve this Plan by January 31, 1998,
this Plan shall be null and void.
D. Definitions. The following definitions shall apply to this Plan:
1. "Board" means the board of directors of the Company.
2. "Board Member" means an individual other than an Executive
who is at the time: (i) a present member of the Board, or (ii) an individual not
then a member of the Board but who served as a member of the Board for ten (10)
or more years and was not removed from the Board for Cause.
3. "Board Shares" means the Shares reserved for Options
awarded to Board Members who are Recipients.
4. "Cash Award" means the payment of compensation to an
Eligible Person in accordance with Article IV hereof.
5. "Cause" in regard to a Termination means only the
following:
a. If an Executive, the termination of the
Executive's employment by the Company or its Subsidiary because
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United Financial
Stock Option and Incentive Compensation Plan
Page 2
there has been a final non-appealable conviction of, or a plea of, guilty or
nolo contendere by the Executive to a felony or misdemeanor involving fraud,
embezzlement, theft, dishonesty or other criminal conduct, or because of the
habitual neglect of the Executive's duties or failure by the Executive to
perform or observe any substantial lawful obligation of the Executive's
employment that is not remedied within thirty (30) days after written notice
thereof from the Board of the Company (or Subsidiary employing the Executive),
or
b. If a Board Member, the removal of the Board Member
from office because there has been a final non-appealable conviction of, or a
plea of, guilty or nolo contendere by the Board Member to a felony or
misdemeanor involving fraud, embezzlement, theft, dishonesty or other criminal
conduct, or because of the failure of the Board Member to perform or observe any
substantial lawful obligation as a Director that is not remedied within thirty
(30) days after written notice thereof from the Board of the Company.
6. "Change of Control" means (1) a tender offer made and
consummated for the ownership of twenty-five percent (25%) or more of the
outstanding voting securities of the Company, (2) a merger or consolidation of
the Company with another corporation and as the result of the merger or
consolidation seventy-five percent (75%) or less of the voting securities of the
surviving corporation are owned by those persons who owned shares of the Company
immediately before the merger or consolidation, (3)a sale of al or substantially
all of the assets of the Company to another corporation not a Subsidiary of the
Company, or (4) an acquisition of the Company by a person, within the meaning of
Section 3(a)(9) or Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, of twenty-five percent (25%) or more of the
outstanding voting securities of the Company (whether directly, indirectly,
beneficially or of record). For purposes hereof, ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(1)(1)(as in effect on the date hereof) pursuant
to the Securities Exchange Act of 1934.
7. "Code" means the Internal Revenue Code of 1986, as amended.
8. "Committee" means the Strategic Review Committee of the
Company, serving as the Plan Committee.
9. "Common Stock" means the Common Stock of the Company.
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United Financial
Stock Option and Incentive Compensation Plan
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10. "Company: means United Financial Holdings, Inc.
11. "Date of Grant" means the date on which an Option is
granted to a Recipient, which date is the date this Plan is approved by the
Board.
12. "Death" means the Recipient has died while he or she
is (i) employed by the Company or a Subsidiary or (ii) a Board
Member.
13. "Eligible Person" means:
a. A Board Member; or
b. An Executive.
14. "Executive" means one of the Executive Officers of the
Company or a Subsidiary identified on Exhibit A as an Eligible Person in the
Plan.
15. "Executive Shares" means the number of Shares reserved for
Options awarded to Executive Recipients.
16. "Fair Market Value" means the fair market value of the
Common Stock. If the Common Stock is not publicly traded on the date as of which
fair market value is being determined, the Board shall determine the fair market
value of the Shares, upon recommendation of the Committee, using such factors as
the Board considers relevant, such as the price at which recent sales have been
made, pending offers, the book value of the Common Stock, and the Company's
current and projected earnings. If the Common Stock is publicly traded on the
date as of which fair market value is being determined, the fair market value is
the average of the high bid and ask price of the Common Stock as quoted on NASD
OTC Bulletin Board on that date. If a price quotation does not occur on the date
as of which fair market value is being determined, the next preceding date on
which a price was quoted will determine the fair market value.
17. "Incentive Stock Option" means a stock option granted
pursuant to either this Plan or any other plan of the Company that satisfies the
requirements of Section 422 of the Code and that entitles the Recipient to
purchase stock of the Company.
18. "Net Option Value" means the amount by which the total
Fair Market Value of the Shares for Options granted and United Financial Stock
Option and Incentive Compensation Plan outstanding (whether or not vested) under
the Plan exceed the total cost of exercising such Options.
<PAGE> 4
United Financial
Stock Option and Incentive Compensation Plan
Page 4
19. "Net Sales Proceeds" are the "net proceeds" distributable
to, or paid to, shareholders of the Company upon a transaction resulting in a
Change of Control. The net proceeds is the amount of cash, notes, securities or
other consideration received in the transaction, reduced by usual and customary
out-of-pocket closing costs such as legal fees, accounting fees, appraisals,
fairness opinions, broker commissions, and transfer taxes, fees and costs.
20. "Nonqualified Stock Option" means a stock option granted
pursuant to the Plan that is not an Incentive Stock Option and that entitles the
Recipient to purchase stock of the Company.
21. "Option" means an Incentive Stock Option or a Nonqualified
Stock Option granted pursuant to the Plan.
22. "Option Agreement" means a written agreement entered into
between the Company and a Recipient which sets out the terms and restrictions of
an Option award granted to the Recipient.
23. "Option Shareholder" means a Recipient who has or her
Option.
24. "Option Shares" means Shares issued by the company upon
exercise of an Option.
25. "Option Term" means the period of ten (10) years following
the Date of Grant.
26. "Permanent and Total Disability" means a finding by the
Board that the Recipient has become, while (i) employed by the Company or a
Subsidiary, or (ii) a Board Member, unable to perform any full-time, substantial
gainful activity, with or without accommodation, by reason of medically
determinable physical or mental impairment which can be expected to result in
death or which is otherwise permanent.
27. "Plan" means this United Financial Holdings Inc. Stock
Option and Incentive Compensation Plan.
28. "Pool" is the maximum amount available for Cash Awards,
calculated as of the date of a Change of Control. The Pool is determined in the
sole and absolute discretion of the Board, but the Pool shall not exceed an
amount which is equal to fifteen percent (15%) times the excess of the Net Sales
Proceeds over the Return Amount, with the product reduced by the total of (i)
the Net Option Value and the (ii) the Salary Continuation Amounts.
<PAGE> 5
United Financial
Stock Option and Incentive Compensation Plan
Page 5
29. "Recipient" means an Eligible Person who is awarded an
Option.
30. "Retirement" means termination of the Recipient's
employment as an Executive of the Company or a Subsidiary, or, as the case may
be, status as a Board Member, (i) at or after age sixty (60) at a time the sum
of his or her age and years of service with the Company or Subsidiary equals at
least seventy-five (75), or (ii) at or after age sixty-five (65) provided that
the years of service have been ten (10) or more years.
31. "Return Amount" means the computed amount which would
result had the average daily consolidated capital of the Company been invested
since commencement of the Company in 1986 at sixteen and one-half percent
(16.5%) compounded annually.
32. "Salary Continuation Agreements" means the Salary
Continuation Agreements entered into by the Company or a Subsidiary
with an Executive.
33. "Salary Continuation Amounts" means the face amounts
payable to Executives under the Salary Continuation Agreements in
effect.
34. "Share" means a share of the Common Stock, as adjusted in
accordance with the Plan.
35. "Subsidiary" means a wholly owned subsidiary of the
Company.
36. "Termination" means that for a reason other than Death,
Permanent and Total Disability or Retirement the Recipient (i) who was an
Executive no longer is employed by the Company or a Subsidiary as an Executive,
or (ii) who was a Board Member no
longer is a Board Member.
E. Administration. The Plan shall be administered by the
Committee. The Committee shall not have the authority to designate Eligible
Persons, Recipients or award Options. All Eligible Persons, Recipients and all
Options are designated in this Plan and its Exhibits; however, the Committee
shall allocate United Financial Stock Option and Incentive Compensation Plan
Incentive Stock Options and Nonqualified Stock Options to be awarded to
Executives when the Fair Market Value of the Shares is determined by the Board.
The Committee has the authority and responsibility to interpret the Plan, adopt,
amend, and rescind rules and regulations related to the administration of the
Plan, and to make all other determinations and take all other action necessary
or advisable for the implementation and administration of the Plan.
<PAGE> 6
United Financial
Stock Option and Incentive Compensation Plan
Page 6
No member of the Committee shall be liable for any action taken or decisions
made in good faith relating to the Plan or its interpretation or administration.
F. General Plan Provisions Applicable to All Options. The following
provisions apply to each Option, whether for Shares under the Nonqualified Stock
Option or the Incentive Stock Option.
1. Option Vesting. Each Recipient may only exercise an
Option that has vested, subject to the further requirements of the
Plan related to Death, Permanent and Total Disability, Retirement
and Termination. The following shall apply:
a. Each Board Member Recipient fully vests in
his or her Option at the Date of Grant.
b. Each Executive-Recipient fully vests upon
Death, Permanent and Total Disability, and Retirement. Otherwise, each
Executive-Recipient Option vests in accordance with the following schedule of
continuous years of service for the Company and its Subsidiaries:
(1) Prior to completing two (2) years of
service, a Recipient is not vested in his or her Option.
(2) During the third year of service,
the Recipient vests in twenty percent (20%) of the Option.
(3) During the fourth year of service,
the Recipient vests in forty percent (40%) of the Option.
(4) During the fifth year of service,
the Recipient vests in sixty percent (60%) of the Option.
(5) During the sixth year of service,
the Recipient vests in eighty percent (80%) of the Option.
(6) After the sixth year of service, the
Recipient vests in one hundred percent (100%) of the Option.
For purposes of Plan vesting, service commences on the date the
Executive-Recipient commenced full-time employment for the Company or a
Subsidiary.
2. Shares Limits Each Option Exercise. Vested Options may be
exercised either at one time as to the total number of Shares then available, or
from time to time as to any portion of the Shares available, in unites of one
hundred (100) Shares or multiples thereof.
<PAGE> 7
United Financial
Stock Option and Incentive Compensation Plan
Page 7
3. Notice of Exercise. Subject to the terms and a be exercised
by written notice to the Company at its principal office, attention Chief
Executive Officer, with copies to the attention of the Chief Financial Officer.
Each notice shall state the election to exercise an Option and the number of
Shares in respect of which it is being exercised.
4. Payment and Deliver of Documents. The notice shall be
accompanied by:
a. a certified cashier's check payable to the
order of the Company, or other acceptable funds, for the full purchase price of
the Shares in respect of which an Option is being exercised, and
b. the agreement required under the Section
hereof titled "Purchase for Investment Only."
5. Issue of Shares. Subject to the Recipient's covenants
contained in Sections titled "Income Tax," "Purchase for Investment Only," and
other provisions of this Plan, the certificate or certificates representing the
Shares shall be issued and delivered by the Company as soon as practicable and
within thirty (30) days after receipt of the notice, documents to be delivered,
and payment.
6. Name Registration of Shares. The stock certificate or
certificates shall be registered in the name of the person exercising an Option
or, if the Option shall be exercised by the Recipient, and if the Recipient
shall so request in the notice exercising the Option, shall be registered in the
name of the Recipient and another person jointly, with right of survivorship (or
as tenants by the entireties, if a spouse), and shall be delivered to or on the
written order of the person or persons exercising the Option.
7. Limitation As to Exercise. Except for exercise of an Option
following the Recipient's Death an Option may only be exercised by the
Recipient. If an Option is being exercised following the Death of the Recipient,
the notice of Option exercise shall be accompanied by appropriate proof of the
right of the person or persons to exercise the Option.
8. Options Not Transferrable. No Option may be transferred
except by testamentary bequest (or equivalent) or by the laws of descent and
distribution. An Option may not otherwise be assigned, transferred, pledged or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment, or similar process. Any
<PAGE> 8
United Financial
Stock Option and Incentive Compensation Plan
Page 8
attempted assignment, transfer, pledge, hypothecation, or other disposition of
an Option contrary to the provisions of this Plan, and the levy of any
attachment or similar process on an Option, shall be null and void and without
effect.
9. Dilution Adjustments. The number of Shares of stock subject
to the Options and the Options price per Share shall be appropriately adjusted
for any increase or decrease in the number of outstanding shares of Common Stock
of the Company resulting from payment of a stock dividend on the Common Stock, a
subdivision or combination of shares of the Common Stock, or a reclassification
of the Common Stock. The adjustments and the manner of application of the
provisions of this Section shall be determined by the Board, upon advice of the
Committee. An adjustment may provide for the elimination of any fractional Share
which might otherwise become subject to the Options.
10. Rights as Shareholder. A Recipient or a permitted
transferee of the Options shall have no right as a shareholder with respect to
any Share covered by the Options until he or she is the holder of record of the
Share. Except as provided in this Plan, no adjustment shall be made for
dividends or cash distributions, ordinary or extraordinary, whether in cash,
securities, or other property, or distributions or other rights in respect of
the Shares for which the record date is prior to the date on which he or she
becomes the holder of record of the Share.
11. No Employment Rights. Nothing contained in this Plan shall
restrict the right of the Company or any Subsidiary then employing an Executive
to terminate the employment of the Executive at any time, with or without Cause.
The termination of employment of the Executive, whether by the Company or any
Subsidiary, and regardless of the reason, shall, as to the subject matter
hereof, have the results provided for in this Plan. Similarly, nothing herein
shall grant any right to any Board Member to continue as a member of the Board.
12. Non-Uniform Determination. Nothing contained in this Plan
shall require the Company, a Subsidiary, the Board or the Committee to make
uniform decisions in regard to any award, regardless of whether or not persons
are similarly situated.
13. Leave of Absence. The Committee shall be entitled to make
rules, regulations and determinations deemed appropriate under the Plan in
respect to any leave of absence taken by a Recipient. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine (i)
whether or not a leave of absence shall constitute a Termination within the
meaning of the
<PAGE> 9
United Financial
Stock Option and Incentive Compensation Plan
Page 9
Plan, (ii) the impact, if any, of any such leave of absence on awards hereunder.
G. Purchase for Investment Only. Each Recipient, by accepting an
award of a Stock Option, represents to the Company that it is his or her present
intention to acquire the Shares covered by the Options for investment and not
with a view toward the distribution or sale of the Shares.
1. Each Recipient understands and agrees that, unless
the Shares subject to Option are registered by election of the Board:
a. The Shares issued under the Options shall be
unregistered within the meaning of applicable federal and state securities,laws,
and will be issued under applicable exemptions from registration.
b. The Shares acquired under the Options shall
not thereafter be transferable except in accordance with applicable exemptions
from registration.
c. Neither the Company nor any Subsidiary has
any obligation to cause any Shares to be registered for further distribution.
d. Upon Option exercise, and as a condition of
such exercise, the Recipient or other person or persons exercising the Options
shall sign and deliver to the Company for its benefit a written agreement in
form and substance reasonably satisfactory to the Company in which he or she (1)
represents that, unless the Shares are registered, (a) the purchase of the
Shares are being purchased for investment and not with a view of resale or
redistribution thereof, and (b) agrees not to assign, hypothecate, pledge, sell
or transfer the Shares with or without consideration except pursuant to a
transaction which is exempt from registration under federal and state securities
laws (unless a registration statement under applicable securities laws is then
effective in regard to such Shares), and (2) consents to withholding all
necessary and appropriate payroll and employment taxes in connection with the
exercise of the Options.
2. Unless the Company has registered the Shares, shares
issued shall be endorsed substantially as follows:
"The Shares of stock represented by this Certificate have not
been registered under the federal or any applicable state
securities acts and cannot be transferred without an opinion
of counsel satisfactory to legal counsel for
<PAGE> 10
United Financial
Stock Option and Incentive Compensation Plan
Page 10
the Company that such transfer will not violate any such
securities laws."
3. The Recipient's investment representations and
understandings contained herein bind him or her and his or her personal
representatives, heirs, beneficiaries, successors and assigns. Upon any exercise
of an Option by a permitted transferee, the permitted transferee shall represent
in writing to the Company his or her investment intent and understandings, which
shall be consistent with this Section, as if the transferee was the Recipient.
H. Compliance with Law; Approval of Regulatory Bodies. To the contrary
notwithstanding, Options can be granted, and Shares can be delivered under this
Plan, only in compliance with all applicable federal and state laws and
regulations and the rules of all stock exchanges on which the Company's stock is
listed at any time. An Option is exercisable only if either (a) a registration
statement pertaining to the Shares to be issued upon exercise of the Option has
been filed with and declared effective by the Securities and Exchange Commission
and remains effective on the date of exercise, or (b) an exemption from the
registration requirements of applicable securities laws is available. This Plan
does not require the Company, however, to file such a registration statement or
to assure the availability of such exemptions. No Option may be exercised, and
Shares may not be issued under this Plan, until the Company has obtained the
consent or approval of every regulatory body, federal or state, having
jurisdiction over such matters as the Committee deems advisable.
I. Income Taxes. Each Recipient, by his or her acceptance of the award
of a Stock Option, represents to the Company that (i) he or she understands that
the fair market value of the Shares in excess of the price at which an Option
for Nonqualified Stock Option Shares is exercised is taxable to the Recipient as
ordinary compensatory income under federal income tax laws current at the time
the Nonqualified Stock Option is exercised and that (ii) he or she understands
that exercise of the Incentive Stock Option can also cause taxation at the time
of exercise, or at other times, as described in Article III, and that if the
price at which Incentive Stock Options are exercised is less than the amount
required in the Internal Revenue Code, such Options may also be taxed upon their
exercise. The taxes applicable shall, if an Option resulting in tax is exercised
by the Recipient, be paid by withholding taxes or as otherwise agreed at the
time; if the Recipient is deceased, or not employed by the Company at the time
of Option exercise, the Recipient (or the Recipient's successor) and the Company
shall agree on the proper payment of tax liability prior to the issuance of the
Option Shares upon exercise. The Company reserves the
<PAGE> 11
United Financial
Stock Option and Incentive Compensation Plan
Page 11
right, in its sole and absolute discretion to issue or transfer Shares net of
the number of Shares sufficient to satisfy the withholding and payroll tax
requirements. For this purpose, the Shares shall be valued on the date of the
withholding obligation.
J. Parachute Compensation Exception. Anything contained in this Plan to
the contrary notwithstanding, upon a Change in Control as defined in this Plan,
or other change of control defined in Internal Revenue Code with respect to
golden parachute payments, no "excess golden parachute payments" shall be paid
by the Company to or for any "disqualified person" as those terms are used and
defined in the Internal Revenue Code, in particular Sections 280G and 4999,
unless the issued and outstanding stock of the Company is then not readily
traceable on an established securities market or otherwise, thus, qualifying for
the "exception" provided in Section 280G and any such payments which otherwise
would be excess golden parachute payments are approved prior to any change in
control by the shareholders of the Company in accordance with Section 280G.
K. Liability of the Company. The Company and any Subsidiary that is in
existence or hereafter comes into existence shall not be liable to any person
for any tax consequences incurred by a Recipient or other person with respect to
an Option, Cash Award, or the Plan.
L. Claims Dispute Resolution. If the Recipient or other person
authorized to exercise the Options or receive a Cash Award, believes that he or
she is being denied an Option or Cash Award, or a right thereunder, (whether by
termination of the Option or otherwise) to which he or she is entitled under
this Plan (hereinafter referred to as a "Claimant"), the Claimant may file a
written request for such benefit with the Company, setting forth his or her
claim. The request must be addressed to the Chief Executive Officer at the
Company's then principal place of business.
1. Upon receipt of a claim, the Company shall advise the
Claimant that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Company may, however, extend
the reply period for an additional ninety (90) days for reasonable cause.
2. If the claim is denied in whole or in part, the Company
shall adopt a written opinion, using language calculated to be understood by the
Claimant, setting forth:
a. The specific reason or reasons for such denial;
<PAGE> 12
United Financial
Stock Option and Incentive Compensation Plan
Page 12
b. The specific reference to pertinent provisions of
this Plan or the Option Agreement on which such denial is based;
c. A description of any additional material or
information necessary for the Claimant to perfect his or her claim and an
explanation why such material or such information is necessary;
d. Appropriate information as to the steps to be
taken if the Claimant wishes to submit the claim for review; and
e. The time limits for requesting a review under
Subsection 3. and for review under Subsection 4. hereof.
3. Within sixty (60) days after the receipt by the Claimant of
the written opinion described above, the Claimant may request in writing that
the Board review the determination of the Company. Such request must be
addressed to the Board, at the then principal place of business of the Company.
The Claimant or his or her duly authorized representative may, but need not,
review the pertinent documents and submit issues and comments in writing for
consideration by the Board. If the Claimant does not request a review of the
Company's determination by the Board within such sixty (60) day period, he or
she shall be barred and estopped from challenging the Company's determination.
4. Within sixty (60) days after the Board's receipt of a
request for review, the Board will review the Company's determination. After
considering all materials presented by the Claimant, the Board will render a
written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific references to the pertinent provisions of this Plan on which the
decision is based. If special circumstances require that the sixty (60) day time
period be extended, the Board will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred eighty (180) days
after receipt of the request for review.
M. Types of Awards. Awards under this Plan shall be in one or
more of the following:
1. Nonqualified Stock Option, as described in Article III.
2. Incentive Stock Option, as described in Article III.
3. Cash Award, as described in Article IV.
<PAGE> 13
United Financial
Stock Option and Incentive Compensation Plan
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N. Aggregate Limitation on Awards.
1. Shares of stock issued under the Plan are from the
authorized but unissued shares of common stock of the Company. The maximum
number of Shares which may be issued under the Plan are one hundred fifty-six
thousand (156,000) shares, allocated one hundred four thousand (104,000) shares
as Executive Shares and fifty two thousand (52,000) shares as Board Shares.
2. The Cash Award shall equal the amount determined by the
Board at the time of the Award. However, the Cash Award shall not exceed the
Pool Amount.
O. Amendment of Plan. At any time in its sole discretion, the Company
may, but is not required to, amend the Plan, or any Article thereof, in response
to changes in securities laws, tax laws, banking laws, employment laws or other
laws, or rules, regulations, or regulatory interpretations thereof applicable to
the Plan, the Option or the Shares. Without limiting the foregoing, each Option
and Option Agreement may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable in
light of any addition to or change in the Internal Revenue Code or the rules and
regulations thereunder, or any federal or state securities law or banking law,
or other law, rule or regulation, which change occurs after the Date of Grant
and by its terms applies to the Option, or (ii), in addition to the
circumstances described in (i), a Recipient's Option Agreement and Option may be
amended with the consent of the Recipient.
ARTICLE II. - NONQUALIFIED STOCK OPTIONS
A. Board Shares. Options to Board Members from the Board Shares are
awarded as Nonqualified Options to Eligible Person Board Members as specified on
Exhibit B.
B. Executive Shares. Options to Executives from the Executive Shares
which were not awarded as Incentive Stock Options under Article III are awarded
as Nonqualified Options to Eligible Person Executives as specified on Exhibit C.
C. Option Agreement. The award of a Nonqualified Stock Option to an
Eligible Person (Recipient) shall be evidenced by a written Option Agreement
executed by the Company and the Recipient of the award. The form and substance
of the Option Agreement shall be approved by the Committee.
<PAGE> 14
United Financial
Stock Option and Incentive Compensation Plan
Page 14
D. Price. The Option price shall be stated in the Option Agreement and
shall be equal to one hundred percent (100%) of the Fair Market Value of the
Shares on the Date of the Grant.
E. Period of Option Exercise. Except as provided herein in the event of
the Recipient's Death, Permanent and Total Disability, Retirement or
Termination, each Nonqualified Stock Option is exercisable from and after the
Date of Grant (to the extent vested) and may be exercised only during the Option
Term. No Nonqualified Stock Option may be exercised after the expiration of the
Option Term.
F. Manner of Payment. Each Option Agreement shall set forth the
procedure governing the exercise of the Nonqualified Stock Option and shall
provide that, upon such exercise, the Shares optioned shall be paid for in cash
or other acceptable funds.
G. Death. Upon the Death of the Recipient, any Nonqualified Stock
Option rights exercisable on the date of death shall be exercisable by the
estate of the Recipient, or by the person who acquires the right to exercise the
Option by inheritance or by reason of Death, provided that such exercise occurs
both within the Option Term and within one (1) year following the date of Death.
H. Retirement or Permanent and Total Disability. Upon the Recipient's
Retirement or Permanent and Total Disability (as each is defined in the Plan and
determined by the Committee), the Recipient may exercise his or her Nonqualified
Stock Option provided that the exercise occurs both within the Option Term and
within thirty-six (36) months following the date of Retirement or Permanent and
Total Disability, as the case may be.
I. Termination. A Recipient's right to exercise any unexercised
Nonqualified Stock Option shall cease and become void upon a Termination for
Cause as defined in the Plan, but may be exercised following any other
Termination if exercised both within the Option Term and within one (1) year
following the date of Termination.
ARTICLE III. - INCENTIVE STOCK OPTIONS
A. Executive Shares. Options to Executives from the Executive Shares
which are awarded as Incentive Stock Options to Eligible Person Executives are
specified on Exhibit C.
B. Option Agreement. The award of an Incentive Stock Option to an
Eligible Person (Recipient) shall be evidenced by a written Option Agreement
executed by the Company and the Recipient of the
<PAGE> 15
United Financial
Stock Option and Incentive Compensation Plan
Page 15
award. The form and substance of the Agreement shall be approved by the
Committee.
C. Price. Except as provided in the next sentence, the Option price
shall be stated in the Option Agreement and shall be equal to one hundred
percent (100%) of the Fair Market Value of the Shares on the Date of the Grant.
An Incentive Stock Option granted to an individual who, on the Date of Grant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of either the Company or any parent or subsidiary,
shall be granted at an exercise price of one hundred ten percent (110%) of Fair
Market Value on the Date of Grant. In calculating stock ownership of any person,
the attribution rules of Code Section 424(d) will apply. Furthermore, in
calculating stock ownership, any stock that the individual may purchase under
outstanding options will not be considered.
D. Period of Option Exercise. Except as provided herein in the event of
the Recipient's Death, Permanent and Total Disability, Retirement or
Termination, or ownership of ten percent (10%) or more of the stock of the
Company, its parent or any subsidiary, each Incentive Stock Option is
exercisable from and after the Date of Grant (to the extent vested) and may only
be exercised during the Option Term. No Incentive Stock Option may be exercised
after the expiration of the Option Term. Any Incentive Stock Option granted to a
Recipient who owns ten percent (10%) or more of the stock of the Company, or any
parent or subsidiary of the Company, shall be exercisable only during the
five-year period immediately following the Date of Grant.
E. Maximum Amount of Incentive Stock Options Award. The aggregate Fair
Market Value, determined on the Date of Grant, of stock in the Company with
respect to which any Incentive Stock Options under the Plan and all other plans
of the Company or its Subsidiaries (within the meaning of Section 422(b) of the
Code) may become exercisable by any individual for the first time in any
calendar year shall not exceed One Hundred Thousand Dollars ($100,000).
F. Manner of Payment. Each Incentive Stock Option Agreement shall set
forth the procedure governing the exercise of the Incentive Stock Option and
shall provide that, upon such exercise, the Shares optioned shall be paid for in
cash or other acceptable funds.
G. Death. Upon the Death of the Recipient, any Incentive Stock Option
rights exercisable on the date of Death shall be exercisable by the estate of
the Recipient, or by the person who acquires the right to exercise the Option by
inheritance or by
<PAGE> 16
United Financial
Stock Option and Incentive Compensation Plan
Page 16
reason of death, provided that such exercise occurs both within the Option Term
and within one (1) year following the date of Death.
H. Retirement or Permanent and Total Disability. Upon the Recipient's
Retirement or Permanent and Total Disability (as each is defined in the Plan and
determined by the Committee), the Recipient may exercise his or her Incentive
Stock Option provided that the exercise occurs both within the Option Term and
within thirty-six (36) months following the date of Retirement or Permanent and
Total Disability, as the case may be.
I. Termination. A Recipient's right to exercise any unexercised
Incentive Stock Option shall cease and become void upon a Termination for Cause
as defined in the Plan, but may be exercised following any other Termination if
exercised both within the Option Term and within one (1) year following the date
of Termination.
J. Incentive Stock Option Tax Treatment. Provided, however,
notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Internal Revenue Code upon the exercise of an Incentive Stock Option
will not be available to a Recipient who exercises any Incentive Stock Option
more than (i) one (1) year after the date of termination because of Permanent
and Total Disability or (ii) three (3) months after the date of termination
because of Retirement or other Termination.
ARTICLE IV. - CASH AWARDS
A. Change of Control Event. Upon a Change of Control, a Cash Award,
allocated among Recipients in accordance with Exhibit D, may be awarded to
Recipients in the sole and absolute discretion of the Board. Two-thirds of the
Cash Award shall be allocated to Executives and one-third of the Cash Award
shall be allocated to Board Members. The Cash Award allocated to Executives
shall be allocated among Executives in accordance to the ratios of Executive
units established in accordance with Exhibit D-1. The Cash Award allocated to
Board Members shall be allocated among Board Members in accordance to the ratios
of Board Member units established in accordance with Exhibit D-2.
B. Death, Retirement or Permanent and Total Disability. If within one
(1) year after the Death, Retirement or Permanent and Total Disability of a
Recipient, a Change of Control occurs, the Recipient (or his or her estate)
shall participate in the Cash Award allocated in the ratio of his or her units
to other units of the same class (that is, if the Recipient had been an
Executive, the deceased, retired or disabled Recipient shall participate in the
Cash Award assigned to Executive units; if the Recipient had
<PAGE> 17
United Financial
Stock Option and Incentive Compensation Plan
Page 17
been a Board Member, the deceased, retired or disabled Recipient shall
participate in the Cash Award assigned to Board Member units).
C. Termination. A Recipient's right to an unpaid Cash Award (whether or
not earned before Termination) shall terminate upon a Termination, whether or
not with Cause, occurring prior to the Change of Control.
D. Withholding. All payments of Cash Awards shall be subject to payroll
and withholding tax, as required by law.
<PAGE> 18
United Financial
Stock Option and Incentive Compensation Plan
Page 18
E. Time of Payment. Payment of Cash Awards shall be made by the Company
within one (1) month following the closing of the transaction resulting in a
Change of Control.
UNITED FINANCIAL HOLDINGS, INC.
By:
----------------------------------
Approved By:
The Board of Directors on November 18, 1997 and by the Shareholders on
, 1997.
<PAGE> 19
United Financial
Stock Option and Incentive Compensation Plan
Page 19
Exhibit A
Executives: Eligible Persons
The following Executives employed by the Company or a Subsidiary are
designated as eligible for participation in the Plan:
As to Stock Options: Savage, Winner, Nidasio, Stokes,
Johler, Blackburn, Bardin, Sharp, Swanson, Williams,
Barletta, Shingler, Lombardo, Schmidt, Levering, and
Barker.
As to Cash Awards: Savage, Winner, Nidasio, Stokes,
Johler, Blackburn, Bardin, Sharp, Swanson, Williams,
Barletta, Pettit, Shingler, Stufflebeam, Lombardo,
Nicholas, Knowlton, Levering, Barker, Collins, Stamper,
Schmidt, Curtis, Fasan, Lowe, Mittermayer, Eickhoff,
Peiper, and Willoughby.
For purposes of allocation of the Executive portion of Cash Awards Pool
among Executives, the Company reserves the right from time to time and at any
time, by action of its Board of Directors, to designate one or more additional
persons as participants in the Executive Cash Award Pool, and upon such
designation, reference to Executives in regard to Cash Awards shall include such
persons.
<PAGE> 20
United Financial
Stock Option and Incentive Compensation Plan
Page 20
Exhibit B
Stock Options
Awards of Board Shares
The Board Shares are allocated to Board Members in accordance with the
following:
Clampitt, 7,682; Davis, 7,060; Esteva 1,923; Focardi 1,162;
Foreman 3,783; Irwin 7,618; MaCris 4,326; Norrie 6,436;
Petrini 564; Snell 3,421; and Wier 8,025 for a total of 52,000
Shares.
<PAGE> 21
United Financial
Stock Option and Incentive Compensation Plan
Page 21
Exhibit C
Stock Options
Awards of Executive Shares
The Executive Shares are allocated to Executives in accordance with the
following:
Savage 34,000; Winner 19,000; Nidasio 2,500; Stokes 12,500;
Johler 6,500; Blackburn 3,500; Bardin 9,000; Sharp 3,500;
Swanson 6,500; Williams 1,500; Barletta 500; Shingler 500;
Lombardo 1,500; Schmidt 1,000; Levering 1,000; and Barker
1,000 "for a total of 104,000 Shares.
The Committee shall allocate the Executive Shares, first to Incentive
Stock Options, to the extent permitted by the Plan, and then to Nonqualified
Stock Options.
<PAGE> 22
United Financial
Stock Option and Incentive Compensation Plan
Page 22
Exhibit D
Cash Award Allocation
NOTHING CONTAINED IN THIS EXHIBIT SHALL SERVE AS A REPRESENTATION OR
GUARANTEE BY THE COMPANY THAT ANY CASH AWARD WILL BE MADE TO ANY BOARD MEMBER OR
ANY PRESENT OR FUTURE EXECUTIVE, AS THE AMOUNT OF THE CASH AWARD POOL TO BE SET
UPON ANY CHANGE OF CONTROL IS DISCRETIONARY WITH THE BOARD OF DIRECTORS (SUBJECT
TO PLAN REQUIREMENTS AND LIMITATIONS); AND A CASH AWARD (IF AN EXCESS GOLDEN
PARACHUTE PAYMENT) MAY REQUIRE FURTHER APPROVAL OF THE STOCKHOLDERS, AS PROVIDED
IN THE PLAN.
EXCEPT AS PROVIDED IN THE PLAN RELATED TO THE PRIOR DEATH, RETIREMENT,
OR PERMANENT AND TOTAL DISABILITY OF A RECIPIENT, A RECIPIENT MUST NOT BE A
PARTY TO A TERMINATION PRIOR TO THE TIME OF THE CHANGE IN CONTROL.
Exhibit D-1; Executives:
Of the amount of a Cash Award Pool allocated to Executives, the amount
shall be allocated among Executives in accordance with the units allocated to
the Executive compared with the total number of units allocated to all
Executives.
Nineteen (19) Executive units are assigned by the Company for present
and future Executives employed by United Trust, (presently a department of
United Bank and Trust Company, but to be spun out as a separate Subsidiary) and
by Eickhoff, Pieper & Willoughby, Inc., a Subsidiary (collectively, the "Trust
and Eickhoff Executives"). Eighty-one (81) units are assigned for present and
future Company and Subsidiary Executives, exclusive of the Trust and Eickhoff
Executives. Units will be allocated among Executives at the time of the Change
of Control by the Board, in consideration of the Executive's service,
compensation level, responsibility and performance, as then evaluated by the
Board in its sole and absolute discretion.
By way of example and not limitation, as of November 1997, the Board
has tentatively approved the following Executive units, subject to future
adjustment among Executives, as well as dilution resulting from allocation of
additional units to persons who become future Executives.
Savage 18; Winner 12; Nidasio 3; Stokes 8; Johler 5; Blackburn
3; Bardin 7; Sharp 4; Swanson 6; Williams 2; Barletta 1;
Pettit 1; Shingler 1; Stufflebeam 1; Lombardo 2; Nicholas 1;
Knowlton 1; Levering 1; Barker 1; Collins
<PAGE> 23
United Financial
Stock Option and Incentive Compensation Plan
Page 23
1.5; Stamper 0.5; Schmidt 1; Curtis 3; Fasan 3; Lowe 1;
Mittermayer 3; Eickhoff 3; Peiper 3; and Willoughby 3.
Exhibit D-2; Board Members:
Of the amount of a Cash Award Pool allocated to Board Members, the
amount shall be allocated among Board Members in accordance with the units
allocated to the Board Member compared to the total number of units allocated to
all Board Members. Units are determined by measuring the compensation paid by
the Company to a Board Member from 1994 to the date a Change in Control occurs
compared to the total compensation paid by the Company to all Board Members
during the same time period, with each percentage-point equaling one unit.
By way of example and not limitation, as of November 1997, the Board
Members have the following current numbers of units.
Clampitt 14.8; Davis 13.6; Esteva 3.7; Focardi 2.2; Foreman
7.3; Irwin 14.7; MaCris 8.3; Norrie 12.4; Petrini 1.1;
Snell ,6.6; and Wier 15.4.
<PAGE> 1
Exhibit 10.2
TRUST DEPARTMENT STOCK OPTION PLAN
UNITED BANK AND TRUST COMPANY (the "Bank") and PINELLAS BANCSHARES CORP. (the
"Parent Corporation") adopt the following Stock Option Plan (the "Plan") for the
benefit of designated employees ("Participants") of Bank's Trust Department.
Stock options granted under the Plan are referred to as "Options."
1. EFFECTIVENESS OF GRANTS OF OPTIONS. Grants of Options under
this Plan shall be effective and made only if, and after, all
of the 75,000 Performance Shares authorized for delivery to
the Participants as Stockholders under the AGREEMENT AND PLAN
OF REORGANIZATION (the "Merger Agreement") by and between
Participants, Bank, Parent Corporation and Fiduciary Services
Corporation have, in fact, been entirely vested in the
Participants for delivery to Participants in accordance with
the terms and conditions of the Merger Agreement. The
definitions used in the Merger Agreement are incorporated into
this Plan and shall have the same meaning herein.
2. PARTICIPANTS. The following persons are designated as Participants in
the Plan:
a. WARD J. CURTIS, JR.
b. CHARLES O. LOWE
c. SUSAN STROUP MITTERMAYR
3. RATIO OF PARTICIPATION. The Participants shall participate in
this Plan, and any Options granted under this Plan, in the
following ratios:
<TABLE>
<S> <C>
a. WARD J. CURTIS, JR., 72%
b. CHARLES O. LOWE, 18%
c. SUSAN STROUP MITTERMAYR 10%
</TABLE>
In the event one or more of the Participants cease to be eligible to
participate because employment has terminated, or for any other reason,
the interest under the Plan of the remaining Participant, or
Participants, shall not increase.
4. TERM OF PLAN. This Plan shall terminate March 31, 2002.
5. OPTION SHARES. The shares of stock which are the subject of this Plan
are authorized but unissued common voting shares of the Parent
Corporation, $0.01 par value (the "Option Shares").
6. OPTION PRICE. The purchase price for each Option Share purchased upon
exercise of an Option granted under the Plan is One Cent ($0.01) per
Option Share.
7. TERM OF OPTION. Each Option granted under the Plan may only be
exercised after December 31, 1999, and shall terminate and expire to
the extent not exercised, or otherwise
<PAGE> 2
terminated under this Plan, upon the earlier of midnight December 31,
2005, or a date which is six (6) months following the date of the
Participant's death.
8. PARTICIPATION TERMINATION AND VESTING. Participation in the
Plan shall terminate for a Participant when that person is no
longer an Employee of Bank or Parent Corporation for any
reason, whether termination is with or without cause, or is
voluntary or involuntary. Options for a year shall be granted
as of December 31st of a year and shall be deemed to vest in
a Participant who is employed by Bank or Parent Corporation on
that December 31st. No Options shall be granted to, or deemed
vested in, any Participant who is not employed on December
31st of the applicable year.
9. TERMINATION OF OPTION IN THE EVENT OF COMPETITION. Any unexercised
Options shall terminate and expire before January 1, 2006 for each
Participant who breaches his or her "Covenants Against Competition"
contained in his or her Employment Agreement with Bank, whether such
breach occurs during or after the Participant's employment terminates.
10. TERMINATION OF PLAN AND UNEXERCISED OPTIONS UPON OCCURRENCE OF
OTHER EVENTS. The Plan and all unexercised Options shall
terminate, and Bank and Parent Corporation shall have no
further obligation to issue or deliver Option Shares to any
Participant, in the event (i) the Trust Department permanently
ceases doing business for any reason, including the sole and
absolute discretion of the Bank or Parent Corporation, (ii)
the Participants, or any of them, purchase the Trust
Department from Bank under the First Right of Refusal
Agreement provided participants under a separate agreement, or
otherwise, or (iii) the Trust Department is sold after the
First Right of Refusal Agreement vested in the Participants no
longer applies or is not exercised by any Participant.
11. GRANT OF OPTIONS.
a. Options shall not be granted for the calendar year 1995.
b. No Options shall be granted to the extent any Performance
Shares authorized to be issued under the Merger Agreement are
unissued, not vested, and not earned to be issued for a
particular year in accordance with the Merger Agreement.
c. The aggregate number of Option Shares that can be Optioned by
all Participants for calendar years 1996 through 1999 (subject
to the priority of Performance
2
<PAGE> 3
Shares) shall be determined in accordance with the following
formula:
i. Trust Department Net Earnings shall be determined for
the calendar year in question.
ii. The value of each outstanding Parent Share as of the
end of the calendar year (this value of Parent Shares
is hereafter referred to as the Value) shall:
(1) be determined as if Performance Shares and
Options to purchase Option Shares for the
year were not outstanding (however,
Performance Shares issued for a prior year,
and Option Shares as to which Options have
been exercised, shall be included as
outstanding Shares for subsequent years'
Values); and
(2) be based upon the independent appraisal of
the Parent Corporation, prepared for the
immediate prior calendar year-end, for use
by the Trustees of the Parent Corporation's
qualified Employee Stock Ownership Plan then
in effect (hereinafter referred to as ESOP);
however, if no ESOP is then in effect, the
Value shall be determined by arbitration
unless the Stockholders and Bank otherwise
agree.
(3) The Trust Department Net Earnings for the
calendar year for which a determination is
being made shall be divided by the Value to
determine the number of Performance Shares.
If all available Performance Shares have
been issued, Options may be granted and the
number of Option Shares available for
Options for the year under this Plan shall
be equal to 120% of the number of
Performance Shares determined by the same
formula. If insufficient Performance Shares
are available, the Option Shares shall be
determined on a pro rata basis, in
accordance with the examples that follow. If
the amount of Performance Shares or Options
Shares is zero or less, no Performance
Shares shall be delivered, and no Options
shall be issued for the year. By way of
examples:
(a) If the Trust Department Net Earnings for
a calendar year are $100,000 and the
3
<PAGE> 4
Value of each issued and outstanding Parent
Share, exclusive of Performance Shares and
Option Shares for the year, is $20.00, then
the Stockholders shall be distributed 5,000
Parent Shares for the year as Performance
Shares. No Options shall be granted.
(b) If all Performance Shares have been
issued in prior years, and the Trust
Department Net Earnings for a calendar year
are $100,000 and the Value of each issued
and outstanding Parent Share, is $20.00,
then the Stockholders shall be granted
Options for 6,000 Option Shares for the
year. (5,000 Performance Shares times 120%)
(c) If 73,000 Performance Shares were issued
for prior years, then the final 2,000
Performance Shares will be issued for the
current year and Options for 3,600 Option
Shares may be granted (60% of the potential
Option Shares, since 60% of the Net Earnings
is allocated to the determination of Option
Shares). If all Participants are eligible
for Options, the Option Shares will be
granted to them in the ratios provided. But,
if for example, Mr. Lowe has retired, he
shall receive no Options, and the Options
for 2,952 Option Shares shall be granted to
the remaining Participants.
d. Options for Option Shares, if any, for 1999 (subject to the
requirement as to the priority of Performance Shares), shall
be granted in accordance with the provisions of this
paragraph:
i. If the Trust Department Net Earnings for 2000 shall
be equal to, or greater than, Trust Department Net
Earnings for 1999, fifty percent (50%) of the 1999
Option Shares eligible for Option to Stockholders
shall be Optioned to the Stockholders on March 15,
2001.
ii. If the Trust Department Net Earnings for 2001 shall
be equal to, or greater than, Trust Department Net
Earnings for 1999, fifty percent (50%) of the 1999
Option Shares assignable for Option to Stockholders
shall be Optioned to the Stockholders on March 15,
2002.
4
<PAGE> 5
iii. If the Trust Department Net Earnings for either
2000 or for 2001 are less than Trust Department Net
Earnings for 1999, the number of Option Shares for
1999 to be optioned to the Participants shall be
based upon dividing the average Value (for the
years 1999, 2000 and 2001) into the average Trust
Department Net Earnings for the years 1999, 2000
and 2001. The Option Shares so determined shall be
optioned to the Participants as of March 15, 2002
from the balance of the 1999 Option Shares eligible
for Option to Stockholders.
e. For purposes of determining the annual amount of Option Shares
to be Optioned in the aggregate to the Participants, the Trust
Department Net Earnings, shall be determined in accordance
with the following:
i. The net "after-tax" income of the Trust Department
for the year shall be calculated as if the Trust
Department was operated independent of Bank, with any
investment advisory subsidiary of the Parent
Corporation (or Bank) operating primarily for or as
part of the Trust Department as a consolidated entity
for purposes of calculations.
(1) The Parent Corporation is negotiating for,
and contemplates acquiring, an investment
advisory subsidiary, as heretofore noted.
(2) The net after-tax income of the investment
advisory subsidiary, if acquired, shall be
consolidated with the net after-tax earnings
of the Trust Department for purposes of
determination of Trust Department Net
Earnings under this Plan.
ii. The Trust Department Net Earnings shall be based on
net after-tax earnings, as reported for financial
statement purposes, and as consolidated in
accordance with this Plan. Trust Department Net
Earnings shall otherwise be determined by
application of generally accepted accounting
principles consistently applied, and shall, for
each year, reflect and be reduced by loss carry-
forwards from years after December 31, 1995 (losses
shall not be carried back for this purpose), as
incurred by the Trust Department and subsidiary
included for purposes of the calculation. In
making the calculation, Trust Department and
investment advisory subsidiary revenues shall be
charged with all accrued direct costs and also
reasonable and necessary charges
5
<PAGE> 6
assessed the Trust Department or investment advisory
subsidiary for services and facilities provided by
it, or allocated to the Trust Department or
investment advisory subsidiary, including, but not
limited to, Parent Corporation charges, services of
independent accountants and attorneys, preparation of
tax returns and reports, space, equipment, internal
auditors, assigned and shared employees, fringe
benefits, insurance, interest on loans and capital
provided, security, utilities, appropriate income tax
burden, and other services or facilities, which in
good business practice, upon advice of the
independent accountants of Bank and Parent
Corporation, should be allocated to the Trust
Department and investment advisory subsidiary
included in this calculation for the determination of
Trust Department Net Earnings. The decision of the
independent accountants, unless patently erroneous or
fraudulent, shall bind the parties.
iii. The total of the net after-tax earnings of the
Trust Department and the investment advisory
subsidiary, if any, consolidated for the year when
determining Trust Department Net Income shall be
reduced by the amount of the consolidated net
after-tax earnings for that year used in
determining the number of Parent Corporation Shares
earned under any stock option plan or agreement of
Parent Corporation, Bank, or any investment
advisory subsidiary, for a person who is not a
Stockholder. The balance of the consolidated net
after-tax earnings of the Trust Department and
investment advisory subsidiary are Trust Department
Net Earnings for the year.
(1) For this purpose, "stock option" includes
but is not limited to qualified or
non-qualified stock options or plans, stock
purchase plans, or similar plans, contracts
or agreements, entitling one or more persons
to acquire, or awarding one or more persons,
Shares of Parent Corporation stock under
arrangements and in accordance with formulas
related to Trust Department Net Earnings as
defined herein. Stock options include such
plans or agreements whether or not the right
or option to acquire Shares is immediately
exercisable or vested, or thereafter
terminates, is forfeited or divested, and
whether or not the option is granted in
connection with employment or otherwise.
6
<PAGE> 7
(2) By way of example, assume the net after-tax
earnings of the Trust Department for a year
are $100,000 and the net after-tax earnings
of the investment advisory subsidiary for
the same year are $75,000. Assume further
that of the total of $175,000 of
consolidated net after-tax earnings of the
Trust Department and the investment advisory
subsidiary, a portion of the net after-tax
earnings for the year are used in the
calculation of the numbers of Shares earned
under an existing or new stock option.
Assume that the option has been granted to a
person employed in the Trust Department who
is not a Stockholder. Assume the number of
Shares earned that year by the person under
the stock option is based upon $25,000 of
that year's net consolidated after-
tax earnings, as calculated above. Assume
that the Value of a Share is $25 and the
person earns options to acquire 1,000
Shares, regardless of when exercisable. For
purposes of computation of Option or
Performance Shares, $150,000 of consolidated
net after-tax earnings remain and the
remainder is Trust Department Net Earnings
for the year.
iv. The Trust Department or investment advisory
subsidiary may from time-to-time purchase services or
products from Bank, Parent Corporation or another
subsidiary of Parent Corporation or Bank. Trust
Department may also purchase investment advisory
services from the investment advisory subsidiary, if
any is acquired.
v. Affiliated purchases shall be at fair, reasonable and
competitive prices.
vi. The Trust Department may from time-to-time elect to
purchases services and products from independent
sources, even though similar services or products
are available from or through Parent Corporation,
Bank or any subsidiary. (Purchases of Trust
Department from any investment advisory subsidiary
are consolidated for purposes of determining Trust
Department Net Income.)
vii. Trust Department service and product purchasing
decisions shall be in the discretion of Trust
Department's senior management, consistent with the
authority granted by the Board of Directors of Bank
and Parent Corporation, with the objective of
7
<PAGE> 8
obtaining services and products at competitive
prices available consistent with the requirements
of the Trust Department.
viii. In determining whether services and products
should, at any time, or from time to time,
be purchased for Trust Department from Bank,
Parent Corporation, or other affiliate, or
from independent third-parties, the Board of
Directors of Bank and Parent Corporation
shall not unreasonably withhold approval of
purchases from unaffiliated third parties.
f. Options for Option Shares based upon Earnings for a calendar
year shall be effective as of December 31st of that year, and
shall be granted as of that date to Participants then eligible
for such Options. Options shall be evidenced by an "Option
Grant Certificate" prepared by, and delivered by, Bank to each
eligible Participant as of that date. The Certificate shall
incorporate the terms of this Plan and shall separately state
the number of Option Shares as to which it applies, the
expiration date of the particular Option, the Price of the
Option Shares, and the notification requirements that apply to
any exercise of the Option.
g. In no event will Options to Option Shares be granted until all
Performance Shares have been earned and issued to the
Participants in their capacities as former Stockholders of
Fiduciary Services. In no event will the same Trust Department
Net Earnings be used for the measure of Performance Shares or
Option Shares.
12. OPTION EXERCISE BONUS. Bank has been advised that, upon
exercise of an Option by a Participant, Bank (and Parent
Corporation on a consolidated basis) will benefit from a
compensation deduction (to the extent of reasonable
compensation) and the Participants and Bank have been advised
that the Participants will be taxed as earned income upon any
value of the Option Shares purchased in excess of the Option
Price. To the extent of the Parent Corporation's and Bank's
tax benefit from its compensation deduction, Bank will pay a
bonus to the Participant exercising the Option. By way of
example, assume that a Participant exercises an option to
purchase 5,000 Option Shares at a time Option Shares have a
market value of $20 per share. Further assume the Bank is in
a 35% top margin federal corporate income tax bracket. The
Bank will receive a compensation deduction of $100,000 upon
exercise of an Option. The Bank shall pay the Participant
exercising the Option a bonus of $35,000.
8
<PAGE> 9
13. TRANSFER. No Option may be transferred by a Participant
except by last will and testament, or the laws of descent and
distribution, and may be exercised only by the Participant
during his or her lifetime. More particularly, but without
limiting the generality of the foregoing, no Option may be
assigned, transferred (except as noted herein), pledged or
hypothecated in any way (whether by operation of law or
otherwise), and shall not be subject to execution, attachment,
or similar process. Any attempted assignment, transfer,
pledge, hypothecation, or other disposition of the Option
contrary to the provisions hereof, and the levy of any
attachment or similar process on an Option, shall be null and
void and without effect.
14. DEATH OF PARTICIPANT. Subject to the terms of this Agreement, in the
event of a Participant's death an unexpired Option of that Participant
may be exercised within the six (6) month period following death by the
legal representatives of the estate of the Participant or by the person
or persons to whom the Participant's rights under the Option shall pass
by will or the laws of descent and distribution.
15. TOTAL OR PARTIAL EXERCISE. Options may be exercised either at one time
as to the total number of the applicable Shares or from time to time as
to any portion thereof.
16. RECAPITALIZATION ADJUSTMENT. Anything contained herein to the
contrary notwithstanding, the number of shares subject to each
of the Options contained herein shall be equitably adjusted in
the event of any recapitalization, merger, reorganization,
reclassification of stock, consolidation, split-up, stock
dividend, or other change in the corporate structure of
affecting the Corporation's common stock as presently
constituted.
17. PURCHASE FOR INVESTMENT ONLY. Each Participant shall
represent and agree upon the exercise of an Option, and each
other person who, pursuant to this Agreement, shall exercise
the Option in whole or in part shall be required to represent
and agree at the time of exercise, that any and all Shares of
common stock purchased pursuant to the Option will be
purchased for investment and not with a view to the
distribution or resale thereof.
18. REGISTRATION OF SHARES. Shares issued upon exercise of an
Option shall be unregistered shares within the meaning of
applicable federal and state securities laws, and neither Bank
nor the Parent Corporation shall have an obligation to
register such Shares or integrate them in any public offering
of securities made by the Parent Corporation. If, however, at
the time an Option is exercised, the Parent Corporation
9
<PAGE> 10
is in the process of registering other shares of stock or securities
for public distribution, the Parent Corporation may, in its discretion,
defer the issuance of Shares to the Participant until the securities
being registered have been distributed in accordance with the Parent
Corporation's plan of distribution, or, in its discretion, include the
Shares in the registration.
19. NOTICE OF EXERCISE; ISSUANCE OF CERTIFICATES. Subject to the
terms and conditions of this Agreement, an Option may be
exercised by written notice to the Bank. Such notice shall
state the election to exercise the Option and the number of
Shares in respect of which it is being exercised, shall
contain a representation and agreement by the person or
persons so exercising the Option that such Shares are being
purchased for investment and not with a view to the
distribution or resale thereof, and shall be signed by the
person or persons exercising the Option. The certificate or
certificates representing the Shares shall be issued and
delivered by the Corporation as soon as practicable after
receipt of the notice and payment. Such certificate or
certificates shall be registered in the name of the
Participant (or the Participant's successor in interest, if
the Participant is deceased), or, if the Participant shall so
request in the notice exercising the Option, shall be
registered in the name of the Participant and another person
jointly, with right of survivorship (or as tenants by the entireties,
if the person is the Participant's spouse), and shall be delivered to
or on the written order of the person or persons exercising the Option.
In the event the Option is being exercised by the successor in interest
of the Participant, the notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option.
20. PAYMENT FOR SHARES UPON AN OPTION EXERCISE. Upon the exercise of an
Option, and delivery of the notice of exercise, such notice shall be
accompanied by a certified or bank cashier's check payable to the order
of the Bank for the full purchase price of the Shares in respect of
which the Option is being exercised.
21. NO TRUST CREATED. Nothing contained herein, and no action taken
pursuant to the provisions hereof by either party hereto, shall create,
nor be construed to create, a trust of any kind or a fiduciary
relationship between the Participant, or any other person, and the Bank
or the Parent Corporation.
22. NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed
to be a contract of employment, or any other business relationship, in
any capacity, or for any term of
10
<PAGE> 11
years, nor as conferring upon the Participant the right to continue
a business relationship with the Parent Corporation, in any capacity.
23. NO SHAREHOLDER RIGHTS. This Agreement does not entitle the Participant
to any dividend, distribution, or any voting right, or other rights of
the Parent Corporation's shareholders with respect to the Shares prior
to the date the Option is exercised and the Shares are purchased.
24. AMENDMENT. This Plan may not be amended, altered or modified, except by
a written instrument signed by the Bank, the Parent Corporation and the
Participants, or their respective successors, and may not be otherwise
terminated except as provided herein.
25. INUREMENT. This Plan shall be binding upon and inure to the benefit of
the Bank, the Parent Corporation and the successors and assigns of
each, and each Participant, his or her successors, heirs, executors,
administrators and beneficiaries.
26. NOTICES. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan shall be in writing, and shall
be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by
United States certified mail, postage prepaid, addressed to such
party's last known address as shown on the records of the Parent
Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand. Notice sent to the Parent Corporation or
Bank shall be sent to the President, and a copy thereof shall be sent
to the Treasurer.
27. GOVERNING LAW. This Plan, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the State of Florida.
28. DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND ADMINISTRATION.
a. CLAIM. If the Optionee, or any other person, believes
that he or she is being denied a benefit to which he or
she is entitled under the Plan (hereinafter referred to
as a "Claimant") may file a written request for such
benefit with the Bank, setting forth his or her claim.
The request must be addressed to the Chairman of the
Board of the Bank at its then principal place of
business.
b. CLAIM DECISION. Upon receipt of a claim, the Bank shall advise
the Claimant that a reply will be forthcoming within ninety
(90) days and shall, in fact,
11
<PAGE> 12
deliver such reply within such period. The Bank may, however,
extend the reply period for an additional ninety (90) days for
reasonable cause.
If the claim is denied in whole or in part, the Bank shall
adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:
(1) The specific reason or reasons for such
denial;
(2) The specific reference to pertinent
provisions of this Agreement on which such
denial is based;
(3) A description of any additional material or
information necessary for the Claimant to
perfect his or her claim and an explanation
why such material or such information is
necessary;
(4) Appropriate information as to the steps to
be taken if the Claimant wishes to submit
the claim for review; and
(5) The time limits for requesting a review
under subsection c. and for review under
subsection d. hereof.
c. REQUEST FOR REVIEW. Within sixty (60) days after the receipt
by the Claimant of the written opinion described
above, the Claimant may request in writing that the Board of
Directors review the determination of the Bank. Such request
must be addressed to the Secretary of the Bank, or to the
Board of Directors, at the then principal place of business of
the Bank. The Claimant or his or her duly authorized
representative may, but need not, review the pertinent
documents and submit issues and comments in writing for
consideration by the Bank. If the Claimant does not request a
review of the Bank's determination by the Board of Directors
of the Bank within such sixty (60) day period, he or she shall
be barred and estopped from challenging the Bank's
determination.
d. REVIEW OF DECISION. Within sixty (60) days after the
Board of Directors' receipt of a request for review, the
Board will review the Bank's determination. After
considering all materials presented by the Claimant, the
Board will render a written opinion, written in a manner
calculated to be understood by the Claimant,
12
<PAGE> 13
setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions of
this Agreement on which the decision is based. If special
circumstances require that the sixty (60) day time period be
extended, the Board will so notify the Claimant and will
render the decision as soon as possible, but no later than one
hundred twenty (120) days after receipt of the request for
review.
29. ARBITRATION. In the event of any dispute related to this Plan
between the parties, or in the event of any breach arising out of or
related to this Plan, which, in either case, is not resolved by the
Claims procedure, the dispute or breach shall be resolved by
arbitration in accordance with the Florida Arbitration Code then
pertaining. The prevailing party shall be reimbursed costs of
arbitration, including reasonable attorney fees through all
proceedings.
I certify the above plan was adopted by the Board of Directors of Pinellas Bank
and Trust Company on ___________________,1995, as part of its approval of the
Agreement and Plan of Reorganization (Forward Triangular Merger), dated July 18,
1995, to which it is an exhibit.
September 29, 1995
------------------------------
Authorized Signature
13
<PAGE> 1
Exhibit 10.3
EPW Stock Option Plan
Eickhoff, Pieper & Willoughby, Inc. ("EPW") and PINELLAS BANCSHARES
CORPORATION, (the "Parent Corporation") adopt the following Stock Option Plan
(the "Plan") for the benefit of designated employees ("Participants") of EPW.
Stock options granted under the Plan are referred to as "Options."
1. PARTICIPANTS. The following persons are designated as initial
Participants in the Plan:
(A) William A. Eickhoff ("Eickhoff")
(B) John H. Pieper ("Pieper")
(C) John P. Willoughby ("Willoughby")
Additional employees may be participants in the Plan with the approval
of the majority vote of Eickhoff, Pieper and Willoughby and of the Board of
Directors of EPW (the "Board").
2. RATIO OF PARTICIPATION. The Participants shall participate in this
Plan, and any Options granted under this Plan in ratios to be
determined by the Board of Directors of EPW (the "Board") provided,
however, that "Compensation Committee" (as set forth in the Sale of
Stock Agreement between Seller and Parent Corporation) shall make
recommendations to the Board concerning the granting of options to the
Participants. The Board shall grant and allocate all Options under this
Plan among the Participants, provided, however, that the allocations
for any Calendar year may be in any amount, from zero to 100%.
3. TERM OF PLAN. This Plan shall terminate March 31, 2002.
4. OPTION SHARES. The shares of stock which are the subject of this Plan
are authorized but unissued common voting shares of the Parent
Corporation, $0.01 par value (the "Option Shares").
5. OPTION PRICE. The purchase price for each Option Share purchased upon
exercise of an Option granted unless the Plan is One Cent ($0.01) per
Option Share.
6. TERM OF OPTION. Each Option granted under the Plan may only be
exercised after December 31, 1999, and shall terminate and expire to
the extent not exercised, or otherwise terminated under this Plan, upon
the earlier of midnight December 31, 2005, or a date which is six (6)
months following the date of the Participant's death.
7. PARTICIPATION TERMINATION AND VESTING. Participation in the Plan shall
terminate for a Participant when that person is no longer an employee
of EPW, Parent Corporation or any affiliate of Parent Corporation for
any reason, whether termination is with or without cause, or is
voluntary or involuntary. Options for a year shall be granted as of
December 31st of a year and shall be deemed to vest in a Participant
who is employed by EPW, Parent Corporation or any affiliate of Parent
Corporation on that December 31st. No Options shall be granted to, or
deemed vested in, any Participant who is not employed on December 31st
of the applicable year.
8. TERMINATION OF OPTION IN THE EVENT OF COMPETITION. Any unexercised
Options shall terminate and expire before January 1, 2006 for each
Participant who breaches his or her "Covenants Against Competition"
contained in his or her Employment Agreement with EPW or contained in
the separate Non-Competition Agreement executed by the Participant,
whether such breach occurs during or after the Participant's
employment.
9. TERMINATION OF PLAIN AND UNEXERCISED OPTIONS UNDER OCCURRENCE OF
OTHER EVENTS. The Plan and all unexercised Options shall terminate, and
EPW and Parent Corporation shall have no further obligation to issue or
deliver Option Shares to any Participant, in the event (i) EPW
permanently ceases doing business for any reason, including the sole
and absolute discretion of EPW or
<PAGE> 2
Parent Corporation, (ii) the Participants, or any of them, purchase EPW
from Parent Corporation under the First Right of Refusal Agreement
provided participants under a separate agreement, or otherwise, or
(iii) EPW is sold after the First Right of Refusal Agreement vested in
the Participants no longer applies or is not exercised by any
Participant.
10. GRANT OF Options.
(A) Options shall not be granted for the calendar year 1995.
(B) Trust Department Net Earnings shall be calculated in
accordance with paragraph 10(E). As used in this Plan the term
"Trust Department" shall mean the trust business operated by
United Bank and Trust Company (the "Bank"), a subsidiary of
Parent Corporation, and by EPW. The term "trust business"
shall include, but not be limited to, traditional trust and
fiduciary services, money management services, custody
services, and investment management services (such as those
performed by EPW), and investment and accounting and
performance tracking services but shall not be deemed to
include any activity or service which is included within the
term "Commercial Banking Business" as engaged in by state
chartered banks which do not have trust powers.
(C) The aggregate number of Option Shares that can be Optioned by
all Participants for calendar years 1996 through 1999 shall be
determined in accordance with the following formula:
(1) Trust Department Net Earnings shall be determined
for the calendar year in question.
(2) The value of each outstanding Parent Share as of
the end of the calendar year (this value of Parent
Shares is hereafter referred to as the Value) shall:
(a) be determined as if Options to purchase
Option Shares for the year were not
outstanding (however, Option Shares as to
which Options have been exercised, shall be
included as outstanding Shares for
subsequent years' Values); and
(b) be based upon the independent appraisal of
the Parent Corporation, prepared for the
immediate prior calendar year-end, for use
by the Trustees of the Parent Corporation's
qualified Employee Stock Ownership Plan then
in effect (hereinafter referred to as ESOP);
however, if no ESOP is then in effect, the
Value shall be determined by arbitration
unless the Participants and Parent
Corporation otherwise agree.
(3) The Trust Department Net Earnings for the calendar
year for which a determination is being made shall be
divided by the Value to determine the number of
Shares of stock (the "Total Shares").
(4) The Total Shares shall be multiplied by 35% to
determine the number of Option Shares are to be
granted to Participants under this Plan.
(D) Options for Option Shares, if any, for 1999, shall be granted
in accordance with the provisions of this paragraph:
(1) If the Trust Department Net Earnings for 2000 shall
be equal to, or greater than, Trust Department Net
Earnings for 1999, fifty percent (50%) of the 1999
Option Shares eligible for Option to Stockholders
shall be Optioned to the Participants on March 15,
2001.
<PAGE> 3
(2) If the Trust Department Net Earnings for 2001 shall
be equal to, or greater than, Trust Net Earnings for
1999, fifty percent (50%) of the 1999 Option Shares
assignable for Option to Stockholders shall be
Optioned to the Participants on March 15, 2002.
(3) If the Trust Department Net Earnings for either 2000
or 2001 are less than Trust Department Net Earnings
for 1999 for purposes of the number of options to be
granted under Paragraph 10(C) the value of each
outstanding Parent Share, shall be based upon
dividing the average Value (for the years 1999, 2000
and 2001) into the average Trust Department Net
Earnings for the years 1999, 2000 and 2001. The
Option Shares so determined shall be optioned to the
Participants as of March 15, 2002 from the balance of
the 1999 Option Shares eligible for Option to
Participants.
(E) For purposes of determining the annual amount of Option Shares
to be Optioned in the aggregate to the Participants, the Trust
Department Net Earnings, which shall be equal to the
"after-tax" net income of the Trust Department, shall be
determined in accordance with the following:
(1) The net "after-tax" income of the Trust Department
for the year shall be calculated as if the Trust
Department was operated independent of Bank, with EPW
operating primarily for or as part of the Trust
Department as a consolidated entity for purposes of
calculations. The net after-tax income of EPW shall
be consolidated with the net after-tax income of the
Trust Department for purposes of determination of
Trust Department Net Earnings under this Section.
(2) The Trust Department Net Earnings shall be based on
the after tax earnings, as reported for financial
statement purposes, and as consolidated in accordance
with this Section. Trust Department Net Earnings
shall otherwise be determined by application of
generally accepted accounting principles consistently
applied, and shall, for each year, reflect and be
reduced by loss carry-forwards from years after 1995
(losses shall not be carried back for this purpose).
In making the calculation, Trust Department and EPW
revenues shall be charged with all accrued direct
costs and also reasonable and necessary charges
assessed Trust Department or EPW by any affiliate or
subsidiary of the Parent Corporation for services and
facilities provided by it, or allocated to Trust
Department or EPW, including, but not limited to,
Parent Corporation charges, services of independent
accountants and attorneys, preparation of tax returns
and reports, space, equipment, internal auditors,
assigned and shared employees, fringe benefits,
insurance, interest on loans and capital provided,
security, utilities, appropriate income tax burden,
and other services or facilities, which in good
business practice, upon advice of the independent
accountants of Parent Corporation, should be
allocated to Trust Department and EPW in the
determination of Trust Department Net Earnings. The
decision of the independent accountants, unless
patently erroneous or fraudulent, shall bind the
parties.
(F) The Trust Department or EPW may from time-to-time purchase
services or products from Bank, Parent Corporation or another
subsidiary of Parent Corporation or Bank.
(1) Affiliated purchases shall be at fair, reasonable
and competitive prices.
(2) The Trust Department or EPW may from time-to-time
elect to purchase services and products from
independent sources, even though similar services or
products are available from or through Parent
Corporation, Bank or any subsidiary. (Purchases of
Trust Department from any investment advisory
subsidiary are consolidated for purposes of
determining Trust Department Net Income.)
<PAGE> 4
(3) Trust Department or EPW service and product
purchasing decisions shall be in the discretion of
Trust Department's or EPW's senior management,
consistent with the authority granted by the Board of
Directors of Bank and Parent Corporation, with the
objective of obtaining services and products at
competitive prices available consistent with the
requirements of the Trust Department or EPW.
(4) In determining whether services and products should,
at any time, or from time to time, be purchased from
Trust Department or EPW from Bank, Parent
Corporation, or other affiliate, or from independent
third-parties, the Board of Directors of Bank and
Parent Corporation shall not unreasonably withhold
approval of purchases from unaffiliated third
parties.
(G) Options for Option Shares based upon Earnings for a calendar
year shall be effective as of December 31st of that year, and
shall be granted as of that date to Participants then eligible
for such Options. Options shall be evidenced by an "Option
Grant Certificate" prepared by, and delivered by, EPW to each
eligible Participant as of that date. The Certificate shall
incorporate the terms of this Plan and shall separately state
the number of Option Shares as to which it applies, the
expiration date of the particular Option, the Price of the
Option Shares, and the notification requirements that apply to
any exercise of the Option.
11. OPTION EXERCISE BONUS. EPW has been advised that, upon exercise of
an Option by a Participant, Parent Corporation on a consolidated basis
will benefit from a compensation deduction (to the extent of reasonable
compensation) and the Participants and EPW have been advised that the
Participants will be taxed as earned income upon any value of the
Option Shares purchased in excess of the Option Price. To the extent of
the Parent Corporation's and EPW's tax benefit from its compensation
deduction, EPW will pay a bonus to the Participant exercising the
Option. By way of example, assume that a Participant exercises an
option to purchase 5,000 Option Shares at a time Option Shares have a
market value of $20 per share. Further assume Parent Corporation is in
a 35% top margin federal corporate income tax bracket. Parent
Corporation will receive a compensation deduction of $100,000 upon
exercise of an Option. EPW or Parent Corporation shall pay the
Participant exercising the Option a bonus of $35,000. Any compensation
deduction and any bonus paid to Participants under this section shall
not be charged against the Trust Department Net Earnings.
12. TRANSFER. No Option may be transferred by a Participant except by
last will and testament, or the laws of descent and distribution, and
may be exercised only by the Participant during his or her lifetime.
More particularly, but without limiting the generality of the
foregoing, no Option may be assigned, transferred (except as noted
herein), pledged or hypothecated in any way (whether by operation of
law or otherwise), and shall not be subject to execution, attachment,
or similar process. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option contrary to the
provisions hereof, and the levy of any attachment or similar process on
an Option, shall be null and void and without effect.
13. DEATH OF PARTICIPANT. Subject to the terms of this Agreement, in the
event of a Participant's death an unexpired Option of that Participant
may be exercised within the six (6) month period following death by the
legal representatives of the estate of the Participant or by the person
or persons to whom the Participant's rights under the Option shall pass
by will or the laws of descent and distribution.
14. TOTAL OR PARTIAL EXERCISE. Options may be exercised either at one time
as to the total number of the applicable Shares or from time to time as
to any portion thereof.
15. RECAPITALIZATION ADJUSTMENT. Anything contained herein to the contrary
notwithstanding, the number of shares subject to each of the Options
contained herein shall be equitably adjusted in the event of any
recapitalization, merger, reorganization, reclassification of stock,
consolidation, split-up,
<PAGE> 5
stock dividend, or other change in the corporate structure of affecting
the Parent Corporation's common stock: as presently constituted.
16. PURCHASE FOR INVESTMENT ONLY. Each Participant shall represent and
agree upon the exercise of an Option, and each other person who,
pursuant to this Agreement, shall exercise the Option in whole or in
part shall be required to represent and agree at the time of exercise,
that any and all Shares of common stock purchased pursuant to the
Option will be purchased for investment and not with a view to the
distribution or resale thereof.
17. REGISTRATION OF SHARES. Shares issues upon exercise of an Option
shall be unregistered shares within the meaning of applicable federal
and state securities laws, and neither EPW nor the Parent Corporation
shall have an obligation to register such Shares or integrate them in
any public offering of securities made by the Parent Corporation. If,
however, at the time an Option is exercised, the Parent Corporation is
in the process of registering other shares of stock or securities for
public distribution, the Parent Corporation may, in its discretion,
transfer the issuance of Shares to the Participant until the securities
being registered have been distributed in accordance with the Parent
Corporation's plan of distribution, or, in its discretion, include the
Shares in the registration.
18. NOTICE OF EXERCISE, ISSUANCE OF CERTIFICATES. Subject to the terms
and conditions of this Agreement, an Option may be exercised by written
notice to the Bank such notice shall state the election to exercise the
Option and the number of Shares in respect of which it is being
exercised, shall contain representation and agreement by the person or
persons so exercising the Option that such shares are being purchased
for investment and not with a view to the distribution or resale
thereof, and shall be signed by the person or persons existing the
Option. The certificate or certificates representing the Shares shall
be issued and delivered by the Parent Corporation as soon as
practicable after receipt of the notice and payment. Such certificate
or certificates shall be registered in the name of the Participant (or
the Participant's successor in interest, if the Participant is
deceased), or, if the Participant shall so request in the notice
exercising the Option, shall be registered in the name of the
Participant and another person jointly, with right of survivorship (or
as tenants by the entireties, if the person is the Participant's
spouse), and shall be delivered to or on the written order of the
person or persons exercising the Option. In the event the Option is
being exercised by the successor in interest of the Participant, the
notice shall be accompanied by appropriate proof of the right of such
person or persons to exercise the Option.
19. PAYMENT FOR SHARES UPON AN OPTION EXERCISE. Upon the exercise of an
Option, and delivery of the notice of exercise, such notice shall be
accompanied by a certified or bank cashier's check payable to the order
of the Bank for the full purchase price of the Shares in respect of
which the Option is being exercised.
20. NO TRUST CREATED. Nothing contained herein, and no action taken
pursuant to the provisions hereof by either party hereto, shall create,
nor be construed to create, a trust of any kind or a fiduciary
relationship between the Participant, or any other person, and EPW or
the Parent Corporation.
21. NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed
to be a contract of employment, or any other business relationship, in
any capacity, or for any term of years, nor as conferring upon the
Participant the right to continue a business relationship with the
Parent Corporation, in any capacity.
22. NO SHAREHOLDER RIGHTS. This Agreement does not entitle the Participant
to any dividend, distribution, or any voting right, or other rights of
the Parent Corporation' shareholders with respect to the Shares prior
to the date the Option is exercised and the Shares are purchased.
<PAGE> 6
23. AMENDMENT. This Plan may not be amended, altered or modified, except by
a written instrument signed by EPW, the Parent Corporation and the
Participants, or their respective successors, and may not be otherwise
terminated except as provided herein.
24. INUREMENT. This Plan shall be binding upon and inure to the benefit of
the Bank, the Parent Corporation and the successors and assigns of
each, and each Participant, his or her successors, heirs, executors,
administrators and beneficiaries.
25. NOTICES. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan shall be in writing, and shall
be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by
United States certified mail, postage prepaid, addressed to such
party's last known address as shown on the records of the Parent
Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand. Notice sent to the Parent Corporation or
Bank shall be sent to the President, and a copy thereof shall be sent
to the Treasurer.
26. GOVERNING LAW. This Plan, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the
State of Florida.
27. DETERMINATION OF BENEFITS, CLAIMS, PROCEDURE AND ADMINISTRATION.
(A) Claim. If the Optionee, or any other person, believes that he
or she is being denied a benefit to which he or she is
entitled under the Plan (hereinafter referred to as a
Claimant) may file a written request for such benefit with
EPW, setting forth his or her claim. The request must be
addressed to the Chairman of the Board of EPW at its then
principal place of business.
(B) Claim Decision. Upon receipt of a claim, EPW shall advise the
Claimant that a reply will be forthcoming within ninety (90)
days and shall, in fact, deliver such reply within such
period. EPW may, however, extend the reply period for an
additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, EPW shall adopt a
written opinion, using language calculated to be understood by
the Claimant, setting forth:
(1) The specific reason or reasons for such denial;
(2) The specific reference to pertinent provisions of
this Agreement on which such denial is based;
(3) A description of any additional material or
information necessary for the Claimant to perfect his
or her claim and an explanation why such material or
such information is necessary;
(4) Appropriate information as to the steps to be
taken if the Claimant wishes to submit the claim for
review: and
(5) The time limits for requesting a review under
subsection c. and for review under subsection d.
hereof.
(C) Request for Review. Within sixty (60) days after the receipt
by the Claimant of the written opinion described above, the
Claimant may request in writing that the Board of Directors
review the determination of EPW. Such request must be
addressed to the Secretary of EPW, or to the Board of
Directors, at the then principal place of business of EPW. The
Claimant or his or her duly authorized representative may, but
need not, review the pertinent documents
<PAGE> 7
and submit issues and comments in writing for consideration by
EPW. If the Claimant does not request a review of EPW's
determination by the Board of Directors of EPW within such
sixty (60) day period, he or she shall be barred and estopped
from challenging EPW's determination.
(D) Review of Decision. Within sixty (60) days after the Board of
Directors' receipt of a request for review, the Board will
review EPW's determination. After considering all materials
presented by the Claimant, the Board will render a written
opinion, written in a manner calculated to be understood by
the Claimant, setting forth the specific reasons for the
decision and containing specific references to the pertinent
provisions of this Agreement on which the decision is based.
If special circumstances require that the sixty (60) day time
period be extended, the Board will so notify the Claimant and
will render the decision as soon as possible, but no later
than one hundred twenty (120) days after receipt of the
request for review.
28. ARBITRATION. In the event of any dispute related to this Plan between
the parties, or in the event of any breach arising out of or related to
this Plan, which, in either case, is not resolved by the Claims
procedure, the dispute or breach shall be resolved by arbitration in
accordance with the Florida Arbitration Code then pertaining. The
prevailing party shall be reimbursed costs of arbitration, including
reasonable attorney fees through all proceedings.
<PAGE> 8
ADDENDUM TO PARAGRAPH 15. Life Insurance.
Employment Agreement for: John H. Pieper
Rights with Respect to Policies
<TABLE>
<CAPTION>
Policy Death Benefit Rights
<S> <C> <C>
Mass Mutual 7 041 733 $ 271,602 United will pay premiums during
term of employment.
Pieper has right to take
at termination.
Mass Mutual 7 167 869 $ 300,000 United will pay premiums during
term of employment and has right
to replace with policy with same
death benefit.
Pieper has right to take if
United chooses to replace.
Mass Mutual 8 940 620 $ 200,000 Policies will be terminated
Mass Mutual 6 750 334 $ 304,752* effective 2/1/96 unless Pieper
Mass Mutual 7 447 789 $ 200,000 elects to take personally.
Mass Mutual 8 939 820 $ 150,000
</TABLE>
*Note that this policy has a cash value of about $ 10,000, which Pieper has
right to take and will be taxable to him.
In addition, United will provide Pieper with $ 345,000 of coverage available
under the company group plan which when added to the first two policies above (7
041 733 and 7 167 869) will provide total coverage of $916,602.
<PAGE> 1
Exhibit 10.4
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made and entered into
by and among EICKHOFF, PIEPER, & WILLOUGHBY, INC., a Florida corporation,
("EPW"), WILLIAM A. EICKHOFF, ("WAE"), JOHN P. WILLOUGHBY ("JPW"), JOHN H.
PIEPER ("JHP"), WARD J. CURTIS, JR. ("WJC"), CHARLES O. LOWE ("COL"), SUSAN S.
MITTERMAYR ("SSM"), UNITED BANK AND TRUST COMPANY, (the "Subsidiary") and
PINELLAS BANCSHARES CORPORATION, now known as UNITED FINANCIAL HOLDINGS, INC.
("PARENT CORPORATION").
RECITALS
A. On or about September 29, 1995, Fiduciary Services Corporation
merged into UNITED BANK AND TRUST COMPANY, and in connection with such merger,
the following documents (collectively the "Merger Documents") were executed:
1. Agreement and Plan of Reorganization Forward Triangular
Merger, dated July 18, 1995, as amended by that certain Amendment to Plan of
Agreement and Plan of Reorganization Forward Triangular Merger (the
"Amendment"), dated September, 1995, by and between WJC, COL, SSM, FSC, and
Subsidiary (collectively the "Merger Agreement");
2. Employment Agreement, dated September 28, 1995, by and
between Subsidiary and WJC;
3. Employment Agreement, dated September 29, 1995, by and
between Subsidiary and COL;
4. Employment Agreement, dated September 29, 1995, by and
between Subsidiary and SSM;
5. Parent corporation adopted a Trust Department Stock Option
Plan (the "FSC Stock Option Plan") on September 16, 1995, as part of its
approval of the merger, which are attached to the Employment Agreements of WJC,
COL and SSM;
6. A First Right of Refusal Agreement, dated September 29,
1995, between WJC, COL, SSM, Subsidiary and Parent Corporation (collectively the
"FSC Right of First Refusal Agreement").
B. Parent Corporation acquired all of the stock of EPW effective
January 31, 1996, and in accordance therewith executed the following documents
(collectively the "Stock Sale Documents"):
1. Sale of Stock Agreement dated October 24, 1995, by and
among Parent, WAE, JHP, JPW, THE ROBERT L. MASSIE TRUST, and EPW;
2. Addendum to Sale of Stock Agreement executed by the same
parties executing the Stock Sale Agreement and joined in by EICKHOFF and PIEPER,
a Florida General Partnership ("the Partnership") dated December 29, 1995;
3. Employment Agreement dated December 28, 1995, by and
between EPW and WAE;
<PAGE> 2
4. Employment Agreement dated December 28, 1995, by and
between EPW and JPW;
5. Employment Agreement dated December 28, 1995, by and
between EPW and JHP;
6. First Right of Refusal Agreement dated December 28, 1995,
by and between WAE, JHP, JPW, Subsidiary, and Parent (the "EPW Right of First
Refusal Agreement");
7. Parent Corporation adopted the EPW Stock Option Plan, which
are attached as exhibits to the Employment Agreements of WAE, JPW, and JHP.
C. The parties (excluding the Robert L. Massie Trust) to the Merger
Documents and the Stock Sale Documents (collectively the "Closing Documents")
wish to modify, amend, and revise the Closing Documents and to modify, amend and
revise the stock option/bonus plan.
D. Unless otherwise defined herein, defined terms shall have the same
meaning as set forth in the Closing Documents.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as follows:
PARAGRAPH 1: TERMINATION OF RIGHT OF FIRST REFUSAL AGREEMENTS
The parties to the FSC Right of First Refusal Agreement and the EPW
Right of First Refusal Agreement hereby revoke and terminate in its entirety the
EPW Right of First Refusal Agreement and the FSC Right of First Refusal
Agreement.
PARAGRAPH 2: TRANSFER PRICING
The parties to the Merger Agreement, EPW Stock Option Plan, and the FSC
Stock Option Plan hereby modify, amend and revise such plans and agreements as
follows:
2.01 Accounting and Finance Services. In determining the Trust
Department Net Earnings, the Trust Department (as defined in such plans and
agreement) shall be charged the following amounts for the accounting services
and finance expenses incurred by the Subsidiary and Parent Corporation:
<TABLE>
<CAPTION>
Year United Trust Division EPW Division
<S> <C> <C>
1997 7,200.00 $ 10,800.00
1998 9,600.00 10,800.00
1999 12,000.00 10,800.00
2000 14,400.00 10,800.00
</TABLE>
2.02 Human Resources. The charges incurred by the Parent Corporation or
Subsidiary for Human Resources shall be charged to United Trust and EPW
Divisions of the Trust Department at the rate of $100.00 per month, per
employee.
2
<PAGE> 3
2.03 Occupancy Costs. The United Trust Division of the Trust Department
occupancy costs shall be charged at the rate of $11.00 per year per square foot,
which amount shall increase 4% per annum, effective January 1 of each applicable
year.
2.04 Goodwill/Debentures. In determining the Trust Department Net
Earnings, the Trust Department will not be charged for the amortization of any
goodwill or the payment of any interest on debentures issued in connection with
the acquisition of EPW.
2.05 Formation of New Trust Company. If a separate trust company is
organized, the Trust Department Net Earnings shall not be reduced for the
interest differential between the costs of funds to capitalize the new trust
company and the yield on the same funds earned by the Subsidiary or Parent
Corporation. Furthermore, no costs shall be allocated to the new trust company
or the existing Trust Department for the non operational expenses of such trust
company which shall include the formation and organizational costs of the new
trust company.
PARAGRAPH 3: CHANGE OF CONTROL
3.01 EPW Employment Contracts. WAE, JHP, JPW, and EPW hereby amend,
modify, and revise the applicable Employment Agreements to provide that if there
occurs a "Change of Control" (as defined in the EPW Right of First Refusal
Agreement) prior to December 31, 2000, WAE, JHP, and JPW shall be paid their
employment bonus which remains unearned in the amounts set forth pursuant to the
attached EPW budgeted income statement attached hereto as Exhibit "A". The
payment amount shall be limited to the remaining unearned bonus subsequent to
the Change in Control. For example, if a change in control occurs on October 31,
1999, payment would be $228,800.00. Payment shall be in cash and shall be
simultaneous with the closing of the Change of Control.
3.02 Modification of WAE and WJC Employment Agreements. The Employment
Agreements of WAE and WJC are further modified to provide that in the event of a
Change of Control (as defined in the EPW and FSC First Right of Refusal
Agreements), the acquirer shall have the option to do the following:
(a) Negotiate a new employment contract with each applicable
party;
(b) Terminate the employee, provided that upon such
termination, any and all non-compete provisions shall be null and void; or
(c) Terminate the employee and enforce the non-compete
provisions in the applicable Employment Agreement, provided a payment of
$150,000.00 is made in not more than 12 equal monthly payments.
3.03 Modification of SSM and COL Employment Agreements. The Employment
Agreements of SSM and COL are modified to provide that in the event of a Change
of Control (as defined in the FSC First Right of Refusal Agreement), the
acquirer shall have the option to do the following:
(a) Negotiate a new employment contract with each applicable
party; or
(b) Terminate the employee, provided that upon such
termination, any and all non-compete provisions shall be null and void; or
3
<PAGE> 4
(c) Terminate the employee and enforce the non-compete
provisions in the applicable Employment Agreement, provided a payment of
$50,000.00 is made in not more than 12 equal monthly payments.
3.04 Bonus Payment. The Employment Agreements executed by EPW, WAE,
JPW, and JHP are modified to provide that in the event any bonus is earned by
the employees for the year 2000, such bonus shall be paid in cash or in stock of
the Parent Corporation (at the most recent ESOP price) at the option of the
employee recipient.
3.05 Non Compete Buyout for WJC. Except in the event of a Change of
Control, WJC shall have the right to buy out the last year of his non-compete
agreement (January 1, 2001 - December 31, 2001) in exchange for a cash payment
of $125,000.
PARAGRAPH 4: PERFORMANCE AND REVENUE OPTIONS/SHARES
4.01 Grant of Options/Performance Shares. The following paragraphs of
the EPW Stock Option Plan, the FSC Stock Option Plan, and the Amendment are
hereby revised and modified:
(a) Paragraph 10(A) of the EPW Stock Option Plan is deleted in
its entirety and in lieu thereof, the sentence "Options shall not be granted for
the calendar years 1995 and 1996" shall be inserted.
(b) The introductory clause of Paragraph 10(C) of the EPW
Stock Option Plan is deleted and in lieu thereof, the following is inserted,
"The aggregate number of Option Shares that can be optioned by all Participants
for calendar years 1997-2000 shall be determined in accordance with the
following formula:"
(c) Paragraph 11(a.) of the FSC Stock Option Plan is deleted
in its entirety and in lieu thereof, the following sentence is inserted,
"Options shall not be granted for the calendar years 1995 and 1996".
(d) Paragraph 11(c.) of the FSC Stock Option Plan is deleted
in its entirety and in lieu thereof, the following introductory clause is
inserted, "The aggregate number of Option Shares that can be optioned by all
Participants for the calendar years 1997-2000 (subject to the priority of the
Performance Shares) shall be determined in accordance with the following
formula":
(e) Paragraph 1 of the Amendment is revised to delete the
phrase, "1996 through 1999" and in lieu thereof inserting the phrase, "1997
through 2000". In addition, the last sentence of Paragraph 1 is deleted in it
entirety and in lieu thereof, the following sentence is inserted, "No
performance shares may be earned for 1995 or 1996."
(f) Paragraph 4 of the Amendment is revised by deleting the
phrase, "1996 through 1999" and in lieu thereof inserting the phrase, "1997
through 2000".
The parties recognize that making the above changes shall require
additional adjustments to the plans. Accordingly, all of the performance
standards and date of issuance of all of the applicable shares shall be pushed
back by one year. The parties further acknowledge that it is their intention to
simply
4
<PAGE> 5
delay by one year all of the performance standards and criteria of the FSC Stock
Option Plan, the EPW Stock Option Plan and the granting of Performance Shares
under the Amendment.
4.02 Vesting. If a Change of Control (as defined in the EPW and FSC
First Right of Refusal Agreements) occurs, then all of the shares that could be
granted under the EPW and FSC Stock Option Agreements or the Performance Shares
shall be vested in accordance with the following chart:
<TABLE>
<CAPTION>
1997 1998 1999 2000 TOTAL
------ ----- -------- --------- ------
<S> <C> <C> <C> <C> <C>
Budgeted Earn Out Shares -0- 5,657 10,800 14,469 30,926
Hypothetical Earn Out (97 & 98) -0- 3,000 *25,269 sh. 28,269
Hypothetical Earn Out (97 & 98) 2,000 8,000 *20,926 sh. 30,926
Hypothetical Earn Out (97 & 98) -0- -0- -0- **14,469 14,469
</TABLE>
* Change of Control occurs in 1999
** Change of Control occurs in 2000
These "Earn Out" Shares are based on the Trust Department Five Year Budget, a
copy of which is attached hereto as Exhibit "A".
4.03 Grant of Revenue Options/Shares. The parties to the Merger
Agreement, FSC Stock Option Plan and EPW Stock Option Plan amend and supplement
the Merger Agreement, FSC Stock Option Plan and EPW Stock Option Plan to provide
that in addition to granting options or Performance Shares (as defined in the
Merger Agreement and 4.01 above) based on Trust Department Net Earnings, shares
or Options for up to 30,000 shares shall be granted based on the revenues of the
Trust Department (hereinafter the "Revenue Options" or "Shares") as follows:
(a) Issuance of Shares. The Revenue Options or Shares will be
issued by Parent Corporation upon the Trust Department achieving the following
revenue goals for any trailing twelve months:
<TABLE>
<CAPTION>
Number of Shares Trailing 12 Months
---------------- ------------------
or Shares for which Revenue
------------------- -------
Options can be granted
----------------------
<S> <C>
3,000 $2,100,000.00
6,000 $2,400,000.00
9,000 $2,700,000.00
12,000 $3,000,000.00
</TABLE>
As used herein the "Trust Department" shall mean the
trust business operated by Subsidiary, EPW, and any new trust company that may
be formed by Parent Corporation or Subsidiary provided, however, that existing
revenues from any newly acquired operating company shall be excluded in
determining the Trust Departments revenues.
(b) Ratio of Participation. A participant shall participate in
the plan and any Performance Shares or Revenue Options issued hereunder shall be
in the ratios set forth in Exhibit "B" attached hereto and made part hereof.
5
<PAGE> 6
(c) Change of Control. In the event there is a "Change of
Control" as defined in the EPW and FSC First Right of Refusal Agreements, then
all Revenue Options or Shares to be issued under subparagraph 4.03(a) of this
Agreement that have not yet been issued shall be simultaneously issued to the
participants. For example, if the trailing twelve months revenues were
$2,527,00.00, Revenue Options and Shares for a total of 9,000 shares would have
been previously granted (3,000 for achieving the $2,100,000.00 goal and 6,000
for achieving the $2,400,000.00). Upon a closing of a Change of Control
transaction, the Revenue Options or Shares for 21,000 unearned Shares shall be
simultaneously issued to the participants. In order to qualify for the issuance
of the unearned shares under subparagraph 4.03(a), participants must be employed
at the time of the Change of Control.
4.04 Issuance and Delivery of Shares. Revenue Shares or Options, as the
case may be, shall be issued and delivered to the participants within 30 days
after the end of the month after the applicable goal was achieved. Performance
Shares or Options, as the case may be, shall be issued and delivered to the
participants in accordance with the original agreements except that the shares
or options for the year 2000 shall be escrowed for a period of one year and
issued by December 31, 2001, subject to any adjustments as outlined in the
original agreements.
PARAGRAPH 5: GENERAL PROVISIONS
5.01 Entire Agreement. This writing contains the entire agreement of
the parties with regard to the matters herein described, and no representations
or agreements, oral or otherwise, between the parties prior or subsequent to the
signing of this Agreement not embodied herein shall be of any force and effect.
5.02 Interpretation - No Presumption. It is acknowledged by the parties
that this Agreement is the result of negotiated suggestions of all parties and,
therefore, no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions herein or the modification, addition or
deletion of provisions in prior drafts hereof.
5.03 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.04 Exhibits/Recitals. The "Exhibits" attached hereto or delivered
pursuant to this Agreement, together with all documents which are incorporated
by reference therein, and the "Recitals" set forth in the beginning of this
Agreement:
(a) Form an integral part of this Agreement; and
(b) Are hereby incorporated into this Agreement wherever
reference is made to them to the same extent as if they were set out in full at
the point at which such reference is made.
5.05 Arbitration. The parties hereto shall meet and attempt to agree on
any disputes hereunder, failing same, such disputes shall be determined by
arbitration in the following manner:
(a) Each party shall attempt to agree upon a mutually
acceptable arbitrator.
b) If the parties to the dispute are unable to agree on an
arbitrator, each shall appoint an arbitrator, and the two arbitrators so
selected shall appoint a third.
c) The decision of any two of the aforesaid three
arbitrators shall be final and binding on all parties.
6
<PAGE> 7
(d) The parties shall split the cost of arbitration equally.
5.06 Termination. This Agreement and the Agreements referenced under
Recitals A.1-6 and B.1-7 and all modifications made herein shall terminate on
the later of December 31, 2001 or when all Revenue and Performance
Options/Shares are issued under paragraph 4.
IN WITNESS WHEREOF, the parties have executed this Modification
Agreement this ____ day of ______, 1997.
Witnesses: EICKHOFF, PIEPER, & WILLOUGHBY,INC.,
A FLORIDA CORPORATION
- ----------------------------------
By:
- ---------------------------------- ----------------------------------
WILLIAM A. EICKHOFF, as its
Chairman
Attest:
-----------------------------
,as its Secretary
Witnesses:
- ----------------------------------
------------------------------(SEAL)
- ---------------------------------- WILLIAM A. EICKHOFF
Witnesses:
- ----------------------------------
------------------------------(SEAL)
JOHN P. WILLOUGHBY
- ----------------------------------
Witnesses:
- ----------------------------------
------------------------------(SEAL)
- ---------------------------------- JOHN H. PIEPER
Witnesses:
- ----------------------------------
------------------------------(SEAL)
- ---------------------------------- WARD J. CURTIS, JR.
7
<PAGE> 8
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
8
<PAGE> 9
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
Witnesses:
- ----------------------------------
------------------------------(SEAL)
- ---------------------------------- CHARLES O. LOWE
Witnesses:
- ----------------------------------
------------------------------(SEAL)
- ---------------------------------- SUSAN S. MITTERMAYR
Witnesses: UNITED BANK AND TRUST COMPANY
- ----------------------------------
By:
----------------------------------
HAROLD WINNER, as its President
- ----------------------------------
Attest:
---------------------------------
,as its Secretary
Witnesses: UNITED FINANCIAL HOLDINGS, INC.
- ----------------------------------
By:
-------------------------------------
NEIL W. SAVAGE, as its President
- ----------------------------------
Attest:
--------------------------------
,as its Secretary
Exhibits
A EPW and United Trust Combined ("Trust Department") Five Year Budgeted
Income Statements
B Revenue and Performance Bonus Share Plan Participation Ratios
-9-
<PAGE> 1
EXHIBIT 10.5
PROPERTY MANAGEMENT AGREEMENT
THIS PROPERTY MANAGEMENT AGREEMENT is made as of the 18th day of March,
1997, between IMAGINATIVE INVESTMENTS, INC. a Florida limited corporation and
its successors/assigns (herein "Owner"), and THE SOUTHEAST COMPANIES OF TAMPA
BAY, INC., a Florida corporation (herein "Manager").
WITNESSETH
In consideration of the mutual covenants herein contained, the Owner
and Manager hereby agree as follows:
1. Employment of Manager. Owner hereby employs Manager (as an
independent contractor and not as agent) to act as sole and exclusive Manager in
the management, leasing and operation of the property known as the United Bank
and Trust Center, 48,303 rentable square feet, MOL, being situated on 140,000
square feet of land, MOL, and addressed at 333 3rd Avenue North, St. Petersburg,
Florida, 33701 (herein "Project") and the Manager accepts such employment on the
terms and conditions hereinafter set forth.
2. Term. This Agreement shall take effect April 1, 1997 and shall
continue in full force and effect for a term of one (1) year therefrom, ending
the last day of the twelfth (12th) full calendar month thereafter, and
self-renewing from year-to-year thereafter; provided, however, that the same
shall be subject to earlier termination as provided for herein.
3. Duties of Manager.
a. Manager hereby accepts such appointment for and in
consideration of the compensation hereinafter provided and agrees to devote its
time, attention, skill, experience and best efforts to the management, leasing,
operation and supervision of the Project. Such services to be performed by
Manager under this Agreement shall include the following:
(1) Prepare an annual operating budget within 45 days
of the end of each year, which will include (i) a breakdown of all operating
expenses, (ii) a rent roll in form approved by Owner which includes a list of
all rentable areas subject to leases and lists all currently vacant space, (iii)
review and updating of standard lease forms, (iv) review and recommendations of
all insurance policies.
(2) To make repairs and perform all maintenance
necessary or desirable with respect to the Project.
(3) To comply fully with all federal, state, local
and municipal laws, ordinances, rules, regulations and orders relative to the
use, repair, and maintenance of the Project and with all rules, regulations,
directives and orders of the local board of fire underwriters or similar bodies.
Manager agrees to notify Owner within twenty-four (24) hours of obtaining notice
of such violations.
<PAGE> 2
(4) To administer and supervise existing service
contracts; or make new contracts as necessary. Owner may direct Manager to make
payment on its behalf of all real estate taxes, ground lease or other property
rentals, mortgage interest and amortization, insurance premiums on insurance
which Owner may obtain for the Project and other similar costs as Owner may
direct.
(5) To purchase all supplies and equipment which may
be necessary in order to properly maintain and operate the Project, including
supplies and equipment to be used or consumed in connection with any of the
services furnished under any of the provisions of this Agreement. Repairs,
replacements, supplies or equipment costs which exceed monthly budgeted amounts
in accordance with Paragraph 3.a.(1) hereof shall first be approved by Owner.
(6) To pay all bills for work and supplies and
equipment ordered in connection with the maintenance and operations of the
Project, after ascertaining the correctness thereof. Any rebate or discount
obtained by Manager shall be deducted from the amount of any bill paid by
Manager or to be paid by Owner.
(7) To ask for, demand, collect, receive and receipt
for any and all rents and other charges which may at any time be or become due
to Owner or Manager from any tenant or other person in respect to the Project or
any part thereof.
(8) To administer leases.
(9) To remove any lien or encumbrance upon the
Project created as a result of performance or nonperformance by Manager of its
obligations hereunder, as promptly as possible consistent with law, and to keep
Owner fully and promptly advised as to all matters coming to the attention of
Manager which might cause a breach of this Agreement or of Owner's obligations
under any leases to others, to the extent Manager has knowledge of the contents
of such.
(10) To employ all persons necessary to manage,
supervise, maintain and operate the Project.
(11) To prepare and file all returns and other
documents required under the Federal Insurance Contributions Act and the Federal
Unemployment Tax Act, or any similar federal or state legislation, and all
withholding tax returns required for employees of Manager. Manager shall pay all
amounts required to be paid under the Federal Insurance Contributions Act and
the Federal Unemployment Tax Act, or any similar federal or state legislation.
(12) To prepare and submit to Owner on a quarterly
basis, and more frequently if required by any mortgagee of the Project, either
cash or accrual basis property management accounting statements (as directed by
Owner) consisting of actual revenues and expenses and as compared to the budgets
prepared in accordance with Paragraph 3.a(1) hereof.
2
<PAGE> 3
b. Any of the services to be performed under the Agreement may
be performed directly by employees of Manager or Manager may, in the exercise of
its sound good faith discretion, contract the same with third-party contractors,
for which the use of affiliates or otherwise related entities of Manager are
hereby specifically approved, provided the same provide such services at
competitive costs and prices. It is understood, however, that any such contracts
will be in the name of the Manager, which will be solely responsible for
administering and supervising such contracts.
Notwithstanding that Manager's authority in respect to any of the matters
covered herein is limited by the necessity of getting the consent or
authorization of Owner as required herein, Manager will, nevertheless, be
expected to initiate, by calling the same to the attention of Owner, and change
or improvements which it believes would, if adopted, result in the improved
general operation of the Project.
4. Additional Services. Manager, to the extent required of Owner under
the terms of any and all lease agreements with tenants, to the extent requested
by Owner or to the extent not otherwise provided by third-party contract as
referenced in Paragraph 3 hereof, will at competitive costs and prices for the
level of service being provided:
a. Furnish all cleaning, porter, security and janitorial
service in the Project;
b. Operate and maintain all of Owner's equipment and systems
in the Project including, but not limited to, elevators, plumbing, heating, air
conditioning and wiring;
c. Furnish routine maintenance and repair of the Project and
make alterations and decorations therein to which tenants are entitled under
their leases or which Owner may request or which are required in order to comply
with any orders or violations placed or filed against any part of the Project by
any federal, state or municipal authority having jurisdiction or to comply with
any order of any board of fire underwriters or similar body.
d. Furnish to tenants at tenant's expense, alteration,
decoration, maintenance and other services beyond those required by lease, at
appropriate prices.
5. Independent Contractor. Notwithstanding anything herein to the
contrary, it is the intention of the parties hereto that the Manager shall be an
independent contractor with regard to any and all acts and operations performed
and conducted by it under and pursuant to the terms hereof. In such capacity,
Manager shall be solely and directly responsible for its performance hereunder
including all management decisions made by it in the course of its performance
under this Agreement. Manager will not be treated as a employee of Owner with
respect to its services under this Agreement for federal tax purposes.
3
<PAGE> 4
6. Insurance.
a. Owner, at its cost and expense, agrees to take out and
maintain in effect comprehensive general public liability insurance, including
but not limited to bodily injury liability, property damage liability, personal
injury liability with respect to the Project, naming as insured parties the
Owner, Manager and if necessary, such other parties as Owner may direct. Said
insurance coverage shall be in primary amount of Two Million Dollars
($2,000,000) in respect of bodily injury or death to any number of persons in
any one occurrence, and in an equal amount for property damage. It is understood
and agreed, however, that Manager shall obtain and maintain such insurance as
will fully protect Manager from any and all claims under any Workers
Compensation laws, or other employer's liability laws. Pursuant to such, Manager
shall indemnify and hold Owner harmless against loss resulting from any injury
to or damage to the property or any employee of Manager due to the performance
or nonperformance by Manager of its obligations under this Agreement hereunder
to the extent such loss is not insured pursuant to this Paragraph.
b. Manager and Owner agree to provide each other with
respective certificates evidencing such required insurance coverage within
thirty (30) days after the commencement date under this Agreement and promptly
upon each renewal of such insurance. Manager further shall promptly notify Owner
of any fire or other serious damage or injury for reporting purposes pursuant to
such insurance.
(1) Notwithstanding anything to the contrary
contained herein, it is understood and agreed, however, that to the extent not
insured pursuant to the first paragraph of this Paragraph 7, Owner shall not be
under any obligations to provide Manager with insurance coverage for and/or
indemnify and save harmless Manager with respect to any damages, claims, costs,
penalties and suits occasioned by Manager's violation of laws or legal
requirements, bad faith and/or conduct constituting a breach of this Agreement.
(2) All policies carried by either Owner and Manager
in respect to the Project or its operation shall contain appropriate clauses
waiving the right of subrogation as against Owner and Manager.
Owner and Manager do hereby waive any claims that
either may have against the other for loss or damage resulting from perils
covered by standard forms of fire, extended coverage, special extended coverage
(all risk) and boiler and machinery insurance, to the extent that insurance
payments thereof are made, under such policies as shall be in effect from time
to time in the State of Florida, it being expressly understood that this waiver
is intended to extend to all such loss or damage whether or not the same is
caused by the fault or neglect of either Owner or Manager.
7. Compensation of Property Manager. As full compensation and
reimbursement for performing the services provided for herein, Owner agrees to
pay Manager:
4
<PAGE> 5
a. As a Management Fee:
A base monthly fee of $964.00 plus an amount equal to three
percent (3%) of the Gross Revenues of the Project to also be paid monthly and
based on collections. Gross Revenues of the Project as used herein shall mean
all rentals and other fees received by or credited to Owner, from any source
with respect to the Project, for each calendar year, including, but not limited
to the following:
(1) forfeited deposits of tenants;
(2) lease cancellation fees payable only as said fees
are collected by Owner;
(3) late charges and interest on rentals;
(4) increased rentals based upon a price index, sales
volume or other escalation provisions;
(5) rentals for, or reimbursement of, operating
expenses, including but not limited to real estate taxes;
(6) additional rentals based upon coverage,
percentage or other similar rental provisions;
(7) any other rental adjustments or consideration in
the nature of rental;
(8) rental value and business interruption insurance
proceeds received by Borrower; and
(9) parking revenues.
b. As reimbursement:
(1) An amount equal to the total cost of all other
obligations and expenses incurred by Manager in the performance of the terms of
this Agreement; and
(2) Routine advertising and legal fees in connection
with services performed under Paragraph 5 hereof.
(3) Manager's signage costs as first approved by
Owner.
Reimbursement shall not be made for matters involving violations of laws,
ordinances, orders, rules and/or regulations where failure to comply with the
same is a direct result of Manager's negligence.
5
<PAGE> 6
c. Manager will use its good faith efforts to limit the cost
to Owner of reimbursable expenditures described in Paragraph 8.c. above.
8. Recordkeeping.
a. Manager will keep or cause to be kept, at its own expense,
full and detailed accounts and records in accordance with accepted accounting
principles consistently applied and sufficient to enable the receipts and
disbursements with respect to the services rendered by Manager hereunder to be
ascertained and distinguished from any other receipts or disbursements of
Manager. The system for the keeping of such accounts and records shall be as
established by Manager and such accounts and records shall be open for audit and
inspection by Owner or by independent certified public accountants designated by
Owner, or any regulatory body or agency having jurisdiction, at all reasonable
times. In the event independent certified public accountants shall be designated
by Owner for such purpose at any time, or from time to time, the charges of such
accountants for services rendered by them shall be for the account of Owner and,
if paid by Manager shall be considered to be part of the costs to be reimbursed
to Manager hereunder.
b. Manager will render to Owner quarterly statements as to
receipts and disbursements incurred by Manager in rendering services under this
Agreement.
c. Such quarterly statements shall be rendered not later than
the thirtieth (30th) day of January, April, July and October of each year
throughout the entire period of this Agreement.
9. Notices
a. Except as herein otherwise specifically required, notices,
demands, requests and communications which may be sent or are required shall be
deemed to have been properly given, served, or sent:
(1) if intended for Manager, by mailing by certified or
registered mail, return receipt requested, with postage prepaid, addressed to
Manager at:
THE SOUTHEAST COMPANIES OF TAMPA BAY, INC.
c/o David A. Jenkins, Vice President
P.O. Box 429
222 Second Street N.
St. Petersburg, FL 33731-0429
6
<PAGE> 7
(2) if intended for Owner, by mailing a certified or
registered mail, return receipt requested, with postage prepaid, addressed to
Owner at:
IMAGINATIVE INVESTMENTS, INC.
Neil W. Savage, President
333 3rd Avenue North
St. Petersburg, FL 33701
b. Either party may designate by notice aforesaid a new
address to which any notice, demand, request or communication may thereafter be
given or sent. Except as otherwise herein specifically required, each such
notice, demand, request or communication which shall be so mailed by certified
or registered mail, return receipt requested in the manner aforesaid shall be
deemed sufficiently given, served or sent for all purposes hereunder at the time
such notice, demand, request or communication shall be receipted for by the
other party.
10. Termination.
a. This Agreement shall continue in full force and effect
after the stated termination date as defined in Paragraph 2 from year to year
unless either party hereto shall serve written notice of cancellation at least
sixty (60) days prior to the stated termination date hereof personally or by
registered mail at the address hereinbefore mentioned, in which event this
Agreement shall terminate as of said termination date.
b. Anything herein to the contrary notwithstanding, in the
event (i) this Agreement is transferred by Owner due to foreclosure of Owner's
interest in the Project or a transfer in lieu thereof, or (ii) Owner transfers,
sells or otherwise assigns its interest in the Project to an unrelated,
non-controlled group or entity, either party hereto may terminate this Agreement
upon not less that fifteen (15) days notice served in the manner hereinbefore
set forth.
c. In the event a petition in bankruptcy is filed by or
against any general partner of the Owner, or Manager, or in the event that any
of party shall make an assignment for the benefit of creditors or take advantage
of any insolvency act, either party hereto may forthwith terminate this
Agreement upon not less than fifteen (15) days notice served in the manner
hereinbefore set forth.
d. In the event of a breach of the terms and provisions of
this Agreement by either party, the other party may terminate this Agreement
upon not less than fifteen (15) days written notice served in the manner
hereinbefore set forth. Unintentional errors and action taken in good faith or
upon information believed to be true and accurate, although later proven untrue
or inaccurate, by either party shall not constitute grounds for termination
pursuant to this Paragraph.
7
<PAGE> 8
e. Upon and after the termination of this Agreement in any of
the manners herein provided, Manager shall make a full accounting to Owner
(financial and otherwise) of its actions under this Agreement including a
breakdown of income and expenses for the Project through the date of termination
and turn over to Owner all monies held by Manager, as well as books, records and
other documentation maintained by Manager in accordance herewith.
11. Applicable Law: Implied Covenants. This Agreement shall be
interpreted in accordance with the laws of the State of Florida and no
presumption shall be deemed to exist in favor of or against either party as a
result of the negotiation and/or preparation of this Agreement; and no inference
or covenant shall be implied as against either party hereto, the full
contractual obligations and covenants of each party being herein fully set forth
and expressed.
12. Assignment. This Agreement shall be fully assignable and shall be
binding upon the parties, their heirs, legal representatives, successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESSES: "Owner"
IMAGINATIVE INVESTMENTS, INC.
- ------------------------------- ----------------------------
By: Neil W. Savage
Its: President
- -------------------------------
"Manager"
THE SOUTHWEST COMPANIES OF
TAMPA BAY, INC.
-----------------------------
- -------------------------------- By: David A. Jenkins
Its: Vice President
- --------------------------------
8
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 29th day of September, 1995, by
and between UNITED BANK AND TRUST COMPANY, a banking corporation incorporated
under the laws of the State of Florida (the "Bank") and CHARLES O. LOWE, (the
"Employee").
WHEREAS, the Bank has organized and operates a trust department
(hereinafter the "Trust Department");
WHEREAS, the Bank desires to enter into an employment relationship with the
Employee to obtain the part-time services of the Employee for its Trust
Department, on terms and conditions set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. The Bank hereby employs Employee in its Trust Department as
Executive Vice President.
2. DUTIES. The Employee's principal duties and responsibilities shall be those
executive and administrative duties and responsibilities provided from time to
time by the Board of Directors or Chief Executive Officer of Bank. Employee
shall report to the chief executive officer of the Bank's Trust and Investment
Division within the Trust Department.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms and
conditions herein set forth. Employee agrees to perform such services and duties
and hold such offices as may be assigned to him from time to time by the Bank
and to devote his business time, energies and best efforts to the performance
thereof to the exclusion of all other business activities, except such
activities as the Bank may consent to in writing.
4. TERM. The term of employment shall begin on the date hereof, with the
Employee's commencing work on that date in the Bank's Trust Department and shall
continue until terminated as herein provided.
5. FACILITIES. The Bank shall provide the Employee with an office, staff,
stenographic help, equipment and other services and facilities reasonably
required and suitable for the performance of the Employee's duties hereunder.
6. SALARY. As compensation for the services to be rendered by the Employee to
the Bank pursuant to this Agreement, the Employee shall be paid the following
annualized salary as basic compensation: Thirty-four Thousand Three Hundred
Twenty Dollars ($34,320), payable pro rata in equal monthly, or more frequent
<PAGE> 2
installments (in accordance with the pay practices of the Employer), in arrears,
for each month for which services are rendered, or such higher compensation as
may be established by the Bank from time to time.
7. EXPENSES. The Bank shall pay or reimburse the Employee for the reasonable and
necessary business expenses of the Employee, provided that the same have been
approved by the Bank in accordance with its policies from time to time
established.
8. EMPLOYEE BENEFIT PLANS. The Employee shall be eligible to participate, to the
extent he may be eligible, in any profit sharing, retirement, group insurance or
other employee benefit plan maintained by the Bank. The Bank reserves the right
to amend or cancel such benefit plans from time to time, provided that all
eligible personnel are similarly treated.
9. STOCK OPTIONS. The Employee shall participate in the Trust Department Stock
Option Plan, a copy of which is annexed hereto as an Exhibit.
10. VACATIONS AND LEAVE. The Employee shall be entitled to the same vacation and
leave time as the other executive officers and personnel of the Bank; provided,
however, the allocated vacation and leave time shall not be less than twelve
(12) weeks each year, scheduled as mutually agreed.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee acknowledges that
in and as a result of his employment by the Bank, he will be making use of,
acquiring, and/or adding to confidential information of a special and unique
nature and value relating to such matters as the Bank's proprietary information,
trade secrets, systems, procedures, manuals, confidential reports, lists of
customers and data about customer (which are deemed for all purposes
confidential and proprietary), as well as the nature and type of services
rendered by the Bank, the methods used and preferred by the Bank's customers,
and the fees paid by them. As a material inducement to the Bank to enter into
this Agreement and to pay to Employee the compensation stated in this Agreement,
Employee covenants and agrees that the Employee shall not, at any time during or
following the term of his employment, directly or indirectly divulge or disclose
for any purpose whatsoever any confidential information that has been obtained
by, or disclosed to, Employee as a result of employment by the Bank. In the
event of a breach or threatened breach by Employee of any of the provisions of
this Paragraph, the Bank, in addition to and not in limitation of, any other
rights, remedies, or damages available to the Bank at law or in equity, shall be
entitled to a permanent injunction in order to prevent or restrain any such
breach by the Employee or by Employee's partners, agents, representatives,
servants, employers, employees, family members and/or any and all persons
directly or indirectly acting for or with Employee.
<PAGE> 3
12. COVENANTS AGAINST COMPETITION. The Employee acknowledges that the services
the Employee is to render are of a special and unusual character with a unique
value to the Bank, the loss of which cannot adequately be compensated by damages
in an action at law. In view of the unique value to the Bank of the services of
Employee and because of the confidential information to be obtained by or
disclosed to Employee, as hereinabove set forth, and as a material inducement to
the Bank to enter into this Agreement and to pay to Employee the compensation
provided for in this Agreement, Employee covenants and agrees that during
Employee's employment by Bank, and/or Parent Corporation, and thereafter, the
Employee will not: (x) through a period ending TWO [2] YEARS after employment
ceases, compete with the Bank in Pinellas County, Florida, or (y) through a
period ending TWO [2] YEARS after employment ceases, solicit from any customer,
or provide to any customer, commercial banking or trust business services or
products, wherever such customers may be located, or (z) through a period ending
TWO (2) YEARS after employment ceases, directly or indirectly solicit for
employment, or employ, any of the Bank's or Parent Corporation's employees. For
purposes of this Paragraph:
a. the term "compete" means engaging in any business similar to, or
competitive with, the Bank's commercial banking or trust business in any manner
whatsoever (other than as a passive investor), including without limitation, as
a proprietor, partner, investor, shareholder, director, officer, employee,
consultant, independent contractor, or otherwise.
b. the term "customer" means each person to whom the Bank has sold or
delivered for compensation any trust business or commercial banking business
product or service within a period of TWO (2) YEARS prior to the time the
Employee ceases to be employed by the Bank or Parent Corporation.
c. the term "trust business" means the trust business of the Bank, as
then constituted and permitted under Florida law, presently defining trust
business in Section 658.12, Florida Statutes.
d. the term "commercial banking business" means the commercial banking
business of the Bank, as then constituted and permitted under Florida law,
presently defining commercial banking business in Section 658.12, Florida
Statutes.
e. the term "Parent Corporation" means Pinellas Bancshares Corp., its
successors or assigns.
This covenant is made in accordance with Florida Statutes 542.33(2)(a). This
covenant is cumulative to the covenant made by the Employee as a "Stockholder"
under the AGREEMENT AND PLAN OF REORGANIZATION, FORWARD TRIANGULAR MERGER
between the Employer, Employee, and others. This Employment Agreement is an
exhibit to that contract.
<PAGE> 4
Provided, however, paragraph 12.(X) shall not apply after 2002 in the event this
Agreement is terminated by Corporation upon its notice delivered to Employee
under paragraph 14. F. of this Agreement. The passive ownership of interests in
banks, trust companies, or bank holding companies that does not exceed five
percent (5%) of the issued and outstanding equity ownership of such companies
shall not be deemed to be a violation of the covenants of this paragraph 12.
This covenant shall not apply after the Employee, alone or with others,
purchases the Employer's Trust Department, or after there has been a "Change of
Control," in accordance with the FIRST RIGHT OF REFUSAL AGREEMENT, which is
Exhibit H to the AGREEMENT AND PLAN OF REORGANIZATION, FORWARD TRIANGULAR MERGER
referenced above.
13. Remedies for Breach of Employee's Covenants of Non-Disclosure and
Non-Competition. In the event of a breach or threatened breach of any of the
covenants in Paragraphs entitled Non-Disclosure of Confidential Information and
Covenants Against Competition, the Bank shall have the right to seek monetary
damages for any past breach and equitable relief, including specific performance
by means of an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees, family
members and/or any and all persons acting directly or indirectly by or with him,
to prevent or restrain any further breach.
14. TERMINATION. Employment of the Employee under this Agreement will be
terminated:
a. By the Employee's death.
b. If the Employee is Totally Disabled.
i. For the purposes of this Agreement, the Employee will be
Totally Disabled if the Employee (1) has been declared legally incompetent by a
final court decree (the date of such decree being deemed to be the date on which
the disability occurred), (2) receives disability insurance benefits from any
disability income insurance policy maintained by the Bank for a period of six
(6) consecutive months, or (3) has been found to be disabled pursuant to a
Disability Determination.
ii. A Disability Determination means a finding that the
Employee, because of a medically determinable disease, injury, or other mental
or physical disability, is unable to perform substantially all of his regular
duties to the Bank and that such disability has lasted at least, SIX (6) MONTHS.
The Disability Determination shall be based on the written opinion of the
physician regularly attending the Employee whose disability is in question.
iii. If the Bank disagrees with the opinion of this physician
(the "First Physician"), it may engage at its own expense another physician (the
"Second Physician") to examine the
<PAGE> 5
Employee. If the First and Second Physicians agree in writing that the Employee
is or is not disabled, their written opinion shall, except as otherwise set
forth in this subsection, be conclusive on the issue of disability.
iv. If the First and Second Physicians disagree on the
disability of the Employee, they shall choose a third consulting physician
(whose expense shall be borne by the Bank), and the written opinion of a
majority of these three physicians shall, except as otherwise provided in this
subsection, be conclusive as to the Employee's disability. The date of any
written opinion conclusively finding the Employee to be disabled is the date of
which the disability will be deemed to have occurred.
v. If there is a conclusive finding that the Employee is not
Totally Disabled, the Bank shall have the right to request additional Disability
Determinations provided it agrees to pay all the expenses of the Disability
Determinations and does not request an additional Disability Determination more
frequently than once every six (6) months.
vi. In conjunction with a Disability Determination, the
Employee hereby consents to any required medical examination, and agrees to
furnish any medical information requested by any examining physician and to
waive any applicable physician-patient privilege that may arise because of such
examination.
vii. All physicians except the First Physician must be
board-certified in the specialty most closely related to the nature of the
disability alleged to exist.
c. At the election of the Employee upon six (6) months advance notice.
d. By mutual agreement of the Employee and the Bank.
e. By the Bank for Just Cause. For purposes of this Agreement, "Just
Cause" shall mean only the following:
i. a final non-appealable conviction of or a plea of guilty or
nolo contendere by the Employee to a felony or misdemeanor involving fraud,
embezzlement, theft, or dishonesty or other criminal conduct against the Bank or
others,
ii. habitual neglect of the Employee's duties or failure by
the Employee to perform or observe any substantial lawful obligation of such
employment that is not remedied within thirty (30) days after written notice
thereof from the Bank or its Board of Directors, or
iii. any material breach by the Employee of this Agreement
that is not remedied within thirty (30) days after written notice thereof from
the Bank or its Board of Directors.
<PAGE> 6
f. On or after December 31, 2002, by either party, upon not less than
three (3) months notice to the other.
15. RESIGNATION FROM OFFICES UPON TERMINATION. In the event of termination of
this Agreement other than for death, the Employee hereby agrees to resign from
all positions held in the Bank, other than that of director. Positions to be
resigned include without limitations, any position as officer, agent, trustee or
consultant of the Bank or any affiliate of the Bank. If at the time of
termination the Employee is a member of the Board of Directors of Bank, or any
affiliate of Bank, the Employee shall also resign as director thereof if
termination hereunder is for Just Cause.
16. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement, shall not affect the validity or enforceability or
constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement by that Party or any other Party.
17. GOVERNING LAW. This Agreement shall in all respects be subject to, and
governed by, the laws of the State of Florida.
18. SEVERABILITY. The invalidity or unenforceability of any provision in the
Agreement shall not in any way affect the validity or enforceability of any
other provision and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision had never been in the Agreement.
19. NOTICE. Any and all notices required or permitted herein shall be deemed
delivered if delivered personally or if mailed by registered or certified mail
to the Bank at its principal place of business and to the Employee at the
address hereinafter set forth following the Employee's signature, or at such
other address or addresses as either Party may hereafter designate in writing to
the other.
20. ASSIGNMENT. The rights and benefits of either of the Parties under this
Agreement may not be assigned, nor the burdens delegated, without the prior
written consent of the other Party.
21. AMENDMENTS. This Agreement may be amended at any time by mutual consent of
the Parties hereto, with any such amendment to be invalid unless in writing,
signed by the Bank and the Employee.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Employee and the Bank with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, relating to the employment of the Employee by
the Bank not contained herein shall be of any force or effect. The terms and
provisions of any employee manual or handbook are not a part of this Agreement.
<PAGE> 7
23. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall inure to
the benefit of, the Bank and Employee, and their respective heirs, personal and
legal representatives, successors, and assigns.
24. REFERENCES TO GENDER AND NUMBER TERMS. In construing this Agreement,
feminine or number pronouns shall be substituted for those masculine in form and
vice versa, and plural terms shall be substituted for singular and singular for
plural in any place in which the context so requires.
25. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Bank and Employee have duly executed this Agreement as
of the day and year first above written.
UNITED BANK AND TRUST COMPANY
BANK:
By:
-------------------------------
Its:
-------------------------------
Address of Bank for Notice Purposes:
5801-49th Street North, St. Petersburg, FL 33709
EMPLOYEE:
(SEAL)
- ----------------------------
Address of Employee for Notice Purposes:
- ----------------------------------
- ----------------------------------
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 29th day of September, 1995, by
and between UNITED BANK AND TRUST COMPANY, a banking corporation incorporated
under the laws of the State of Florida (the "Bank") and WARD J. CURTIS, JR.,
(the "Employee").
WHEREAS, the Bank has organized and operates a trust department (hereinafter the
"Trust Department");
WHEREAS, the Bank desires to enter into an employment relationship with the
Employee to obtain the services of the Employee for its Trust Department, on
terms and conditions set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. The Bank hereby employs Employee in its Trust Department in the
capacity of President and CEO, Trust and Investment Division, or another
position within the Bank's Trust Department of the same or greater stature, as
the Bank may direct or desire from time to time.
2. DUTIES. The Employee's principal duties and responsibilities shall be those
that are usual and customary for the Employee's position and as provided from
time to time by the Board of Directors or Chief Executive Officer of Bank.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms and
conditions herein set forth. Employee agrees to perform such services and duties
and hold such offices as may be assigned to him from time to time by the Bank
and to devote his full business time, energies and best efforts to the
performance thereof to the exclusion of all other business activities, except
such activities as the Bank may consent to in writing.
4. TERM. The term of employment shall begin on the date hereof, with the
Employee's commencing full-time work on that date in the Bank's Trust Department
and shall continue until terminated as herein provided.
5. FACILITIES. The Bank shall provide the Employee with an office, staff,
stenographic help, equipment and other services and facilities reasonably
required and suitable for the performance of the Employee's duties hereunder.
6. SALARY. As compensation for the services to be rendered by the Employee to
the Bank pursuant to this Agreement, the Employee shall be paid the following
annualized salary as basic compensation: One Hundred Twenty Five Thousand
Dollars
<PAGE> 2
($125,000), payable pro rata in equal monthly, or more frequent installments (in
accordance with the pay practices of the Employer), in arrears, for each month
for which services are rendered, or such higher compensation as may be
established by the Bank from time to time.
7. EXPENSES. The Bank shall pay or reimburse the Employee for the reasonable and
necessary business expenses of the Employee, provided that the same have been
approved by the Bank in accordance with its policies from time to time
established.
8. EMPLOYEE BENEFIT PLANS. The Employee shall be eligible to participate, to the
extent he may be eligible, in any profit sharing, retirement, group insurance or
other employee benefit plan maintained by the Bank. The Bank reserves the right
to amend or cancel such benefit plans from time to time, provided that all
eligible personnel are similarly treated.
9. STOCK OPTIONS. The Employee shall participate in the Trust Department Stock
Option Plan, a copy of which is annexed hereto as an Exhibit.
10. VACATIONS AND LEAVE. The Employee shall be entitled to the same vacation and
leave time as the other executive officers of the Bank.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee acknowledges that
in and as a result of his employment by the Bank, he will be making use of,
acquiring, and/or adding to confidential information of a special and unique
nature and value relating to such matters as the Bank's proprietary information,
trade secrets, systems, procedures, manuals, confidential reports, lists of
customers and data about customer (which are deemed for all purposes
confidential and proprietary), as well as the nature and type of services
rendered by the Bank, the methods used and preferred by the Bank's customers,
and the fees paid by them. As a material inducement to the Bank to enter into
this Agreement and to pay to Employee the compensation stated in this Agreement,
Employee covenants and agrees that the Employee shall not, at any time during or
following the term of his employment, directly or indirectly divulge or disclose
for any purpose whatsoever any confidential information that has been obtained
by, or disclosed to, Employee as a result of employment by the Bank. In the
event of a breach or threatened breach by Employee of any of the provisions of
this Paragraph, the Bank, in addition to and not in limitation of, any other
rights, remedies, or damages available to the Bank at law or in equity, shall be
entitled to a permanent injunction in order to prevent or restrain any such
breach by the Employee or by Employee's partners, agents, representatives,
servants, employers, employees, family members and/or any and all persons
directly or indirectly acting for or with Employee.
<PAGE> 3
12. COVENANTS AGAINST COMPETITION. The Employee acknowledges that the services
the Employee is to render are of a special and unusual character with a unique
value to the Bank, the loss of which cannot adequately be compensated by damages
in an action at law. In view of the unique value to the Bank of the services of
Employee and because of the confidential information to be obtained by or
disclosed to Employee, as hereinabove set forth, and as a material inducement to
the Bank to enter into this Agreement and to pay to Employee the compensation
provided for in this Agreement, Employee covenants and agrees that during
Employee's employment by Bank, and/or Parent Corporation, and thereafter, the
Employee will not: (x) through a period ending TWO [2] YEARS after employment
ceases, compete with the Bank in Pinellas County, Florida, or (y) through a
period ending TWO [2] YEARS after employment ceases, solicit from any customer,
or provide to any customer, commercial banking or trust business services or
products, wherever such customers may be located, or (z) through a period ending
TWO (2) YEARS after employment ceases, directly or indirectly solicit for
employment, or employ, any of the Bank's or Parent Corporation's employees. For
purposes of this Paragraph:
a. the term "compete" means engaging in any business similar to, or
competitive with, the Bank's commercial banking or trust business in any manner
whatsoever (other than as a passive investor), including without limitation, as
a proprietor, partner, investor, shareholder, director, officer, employee,
consultant, independent contractor, or otherwise.
b. the term "customer" means each person to whom the Bank has sold or
delivered for compensation any trust business or commercial banking business
product or service within a period of TWO (2) YEARS prior to the time the
Employee ceases to be employed by the Bank or Parent Corporation.
c. the term "trust business" means the trust business of the Bank, as
then constituted and permitted under Florida law, presently defining trust
business in Section 658.12, Florida Statutes.
d. the term "commercial banking business" means the commercial banking
business of the Bank, as then constituted and permitted under Florida law,
presently defining commercial banking business in Section 658.12, Florida
Statutes.
e. the term "Parent Corporation" means Pinellas Bancshares Corp., its
successors or assigns.
This covenant is made in accordance with Florida Statutes 542.33(2)(a). This
covenant is cumulative to the covenant made by the Employee as a "Stockholder"
under the AGREEMENT AND PLAN OF REORGANIZATION, FORWARD TRIANGULAR MERGER
between the Employer, Employee, and others. This Employment Agreement is an
exhibit to that contract.
<PAGE> 4
Provided, however, paragraph 12.(X) shall not apply after 2002 in the event this
Agreement is terminated by Corporation upon its notice delivered to Employee
under paragraph 14. F. of this Agreement. The passive ownership of interests in
banks, trust companies, or bank holding companies that does not exceed five
percent (5%) of the issued and outstanding equity ownership of such companies
shall not be deemed to be a violation of the covenants of this paragraph 12.
This covenant shall not apply after the Employee, alone or with others,
purchases the Employer's Trust Department, or after there has been a "Change of
Control," in accordance with the FIRST RIGHT OF REFUSAL AGREEMENT, which is
Exhibit H to the AGREEMENT AND PLAN OF REORGANIZATION, FORWARD TRIANGULAR MERGER
referenced above.
13. Remedies for Breach of Employee's Covenants of Non-Disclosure and
Non-Competition. In the event of a breach or threatened breach of any of the
covenants in Paragraphs entitled Non-Disclosure of Confidential Information and
Covenants Against Competition, the Bank shall have the right to seek monetary
damages for any past breach and equitable relief, including specific performance
by means of an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees, family
members and/or any and all persons acting directly or indirectly by or with him,
to prevent or restrain any further breach.
14. TERMINATION. Employment of the Employee under this Agreement will be
terminated:
a. By the Employee's death.
b. If the Employee is Totally Disabled.
i. For the purposes of this Agreement, the Employee will be
Totally Disabled if the Employee (1) has been declared legally incompetent by a
final court decree (the date of such decree being deemed to be the date on which
the disability occurred), (2) receives disability insurance benefits from any
disability income insurance policy maintained by the Bank for a period of six
(6) consecutive months, or (3) has been found to be disabled pursuant to a
Disability Determination.
ii. A Disability Determination means a finding that the
Employee, because of a medically determinable disease, injury, or other mental
or physical disability, is unable to perform substantially all of his regular
duties to the Bank and that such disability has lasted at least, SIX (6) MONTHS.
The Disability Determination shall be based on the written opinion of the
physician regularly attending the Employee whose disability is in question.
iii. If the Bank disagrees with the opinion of this physician
(the "First Physician"), it may engage at its own expense another physician (the
"Second Physician") to examine the
<PAGE> 5
Employee. If the First and Second Physicians agree in writing that the Employee
is or is not disabled, their written opinion shall, except as otherwise set
forth in this subsection, be conclusive on the issue of disability.
iv. If the First and Second Physicians disagree on the
disability of the Employee, they shall choose a third consulting physician
(whose expense shall be borne by the Bank), and the written opinion of a
majority of these three physicians shall, except as otherwise provided in this
subsection, be conclusive as to the Employee's disability. The date of any
written opinion conclusively finding the Employee to be disabled is the date of
which the disability will be deemed to have occurred.
v. If there is a conclusive finding that the Employee is not
Totally Disabled, the Bank shall have the right to request additional Disability
Determinations provided it agrees to pay all the expenses of the Disability
Determinations and does not request an additional Disability Determination more
frequently than once every six (6) months.
vi. In conjunction with a Disability Determination, the
Employee hereby consents to any required medical examination, and agrees to
furnish any medical information requested by any examining physician and to
waive any applicable physician-patient privilege that may arise because of such
examination.
vii. All physicians except the First Physician must be
board-certified in the specialty most closely related to the nature of the
disability alleged to exist.
c. At the election of the Employee upon six (6) months advance notice.
d. By mutual agreement of the Employee and the Bank.
e. By the Bank for Just Cause. For purposes of this Agreement, "Just
Cause" shall mean only the following:
i. a final non-appealable conviction of or a plea of guilty or
nolo contendere by the Employee to a felony or misdemeanor involving fraud,
embezzlement, theft, or dishonesty or other criminal conduct against the Bank or
others,
ii. habitual neglect of the Employee's duties or failure by
the Employee to perform or observe any substantial lawful obligation of such
employment that is not remedied within thirty (30) days after written notice
thereof from the Bank or its Board of Directors, or
iii. any material breach by the Employee of this Agreement
that is not remedied within thirty (30) days after written notice thereof from
the Bank or its Board of Directors.
<PAGE> 6
f. On or after December 31, 2002, by either party, upon not less than
three (3) months notice to the other.
15. RESIGNATION FROM OFFICES UPON TERMINATION. In the event of termination of
this Agreement other than for death, the Employee hereby agrees to resign from
all positions held in the Bank, other than that of director. Positions to be
resigned include without limitations, any position as officer, agent, trustee or
consultant of the Bank or any affiliate of the Bank. If at the time of
termination the Employee is a member of the Board of Directors of Bank, or any
affiliate of Bank, the Employee shall also resign as director thereof if
termination hereunder is for Just Cause.
16. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement, shall not affect the validity or enforceability or
constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement by that Party or any other Party.
17. GOVERNING LAW. This Agreement shall in all respects be subject to, and
governed by, the laws of the State of Florida.
18. SEVERABILITY. The invalidity or unenforceability of any provision in the
Agreement shall not in any way affect the validity or enforceability of any
other provision and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision had never been in the Agreement.
19. NOTICE. Any and all notices required or permitted herein shall be deemed
delivered if delivered personally or if mailed by registered or certified mail
to the Bank at its principal place of business and to the Employee at the
address hereinafter set forth following the Employee's signature, or at such
other address or addresses as either Party may hereafter designate in writing to
the other.
20. ASSIGNMENT. The rights and benefits of either of the Parties under this
Agreement may not be assigned, nor the burdens delegated, without the prior
written consent of the other Party.
21. AMENDMENTS. This Agreement may be amended at any time by mutual consent of
the Parties hereto, with any such amendment to be invalid unless in writing,
signed by the Bank and the Employee.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Employee and the Bank with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, relating to the employment of the Employee by
the Bank not contained herein shall be of any force or effect. The terms and
provisions of any employee manual or handbook are not a part of this Agreement.
<PAGE> 7
23. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall inure to
the benefit of, the Bank and Employee, and their respective heirs, personal and
legal representatives, successors, and assigns.
24. REFERENCES TO GENDER AND NUMBER TERMS. In construing this Agreement,
feminine or number pronouns shall be substituted for those masculine in form and
vice versa, and plural terms shall be substituted for singular and singular for
plural in any place in which the context so requires.
25. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Bank and Employee have duly executed this Agreement as
of the day and year first above written.
UNITED BANK AND TRUST COMPANY
BANK:
By:
------------------------------
Its:
------------------------------
Address of Bank for Notice Purposes:
5801-49th Street North, St. Petersburg, FL 33709
EMPLOYEE:
(SEAL)
- ----------------------------
Address of Employee for Notice Purposes:
- ----------------------------------
- ----------------------------------
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
_____________, 1997, by and between UNITED FINANCIAL HOLDINGS, INC. D/B/A UNITED
FINANCIAL, a corporation incorporated under the laws of the State of Florida
("Corporation") and HAROLD J. WINNER ("Employee").
W I T N E S S E T H:
WHEREAS, Corporation desires to enter into an employment relationship with
Employee on certain terms and conditions as set forth herein; and
WHEREAS, Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. Corporation hereby employs Employee in the capacity of
President, or in such other position of the same or greater stature as
Corporation may direct or desire.
2. DUTIES. Employee's principal duties and responsibilities shall be
those that are usual and customary for his position and as are provided from
time to time by the Board of Directors.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms and
conditions herein set forth. Employee agrees to perform such services and duties
and hold such offices as may be assigned to him from time to time by Corporation
and to devote his full business time, energies and best efforts to the
performance thereof to the exclusion of all other business activities, except
such activities as Corporation may consent to in writing.
4. TERM. For purposes of this Agreement, the term of employment shall
begin on __________, 1997, with Employee's commencing full-time work on that
date at Corporation's place of business and shall continue until terminated as
herein provided.
5. FACILITIES. Corporation shall provide Employee with an office,
staff, stenographic help, equipment and other services and facilities reasonably
required and suitable for the performance of Employee's duties hereunder.
6. SALARY. As compensation for the services to be rendered by Employee
to Corporation pursuant to the Agreement, Employee shall be paid the following
annualized salary as basic compensation: NINETY-FOUR THOUSAND ONE HUNDRED AND
NO/DOLLARS ($94,100.00), payable in equal monthly installments in arrears for
each month for which services are rendered, or such higher compensation as may
be established by Corporation from time to time.
<PAGE> 2
7. OTHER COMPENSATION. In addition to the basic salary compensation,
Employee shall be paid such additional compensation as is provided for in the
Senior Management Committee Incentive Schedule approved and adopted by
Corporation from time to time. References in this Agreement to "compensation"
shall include Salary under paragraph 6 and Other Compensation under paragraph 7.
8. AUTOMOBILE. Corporation shall furnish Employee with an automobile
for his use in discharging his duties hereunder. At the end of each calendar
year, Employee shall pay a mutually agreed upon percentage of the operating
costs of the automobile for the purpose of reimbursing Corporation for
Employee's personal use of the automobile.
9. EXPENSES. Corporation shall pay or reimburse Employee for the
reasonable and necessary business expenses of Employee, provided that the same
have been approved by the Audit Committee of Corporation in accordance with
Corporation's policies from time to time established.
10. KEY PERSON LIFE INSURANCE. Corporation, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance on
the life of the Employee in any amount or amounts considered advisable by
Corporation, and Employee shall submit to any medical or other examination and
execute and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
11. EMPLOYEE BENEFIT PLANS. Employee shall be eligible to participate,
to the extent he may be eligible, in any profit sharing, retirement, group
insurance or other employee benefit plan maintained by the Corporation.
Corporation reserves the right to amend to cancel such benefit plans from time
to time, provided that all eligible personnel are similarly treated.
12. HEALTH INSURANCE. Corporation shall provide health insurance,
including major medical and dental coverage, for Employee in such form and
provide such coverage as is provided to other executive employees of Corporation
from time to time. Corporation reserves the right to amend or cancel such
insurance from time to time, provided that all eligible executives are similarly
treated.
13. VACATIONS AND LEAVE. Employee shall be entitled to the same
vacation and leave time as the other executive officers of Corporation.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee acknowledges
that in and as a result of his employment by Corporation, he will be making use
of, acquiring, and/or adding to confidential information of a special and unique
nature and value relating to such matters as Corporation's patents, copyrights,
proprietary information, trade secrets, systems, procedures, manuals,
confidential reports, and lists of customers (which are deemed for all purposes
confidential and proprietary), as well as the nature and type of services
rendered by Corporation, the equipment, and methods used and preferred by
Corporation's customers, and the fees paid by them. As a material inducement
<PAGE> 3
to Corporation to enter into this Agreement and to pay to Employee the
compensation stated in this Agreement, Employee covenants and agrees that he
shall not, at any time during or following the term of his employment, directly
or indirectly, divulge or disclose for any purpose whatsoever any confidential
information that has been obtained by, or disclosed to, him as a result of his
employment by Corporation. In the event of a breach or threatened breach by
Employee of any of the provisions of this paragraph, Corporation, in addition to
and not in limitation of, any other rights, remedies, or damages available to
Corporation at law or in equity, shall be entitled to a permanent injunction in
order to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employers, employees, family
members and/or any and all persons directly or indirectly acting for or with
him.
15. DISABILITY DURING EMPLOYMENT. If, during Employee's employment,
Employee becomes unable to perform his duties under this Agreement because of
"disability", Corporation shall pay Employee the Salary that would otherwise be
payable under this Agreement through the period of disability, or if shorter,
for a period of ninety (90) days, and thereafter, until employment terminates in
accordance with this Agreement due to disability, Employee's Salary less the
amount of income paid to Employee under any policy of disability or worker's
compensation insurance paid for by Corporation shall be paid as disability
compensation.
a. For purposes of this Agreement, "disability" shall mean
Employee's inability to perform all, or substantially all, of his duties under
this Agreement because of accident or sickness, with or without reasonable
accommodation.
b. Employee's employment status shall be reinstated upon
return to employment before the end of the disability period for which income is
paid, as described above, with the discharge of Employee's full duties
hereunder.
c. Two (2) or more absences of at least ten (10) days each not
separated by a return to employment for at least six (6) consecutive months
shall be deemed to be a continuation of the same period of absence.
d. The period of absence from employment because of disability
shall not commence for purposes of this paragraph until Employee has taken all
applicable sick leave days, if any, provided under this Agreement.
16. TERMINATION. Employment of Employee under this Agreement will be
terminated:
a. By Employee's death
b. By Employee's disability, if Employee's disability
continues for a continuous period of more than twelve (12) months.
c. Employee's attainment of age sixty-five (65).
<PAGE> 4
d. At the election of Employee, upon ninety (90) days' advance
notice.
e. By mutual agreement of Employee and Corporation.
f. By the dissolution and liquidation of Corporation (other
than as part of a reorganization, merger, consolidation or sale of all or
substantially all of the assets of Corporation whereby the business of
Corporation is continued).
g. By Corporation for Just Cause. For purposes of this
Agreement, "Just Cause" shall mean only the following:
(i) a final non-appealable conviction of or a plea
of guilty or nolo contendere by Employee to a felony or misdemeanor involving
fraud, embezzlement, theft, or dishonesty or other criminal conduct against
Corporation or others; or
(ii) habitual neglect of Employee's duties or failure
by Employee to perform or observe any substantial lawful obligation of such
employment that is not remedied within thirty (30) days after written notice
thereof from Corporation or its Board of Directors; or
(iii) any material breach by Employee of this
Agreement, which shall not be cured after the thirty (30) day period subsequent
to Employee's written notice from Corporation of the specific aspects of such
material breach.
h. By delivery of not less than six (6) months' written notice
from corporation, effective after December 31, 1997.
17. TERMINATION COMPENSATION. If Employee's employment is terminated by
the Corporation (other than for Just Cause, as specifically defined herein),
Employee shall receive continuing compensation under this Agreement for the
twelve (12) month period commencing on the day after Employee's effective date
of termination. Such compensation payments to Employee shall be in the same
manner and at the same intervals which Employee received such compensation
during his employment with the Corporation, and the amount of such compensation
shall be equal to the sum of the annual compensation received by the Employee
for the twelve (12) month period ending on the effective date of termination
plus the amount of compensation Employee would receive through his participation
in the Senior Management Committee Incentive Schedule referred to in Paragraph
7, with such participation being based on a pro-rata daily basis.
18. RESIGNATION FROM OFFICE UPON TERMINATION. In the event of
termination of this Agreement other than for death, Employee hereby agrees to
resign from all officer positions held in Corporation, or as an agent, trustee,
or consultant of Corporation or any affiliate of Corporation.
<PAGE> 5
19. WAIVER. A Party's failure to insist on compliance or enforcement of
any provision of this Agreement, shall not affect the validity or enforceability
or constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement by that Party or any other Party.
20. GOVERNING LAW. This Agreement shall in all respects be subject to,
and governed by, the laws of the State of Florida.
21. SEVERABILITY. The invalidity or unenforceability of any provision
of the Agreement shall not in any way affect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision had never been in this Agreement.
22. NOTICE. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally or if mailed by registered or certified
mail to Corporation at its principal place of business and to Employee at the
address hereinafter set forth following Employee's signature, or at such other
address or addresses as either Party may hereafter designate in writing to the
other.
23. ASSIGNMENT. The rights and benefits of either of the Parties under
this Agreement may not be assigned, nor the burdens delegated, without the prior
written consent of the other Party.
24. AMENDMENTS. This Agreement may be amended at any time by mutual
consent of the Parties hereto, with any such amendment to be invalid unless in
writing, signed by Corporation and Employee.
25. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or any breach of this Agreement, shall be settled by
arbitration in accordance with the Florida Arbitration Code unless otherwise
provided herein.
If such controversy or claim shall occur, Corporation shall
appoint an arbitrator and Employee shall appoint an arbitrator within fifteen
(15) days of one Party hereto sending written notice to the other of the
existence of such controversy or claim. The arbitrators so-appointed shall
appoint a third arbitrator within ten (10) days of the end of the aforementioned
fifteen (15) day period, and the decision by a majority of such arbitrators
shall be binding upon all parties. Corporation and Employee agree to cooperate
with the arbitrators and to supply them with such information as shall be
necessary in making such decision. Such arbitrators shall have the right to
allocate the costs of arbitration to one Party, or, to allocate such costs
between the Parties. If only one of Corporation or Employee shall appoint an
arbitrator within the fifteen (15) day period, such arbitrator so-appointed
shall be the sole arbitrator, and his or her decision shall be binding on all
Parties.
26. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Employee and Corporation with respect to the
employment of
<PAGE> 6
the Employee, and no representations, promises, agreements, or understandings,
written or oral, relating to the employment of Employee by Corporation not
contained herein shall be of any force or effect. The terms and provisions of
any employee manual or handbook are not a part of this Agreement.
27. BURDEN AND BENEFIT. This agreement shall be binding upon, and shall
inure to the benefit of, Corporation and Employee, and their respective heirs,
personal and legal representatives, successors, and assigns.
28. REFERENCES TO GENDER AND NUMBER TERMS. In construing this
Agreement, feminine or neuter pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
singular for plural in any place in which the context so requires.
29. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
IN WITNESS THEREOF, Corporation and Employee have duly executed this
Agreement as of the day and year first above written.
<PAGE> 7
CORPORATION: EMPLOYEE:
UNITED FINANCIAL HOLDINGS, INC. HAROLD J. WINNER
d/b/a UNITED FINANCIAL
By:___________________________ ___________________(SEAL)
Its:__________________________
Address of Corporation for Notice Address of Employee for
Purposes: Notice Purposes:
333 3rd Avenue North _________________________
P.O. Box 14517 _________________________
St. Petersburg, Fl. 33733
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
_____________, 1997, by and between UNITED FINANCIAL HOLDINGS, INC. d/b/a
UNITED FINANCIAL, a corporation incorporated under the laws of the State of
Florida ("Corporation") and CYNTHIA A. STOKES ("Employee").
W I T N E S S E T H:
WHEREAS, Corporation desires to enter into an employment relationship
with Employee on certain terms and conditions as set forth herein; and
WHEREAS, Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. Corporation hereby employs Employee in the capacity of
Director of Operations, or in such other position of the same or greater
stature as Corporation may direct or desire.
2. DUTIES. Employee's principal duties and responsibilities shall be
those that are usual and customary for his position and as are established from
time to time by the Corporation.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms
and conditions herein set forth. Employee agrees to perform such services and
duties and hold such offices as may be assigned to him from time to time by
Corporation and to devote his full business time, energies and best efforts to
the performance thereof to the exclusion of all other business activities,
except such activities as Corporation may consent to in writing.
4. TERM. For purposes of this Agreement, the term of employment shall
begin on __________, 1997, with Employee's commencing full-time work on that
date at Corporation's place of business and shall continue until terminated as
herein provided.
5. FACILITIES. Corporation shall provide Employee with an office,
staff, stenographic help, equipment and other services and facilities
reasonably required and suitable for the performance of Employee's duties
hereunder.
6. SALARY. As compensation for the services to be rendered by Employee
to Corporation pursuant to the Agreement, Employee shall be paid the following
annualized salary as basic compensation: Sixty-five Thousand Eight Hundred and
Twenty-three and No Dollars ($65,823.00), payable in equal monthly installments
in arrears for each month for which services are rendered, or such higher
compensation as may be established by Corporation from time to time.
<PAGE> 2
7. OTHER COMPENSATION. In addition to the basic salary compensation,
Employee shall be paid such additional compensation as is provided for in the
Senior Management Committee Incentive Schedule approved and adopted by
Corporation from time to time. References in this Agreement to "compensation"
shall include Salary under paragraph 6 and Other Compensation under paragraph
7.
8. EXPENSES. Corporation shall pay or reimburse Employee for the
reasonable and necessary business expenses of Employee, in accordance with
Corporation's policies from time to time established.
9. EMPLOYEE BENEFIT PLANS. Employee shall be eligible to participate,
to the extent he may be eligible, in any profit sharing, retirement, group
insurance or other employee benefit plan maintained by the Corporation.
Corporation reserves the right to amend to cancel such benefit plans from time
to time, provided that all eligible personnel are similarly treated.
10. KEY PERSON LIFE INSURANCE. Corporation, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance
on the life of the Employee in any amount or amounts considered advisable by
Corporation, and Employee shall submit to any medical or other examination and
execute and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
11. HEALTH INSURANCE. Corporation shall provide health insurance,
including major medical and dental coverage, for Employee in such form and
provide such coverage as is provided to other executive employees of
Corporation from time to time. Corporation reserves the right to amend or
cancel such insurance from time to time, provided that all eligible executives
are similarly treated.
12. VACATIONS AND LEAVE. Employee shall be entitled to the same
vacation and leave time as the other executive officers of Corporation.
13. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee acknowledges
that in and as a result of his employment by Corporation, he will be making use
of, acquiring, and/or adding to confidential information of a special and
unique nature and value relating to such matters as Corporation's patents,
copyrights, proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are deemed for all
purposes confidential and proprietary), as well as the nature and type of
services rendered by Corporation, the equipment, and methods used and preferred
by Corporation's customers, and the fees paid by them. As a material inducement
to Corporation to enter into this Agreement and to pay to Employee the
compensation stated in this Agreement, Employee covenants and agrees that he
shall not, at any time during or following the term of his employment, directly
or indirectly, divulge or disclose for any purpose whatsoever any confidential
information that has been obtained by, or disclosed to, him as a result of his
employment by Corporation. In the event of a breach or threatened breach by
Employee of any of the provisions of this paragraph, Corporation, in addition
to and not in limitation of, any other rights, remedies, or damages available
to Corporation at
<PAGE> 3
law or in equity, shall be entitled to a permanent injunction in order to
prevent or restrain any such breach by Employee or by Employee's partners,
agents, representatives, servants, employers, employees, family members and/or
any and all persons directly or indirectly acting for or with him.
14. DISABILITY DURING EMPLOYMENT. If, during Employee's employment,
Employee becomes unable to perform his duties under this Agreement because of
"disability", Corporation shall pay Employee the Salary that would otherwise be
payable under this Agreement through the period of disability, or if shorter,
for a period of ninety (90) days, and thereafter, until employment terminates
in accordance with this Agreement due to disability, Employee's Salary less the
amount of income paid to Employee under any policy of disability or worker's
compensation insurance paid for by Corporation shall be paid as disability
compensation.
a. For purposes of this Agreement, "disability" shall mean
Employee's inability to perform all, or substantially all, of his duties under
this Agreement because of accident or sickness, with or without reasonable
accommodation.
b. Employee's employment status shall be reinstated upon
return to employment before the end of the disability period for which income
is paid, as described above, with the discharge of Employee's full duties
hereunder.
c. Two (2) or more absences of at least ten (10) days each
not separated by a return to employment for at least six (6) consecutive months
shall be deemed to be a continuation of the same period of absence.
d. The period of absence from employment because of
disability shall not commence for purposes of this paragraph until Employee has
taken all applicable sick leave days, if any, provided under this Agreement.
15. TERMINATION. Employment of Employee under this Agreement will be
terminated:
a. By Employee's death
b. By Employee's disability, if Employee's disability
continues for a continuous period of more than twelve (12) months.
c. Employee's attainment of age sixty-five (65).
d. At the election of Employee, upon ninety (90) days'
advance notice.
e. By mutual agreement of Employee and Corporation.
<PAGE> 4
f. By the dissolution and liquidation of Corporation (other
than as part of a reorganization, merger, consolidation or sale of all or
substantially all of the assets of Corporation whereby the business of
Corporation is continued).
g. By Corporation for Just Cause. For purposes of this
Agreement, "Just Cause" shall mean only the following:
(i) a final non-appealable conviction of or a plea
of guilty or nolo contendere by Employee to a felony or misdemeanor involving
fraud, embezzlement, theft, or dishonesty or other criminal conduct against
Corporation or others; or
(ii) habitual neglect of Employee's duties or
failure by Employee to perform or observe any substantial lawful obligation of
such employment that is not remedied within thirty (30) days after written
notice thereof from Corporation or its Board of Directors; or
(iii) any material breach by Employee of this
Agreement, which shall not be cured after the thirty (30) day period subsequent
to Employee's written notice from Corporation of the specific aspects of such
material breach.
h. By delivery of not less than six (6) months' written
notice from corporation, effective after December 31, 1997.
16. TERMINATION COMPENSATION. If Employee's employment is terminated
by the Corporation (other than for Just Cause, as specifically defined herein),
Employee shall receive continuing compensation under this Agreement for the
twelve (12) month period commencing on the day after Employee's effective date
of termination. Such compensation payments to Employee shall be in the same
manner and at the same intervals which Employee received such compensation
during his employment with the Corporation, and the amount of such compensation
shall be equal to the sum of the annual compensation received by the Employee
for the twelve (12) month period ending on the effective date of termination
plus the amount of compensation Employee would receive through his
participation in the Senior Management Committee Incentive Schedule referred to
in Paragraph 7, with such participation being based on a pro-rata daily basis.
17. RESIGNATION FROM OFFICE UPON TERMINATION. In the event of
termination of this Agreement other than for death, Employee hereby agrees to
resign from all officer positions held in Corporation, or as an agent, trustee,
or consultant of Corporation or any affiliate of Corporation.
18. WAIVER. A Party's failure to insist on compliance or enforcement
of any provision of this Agreement, shall not affect the validity or
enforceability or constitute a waiver of future enforcement of that provision
or of any other provision of this Agreement by that Party or any other Party.
<PAGE> 5
19. GOVERNING LAW. This Agreement shall in all respects be subject to,
and governed by, the laws of the State of Florida.
20. SEVERABILITY. The invalidity or unenforceability of any provision
of the Agreement shall not in any way affect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision had never been in this Agreement.
21. NOTICE. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally or if mailed by registered or
certified mail to Corporation at its principal place of business and to
Employee at the address hereinafter set forth following Employee's signature,
or at such other address or addresses as either Party may hereafter designate
in writing to the other.
22. ASSIGNMENT. The rights and benefits of either of the Parties under
this Agreement may not be assigned, nor the burdens delegated, without the
prior written consent of the other Party.
23. AMENDMENTS. This Agreement may be amended at any time by mutual
consent of the Parties hereto, with any such amendment to be invalid unless in
writing, signed by Corporation and Employee.
24. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or any breach of this Agreement, shall be settled by
arbitration in accordance with the Florida Arbitration Code unless otherwise
provided herein.
If such controversy or claim shall occur, Corporation shall
appoint an arbitrator and Employee shall appoint an arbitrator within fifteen
(15) days of one Party hereto sending written notice to the other of the
existence of such controversy or claim. The arbitrators so-appointed shall
appoint a third arbitrator within ten (10) days of the end of the
aforementioned fifteen (15) day period, and the decision by a majority of such
arbitrators shall be binding upon all parties. Corporation and Employee agree
to cooperate with the arbitrators and to supply them with such information as
shall be necessary in making such decision. Such arbitrators shall have the
right to allocate the costs of arbitration to one Party, or, to allocate such
costs between the Parties. If only one of Corporation or Employee shall appoint
an arbitrator within the fifteen (15) day period, such arbitrator so- appointed
shall be the sole arbitrator, and his or her decision shall be binding on all
Parties.
25. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Employee and Corporation with respect to the
employment of the Employee, and no representations, promises, agreements, or
understandings, written or oral, relating to the employment of Employee by
Corporation not contained herein shall be of any force or effect. The terms and
provisions of any employee manual or handbook are not a part of this Agreement.
<PAGE> 6
26. BURDEN AND BENEFIT. This agreement shall be binding upon, and
shall inure to the benefit of, Corporation and Employee, and their respective
heirs, personal and legal representatives, successors, and assigns.
27. REFERENCES TO GENDER AND NUMBER TERMS. In construing this
Agreement, feminine or neuter pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
singular for plural in any place in which the context so requires.
28. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
IN WITNESS THEREOF, Corporation and Employee have duly executed this
Agreement as of the day and year first above written.
CORPORATION: EMPLOYEE:
UNITED FINANCIAL HOLDINGS, INC. Cynthia A. Stokes
d/b/a UNITED FINANCIAL
By:___________________________ __________________(SEAL)
Its:__________________________
Address of Corporation for Notice Address of Employee for
Purposes: Notice Purposes:
333 3rd Avenue North _________________________
P.O. Box 14517 _________________________
St. Petersburg, Fl. 33733
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
_____________, 1997, by and between UNITED FINANCIAL HOLDINGS, INC. d/b/a
UNITED FINANCIAL, a corporation incorporated under the laws of the State of
Florida ("Corporation") and NEIL W. SAVAGE ("Employee").
W I T N E S S E T H:
WHEREAS, Corporation desires to enter into an employment relationship with
Employee on certain terms and conditions as set forth herein; and
WHEREAS, Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants
and promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. Corporation hereby employs Employee in the capacity of
President, which includes duties as Chairman and Chief Executive Officer of
Corporation's wholly owned subsidiary, UNITED BANK AND TRUST COMPANY, or in
such other position of the same or greater stature as Corporation may direct or
desire.
2. DUTIES. Employee's principal duties and responsibilities shall be
those that are usual and customary for his position and as are provided from
time to time by the Board of Directors.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms
and conditions herein set forth. Employee agrees to perform such services and
duties and hold such offices as may be assigned to him from time to time by
Corporation and to devote his full business time, energies and best efforts to
the performance thereof to the exclusion of all other business activities,
except such activities as Corporation may consent to in writing.
4. TERM. For purposes of this Agreement, the term of employment shall
begin on __________, 1997, with Employee's commencing full-time work on that
date at Corporation's place of business and shall continue until terminated as
herein provided.
5. FACILITIES. Corporation shall provide Employee with an office,
staff, stenographic help, equipment and other services and facilities
reasonably required and suitable for the performance of Employee's duties
hereunder.
6. SALARY. As compensation for the services to be rendered by Employee
to Corporation pursuant to the Agreement, Employee shall be paid the following
annualized salary as basic compensation: One Hundred Thirty-Six Thousand and
No/Dollars ($136,000), payable in equal monthly installments in arrears for
each month for which services are rendered, or such higher compensation as may
be established by Corporation from time to time.
<PAGE> 2
7. OTHER COMPENSATION. In addition to the basic salary compensation,
Employee shall be paid such additional compensation as is provided for in the
Senior Management Committee Incentive Schedule approved and adopted by
Corporation from time to time. References in this Agreement to "compensation"
shall include Salary under paragraph 6 and Other Compensation under paragraph
7.
8. AUTOMOBILE. Corporation shall furnish Employee with an automobile
for his use in discharging his duties hereunder. At the end of each calendar
year, Employee shall pay a mutually agreed upon percentage of the operating
costs of the automobile for the purpose of reimbursing Corporation for
Employee's personal use of the automobile.
9. EXPENSES. Corporation shall pay or reimburse Employee for the
reasonable and necessary business expenses of Employee, provided that the same
have been approved by the Audit Committee of Corporation in accordance with
Corporation's policies from time to time established.
10. KEY PERSON LIFE INSURANCE. Corporation, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance
on the life of the Employee in any amount or amounts considered advisable by
Corporation, and Employee shall submit to any medical or other examination and
execute and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance.
11. EMPLOYEE BENEFIT PLANS. Employee shall be eligible to participate,
to the extent he may be eligible, in any profit sharing, retirement, group
insurance or other employee benefit plan maintained by the Corporation.
Corporation reserves the right to amend to cancel such benefit plans from time
to time, provided that all eligible personnel are similarly treated. In
addition, Employee shall continue to participate in the split dollar insurance
agreement and in the stock appreciation rights plan established under existing
agreements between Corporation and Employee, and such agreements shall remain
in full force and effect.
12. HEALTH INSURANCE. Corporation shall provide health insurance,
including major medical and dental coverage, for Employee in such form and
provide such coverage as is provided to other executive employees of
Corporation from time to time. Corporation reserves the right to amend or
cancel such insurance from time to time, provided that all eligible executives
are similarly treated.
13. VACATIONS AND LEAVE. Employee shall be entitled to the same
vacation and leave time as the other executive officers of Corporation.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee acknowledges
that in and as a result of his employment by Corporation, he will be making use
of, acquiring, and/or adding to confidential information of a special and
unique nature and value relating to such matters as Corporation's patents,
copyrights, proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are deemed for all
purposes confidential and proprietary), as well as the
<PAGE> 3
nature and type of services rendered by Corporation, the equipment, and methods
used and preferred by Corporation's customers, and the fees paid by them. As a
material inducement to Corporation to enter into this Agreement and to pay to
Employee the compensation stated in this Agreement, Employee covenants and
agrees that he shall not, at any time during or following the term of his
employment, directly or indirectly, divulge or disclose for any purpose
whatsoever any confidential information that has been obtained by, or disclosed
to, him as a result of his employment by Corporation. In the event of a breach
or threatened breach by Employee of any of the provisions of this paragraph,
Corporation, in addition to and not in limitation of, any other rights,
remedies, or damages available to Corporation at law or in equity, shall be
entitled to a permanent injunction in order to prevent or restrain any such
breach by Employee or by Employee's partners, agents, representatives,
servants, employers, employees, family members and/or any and all persons
directly or indirectly acting for or with him.
15. DISABILITY DURING EMPLOYMENT. If, during Employee's employment,
Employee becomes unable to perform his duties under this Agreement because of
"disability", Corporation shall pay Employee the Salary that would otherwise be
payable under this Agreement through the period of disability, or if shorter,
for a period of ninety (90) days, and thereafter, until employment terminates
in accordance with this Agreement due to disability, Employee's Salary less the
amount of income paid to Employee under any policy of disability or worker's
compensation insurance paid for by Corporation shall be paid as disability
compensation.
a. For purposes of this Agreement, "disability" shall mean
Employee's inability to perform all, or substantially all, of his duties under
this Agreement because of accident or sickness, with or without reasonable
accommodation.
b. Employee's employment status shall be reinstated upon
return to employment before the end of the disability period for which income
is paid, as described above, with the discharge of Employee's full duties
hereunder.
c. Two (2) or more absences of at least ten (10) days each
not separated by a return to employment for at least six (6) consecutive months
shall be deemed to be a continuation of the same period of absence.
d. The period of absence from employment because of
disability shall not commence for purposes of this paragraph until Employee has
taken all applicable sick leave days, if any, provided under this Agreement.
16. TERMINATION. Employment of Employee under this Agreement will be
terminated:
a. By Employee's death
b. By Employee's disability, if Employee's disability
continues for a continuous period of more than twelve (12) months.
<PAGE> 4
c. Employee's attainment of age sixty-five (65).
d. At the election of Employee, upon ninety (90) days'
advance notice.
e. By mutual agreement of Employee and Corporation.
f. By the dissolution and liquidation of Corporation ( other
than as part of a reorganization, merger, consolidation or sale of all or
substantially all of the assets of Corporation whereby the business of
Corporation is continued).
g. By Corporation for Just Cause. For purposes of this
Agreement, "Just Cause" shall mean only the following:
(i) a final non-appealable conviction of or a plea
of guilty or nolo contendere by Employee to a felony or misdemeanor involving
fraud, embezzlement, theft, or dishonesty or other criminal conduct against
Corporation or others; or
(ii) habitual neglect of Employee's duties or
failure by Employee to perform or observe any substantial lawful obligation of
such employment that is not remedied within thirty (30) days after written
notice thereof from Corporation or its Board of Directors; or
(iii) any material breach by Employee of this
Agreement, which shall not be cured after the thirty (30) day period subsequent
to Employee's written notice from Corporation of the specific aspects of such
material breach.
h. By delivery of not less than six (6) months' written
notice from corporation, effective after December 31, 1997.
17. TERMINATION COMPENSATION. If Employee's employment is terminated
by the Corporation (other than for Just Cause, as specifically defined herein),
Employee shall receive continuing compensation under this Agreement for the
twelve (12) month period commencing on the day after Employee's effective date
of termination. Such compensation payments to Employee shall be in the same
manner and at the same intervals which Employee received such compensation
during his employment with the Corporation, and the amount of such compensation
shall be equal to the sum of the annual compensation received by the Employee
for the twelve (12) month period ending on the effective date of termination
plus the amount of compensation Employee would receive through his
participation in the Senior Management Committee Incentive Schedule referred to
in Paragraph 7, with such participation being based on a pro-rata daily basis.
18. RESIGNATION FROM OFFICE UPON TERMINATION. In the event of
termination of this Agreement other than for death, Employee hereby agrees to
resign from all officer positions held in Corporation, or as an agent, trustee,
or consultant of Corporation or any affiliate of Corporation.
<PAGE> 5
19. WAIVER. A Party's failure to insist on compliance or enforcement
of any provision of this Agreement, shall not affect the validity or
enforceability or constitute a waiver of future enforcement of that provision
or of any other provision of this Agreement by that Party or any other Party.
20. GOVERNING LAW. This Agreement shall in all respects be subject to,
and governed by, the laws of the State of Florida.
21. SEVERABILITY. The invalidity or unenforceability of any provision
of the Agreement shall not in any way affect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision had never been in this Agreement.
22. NOTICE. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally or if mailed by registered or
certified mail to Corporation at its principal place of business and to
Employee at the address hereinafter set forth following Employee's signature,
or at such other address or addresses as either Party may hereafter designate
in writing to the other.
23. ASSIGNMENT. The rights and benefits of either of the Parties under
this Agreement may not be assigned, nor the burdens delegated, without the
prior written consent of the other Party.
24. AMENDMENTS. This Agreement may be amended at any time by mutual
consent of the Parties hereto, with any such amendment to be invalid unless in
writing, signed by Corporation and Employee.
25. ARBITRATION. Any controversy or claim arising out of, or relating
to this Agreement, or any breach of this Agreement, shall be settled by
arbitration in accordance with the Florida Arbitration Code unless otherwise
provided herein.
If such controversy or claim shall occur, Corporation shall
appoint an arbitrator and Employee shall appoint an arbitrator within fifteen
(15) days of one Party hereto sending written notice to the other of the
existence of such controversy or claim. The arbitrators so-appointed shall
appoint a third arbitrator within ten (10) days of the end of the
aforementioned fifteen (15) day period, and the decision by a majority of such
arbitrators shall be binding upon all parties. Corporation and Employee agree
to cooperate with the arbitrators and to supply them with such information as
shall be necessary in making such decision. Such arbitrators shall have the
right to allocate the costs of arbitration to one Party, or, to allocate such
costs between the Parties. If only one of Corporation or Employee shall appoint
an arbitrator within the fifteen (15) day period, such arbitrator so- appointed
shall be the sole arbitrator, and his or her decision shall be binding on all
Parties.
26. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Employee and Corporation with respect to the
employment of
<PAGE> 6
the Employee, and no representations, promises, agreements, or understandings,
written or oral, relating to the employment of Employee by Corporation not
contained herein shall be of any force or effect. The terms and provisions of
any employee manual or handbook are not a part of this Agreement.
27. BURDEN AND BENEFIT. This agreement shall be binding upon, and
shall inure to the benefit of, Corporation and Employee, and their respective
heirs, personal and legal representatives, successors, and assigns.
28. REFERENCES TO GENDER AND NUMBER TERMS. In construing this
Agreement, feminine or neuter pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
singular for plural in any place in which the context so requires.
29. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
IN WITNESS THEREOF, Corporation and Employee have duly executed this
Agreement as of the day and year first above written.
CORPORATION: EMPLOYEE:
UNITED FINANCIAL HOLDINGS, INC. NEIL W. SAVAGE
d/b/a UNITED FINANCIAL
<PAGE> 7
By:___________________________ __________________(SEAL)
Its:__________________________
Address of Corporation for Notice Address of Employee for
Purposes: Notice Purposes:
201 2nd Avenue North ______________________
P.O. Box 14517 _______________________
St. Petersburg, Fl. 33701-3347
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into effective as of the 28th day of December,
1995, by and between EICKHOFF, PIEPER & WILLOUGHBY, INC., a corporation
incorporated under the laws of the State of Florida ("EPW") and WILLIAM A.
EICKHOFF (the "Employee").
WHEREAS, EPW has organized and operates an investment management and advisory
services business ("Advisory Services Business");
WHEREAS, EPW desires to enter into an employment relationship with the Employee
to obtain the services of the Employee for its Advisory Services Business, on
terms and conditions set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants
and promises hereinafter contained, do hereby agree as follows:
1. EMPLOYMENT. EPW hereby employs Employee in the capacity of Chairman
and CEO or another position within EPW of the same or greater stature, as the
Board of Directors of EPW may direct or desire from time to time.
2. DUTIES. The Employee's principal duties and responsibilities shall be those
that are usual and customary for the,Employee's position and as provided from
time to time by the Board of Directors of EPW.
3. ACCEPTANCE. Employee hereby accepts the employment, on the terms and
conditions herein set forth. Employee agrees to perform such services and
duties and hold such offices as may be assigned to him from time to time by EPW
and to devote his full business time, energies and best efforts to the
performance thereof to the exclusion of all other business activities, except
such activities as EPW may consent to in writing. Employee further agrees to
maintain any and all necessary state and federal licenses that may be required
to provide investment management and advisory services.
4. TERM. The term of employment shall begin on the date hereof, with the
Employee's commencing full-time work on that date and shall continue until
terminated as herein provided.
5. FACILITIES. EPW shall provide the Employee with an office, staff,
stenographic help, equipment and other services and facilities reasonably
required and suitable for the performance of the Employee's duties hereunder.
6. SALARY. For each calendar year of employment, commencing January 1, 1996,
the Employees shall be paid compensation in accordance with the following:
(a) The Employer shall establish an annual "Salary Pool," which shall
be equal to the
<PAGE> 2
lesser of the "Fixed Salary Pool" or the "Variable Salary Pool."
i) The Fixed Salary Pool shall be equal to $115,000 times three, or
if less, times the number of "Shareholders" employed by the Employer for the
particular year.
ii) The Variable Salary Pool shall be equal to 15.5% of "revenues"
times three, or if less, times the number of "Shareholders" employed by the
Employer for the particular year.
(b) For purposes of Salary Pool calculations:
i) "Shareholders" shall be Eickhoff, Pieper and Willoughby, or
whomever among them is then employed by the Employer.
ii) For any partial year of employment, the "number" of
Shareholders employed shall be adjusted to reflect the partial year. For
example, if in 1998, Eickhoff resigns as of June 30, 1998, then for that
calendar year, the Fixed Salary Pool shall be $115,000 times 2.5. Also, for
example, if in 1998, Eickhoff resigns as of March 31. 1998. then for that
calendar year, the Variable Salary Pool shall be 15.5% of revenues times 2.25.
iii) "Revenues" shall mean the gross receipts earned by EPW for a
calendar year (with adjustments for returns, allowances and sales taxes, if any)
for which calculations are being made, calculated in accordance with generally
accepted accounting principles consistently applied. Accrual accounting shall be
used, and compensation paid to EPW from United Bank and Trust Company shall be
included. In the event the Employee and Employer do not agree upon the
calculation of revenues for any annual period, the disagreement shall be
resolved by the regularly employed independent accountant for the Employer,
whose decision shall, unless fraudulent or patently erroneous, bind the parties.
(c) The Employee shall participate in the Salary Pool only during the
portion of each calendar year he is employed under this Agreement.
(d) The Board of Directors shall allocate the entire Salary Pool for
each year among the Shareholders then employed by the Employer. The allocation
may be estimated prospectively for each calendar quarter-annual period, upon
the advice of the Compensation Committee of the Employer. If no recommendation
is made for a particular quarter-annual period, the allocation then in effect
shall continue during the applicable period.
(e) However, the allocations for any calendar year from the Salary
Pool to the Employee may be in any amount, from zero to the maximum amount in
the Salary Pool for the year. The allocations to the Employee are within the
sole and absolute discretion of the Board of Directors of the Employer, after
it has the advice and counsel of the Compensation Committee.
2
<PAGE> 3
(f) Compensation advances shall be paid monthly in arrears, and shall
be adjusted as of the end of each calendar year, or as of the date employment
terminates if earlier. Any reductions or increases in compensation shall be
settled as of the year end, or if earlier, as of the date of employment
terminates. Revenues shall be calculated for each year (or applicable shorter
period) as soon as practicable, and may be estimated, subject to adjustment
upon completion of the annual audit of the Employer's books and records by its
independent accountant.
7. BONUS.
(a) "The Employee shall participate each calendar year of employment
after 1995 in the Employer's Bonus Pool. The Bonus Pool, and the Employee's
participation, shall be in accordance with the following:
i) The total amount of the Bonus Pool for each calendar year
shall be allocated by the Employer among the Shareholders (as defined above in
this Agreement) then employed by the Employer. The amount of the Bonus Pool
shall not be reduced when one or more of the Shareholders is no longer employed
by the Employer. However, the allocations for any calendar year from the Bonus
Pool to the Employee may be, unless the Employee is the sole Shareholder then
employed by Employer, in any amount, from zero to the maximum amount in the
Bonus Pool for the year. The allocations to the Employee are within the sole
and absolute discretion of the Board of Directors of the Employer, after it has
the advice and counsel of the Compensation Committee.
ii) Allocations shall be made as of the end of each calendar
year, as soon as practicable, but in any event by April 30th of each subsequent
year.
iii) The Bonus Pool is deemed earned for a calendar year on
December 31st of the year. The Employee shall not be eligible to participate in
the Bonus Pool for a year unless he has been employed under this Agreement for
the entire calendar year.
iv) The Bonus Pool shall be calculated each calendar year in
accordance with the following:
<TABLE>
<CAPTION>
Bonus Pool % of
If Annual Pre-tax Profit of Employer is: Pre-tax Profits
---------------------------------------- ---------------
<S> <C>
$100,000 to $150,000 25%
$150,001 to $250,000 35%
$250.001 to more 40%
</TABLE>
v) The annual pre-tax profit for the Employer for each year
shall be calculated on the accrual basis by application of generally accepted
accounting principles consistently applied. For purposes of this calculation,
the Employer's net profits shall not be
3
<PAGE> 4
consolidated with those of the Trust Department of United Bank and Trust
Company, but otherwise, pre-tax net profits of the Employer shall bear
appropriate allocations of affiliated charges and expenses, using the
principals provided in the EPW Stock Option Plan between the Employer and
Pinellas Bancshares Corp.
vi) In the event the Employee and Employer do not agree upon
the calculation of the Bonus Pool, or annual pre-tax net profits, for any
annual period, the disagreement shall be resolved by the regularly employed
independent accountant for the Employer, whose decision shall, unless
fraudulent or patently erroneous, bind the parties.
vii) The Bonus Pool for a calendar year shall not be less
than $5,000.00 times the number of Shareholders employed on the last day of
such year.
8. EXPENSES. EPW shall pay or reimburse the Employee for the reasonable and
necessary business expenses of the Employee, provided that the same have been
approved by EPW in accordance with its policies from time to time established.
9. EMPLOYEE BENEFIT PLANS. The Employee shall be eligible to participate, to
the extent he may be eligible, in any profit sharing, retirement, group
insurance or other employee benefit plan maintained by EPW or Pinellas
Bancshares Corp. ("PBC"). EPW reserves the right to amend or cancel such
benefit plans from time to time, provided that all eligible personnel are
similarly treated.
10. STOCK OPTIONS. The Employee shall participate in the EPW Stock Option Plan,
a copy of which is annexed hereto as Exhibit 10.
11. VACATIONS AND LEAVE. The Employee shall be entitled to 4 weeks vacation and
leave time annually and any such additional vacation and leave time as may be
approved by the Board of Directors of EPW.
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee acknowledges that
in and as a result of his employment by EPW, he will be making use of,
acquiring, and/or adding to confidential information of a special and unique
nature and value relating to such matters as the EPW's and United Bank and
Trust Company's ("United") proprietary information, trade secrets, systems,
procedures, manuals, confidential reports, lists of customers and data about
customer (which are deemed for all purposes confidential and proprietary), as
well as the nature and type of services rendered by the EPW and United, the
methods used and preferred by EPW's and United's customers, and the fees paid
by them. As a material inducement to EPW to enter into this Agreement and to
pay to Employee the compensation stated in this Agreement, Employee covenants
and agrees that the Employee shall not, at any time during or following the
term of his employment, directly or indirectly divulge or disclose for any
purpose whatsoever any confidential information that has been obtained by, or
disclosed to, Employee as a result of employment by EPW. In the event of a
breach or threatened breach by Employee of any of the provisions of this
Paragraph, EPW, in addition to and not in limitation of, any other rights,
4
<PAGE> 5
remedies, or damages available to EPW at law or in equity, shall be entitled to
a permanent injunction in order to prevent or restrain any such breach by the
Employee or by Employee's partners, agents, representatives, servants,
employers, employees, family members and/or any and all persons directly or
indirectly acting for or with Employee.
13. COVENANTS AGAINST COMPETITION. Employee, in consideration of his employment
by EPW and other good and valuable consideration, hereby covenants (the
"Covenant") not to compete with EPW pursuant to the following terms:
(a) Covenant. Employee covenants and agrees with EPW that Employee
will not, directly or indirectly, for himself or in connection with any person,
firm or entity:
i) For a period running during his employment by EPW and from
the date after his employment by EPW terminates until the earlier of 2 years
from the date of termination or January 1, 2000 (the "Non-Compete Term") (the
term shall be extended for any period in which Employee is in violation of the
Covenant) come into competition with EPW by participating in or in connection
with or being employed by any business which engages in a similar line of
business (the "Line of Business") of EPW, predominantly within EPW's trade area
(the "Trade Area").
ii) For a period running during his employment by EPW and
from the date after his employment by EPW terminates until the earlier of three
(3) years from the date of termination or January 1, 2000 (the term shall be
extended from any period in which Employee is in violation of the Covenant)
solicit, sell, or handle any investment advisory transactions or business for
any customers or clients of EPW (the "Customers or Clients of EPW") or any
subsidiary of EPW; or solicit or persuade any employee of EPW or the Trust
Department of United Bank and Trust Company (the "Trust Department") to leave
the employment of EPW or Trust Department or hire any such employee.
(b) Customers or Clients Defined. As used in subsection 13(a)(ii),
above, the phrase "Customers or Clients of EPW" shall mean any customer or
client with which EPW has previously provided goods or services or otherwise
engaged in business association and shall additionally include all customers
and accounts serviced by Employee during the term of employment of Employee by
EPW. "Customers or Clients of EPW" shall also mean all previous and;current
customers and clients of the Trust Department and all persons for whom EPW or
Employee has provided services within the Line of Business.
(c) Line of Business Defined. As used in subsection 13(a), above, the
phrase "Line of Business" shall be defined as the sale of investment advisory
and management services.
(d) Trade Area Defined. As used in subsection 13(a), above, the phrase
"Trade Area" shall encompass Pinellas and Hillsborough Counties, Florida.
(e) Breach of Covenant. Employee agrees that any breach of this
Covenant will result
5
<PAGE> 6
in irreparable injury to EPW, for which EPW will have no adequate remedy at
law, and Employee consents to an injunction in favor of EPW, enjoining any
breach of this Covenant by any court of competent jurisdiction, without
prejudice, to any other right or remedy to which EPW may be entitled. In the
event that this Covenant shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a period of time, or too large a geographical area, or over too great a range
of activities, the parties agree that this Covenant shall be interpreted to
extend only over the maximum period of time, geographical area, or range of
activities as to which it may be enforceable. Employee hereby waives any bond
requirement pending any proceeding by EPW to enforce this Covenant.
(f) Purchase of EPW. The Covenant shall not apply to a Employee after
the Employee, alone or with others, purchases EPW or after there has been a
"change of control" in accordance with the First Right of Refusal Agreement
between Employee and Pinellas Bancshares Corporation executed and dated
contemporaneously herewith.
(g) Termination of Employee. If Employee is terminated from Employment by
EPW as a result of a material breach pursuant to subsection 14(e)(iii) of
employment agreement, then subsection 13(a)(i) of the Covenant shall not apply
to Employee.
14. TERMINATION. Employment of the Employee under this Agreement will be
terminated:
(a) By the Employee's death.
(b) If the Employee is Totally Disabled.
i) For the purpose of this Agreement, the Employee will be Totally
Disabled if the Employee (1) has been declared legally incompetent by a final
court decree (the date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits from any
disability income insurance policy maintained by EPW for a period of six (6)
consecutive months, or (3) has been found to be disabled pursuant to a
Disability Determination.
ii) A Disability Determination means a finding that the Employee,
because of a medically determinable disease, injury, or other mental or physical
disability, is unable to perform substantially all of his regular duties to EPW
and that such disability has lasted at least, six (6) months. The Disability
Determination shall be based on the written opinion of the physician regular
attending the Employee whose disability is in question.
iii) If EPW disagrees with the opinion of this physician (the "First
Physician"), it may engage at its own expense another physician (the "Second
Physician") to examine the Employee. If the First and Second Physicians agree in
writing that the Employee is or is not disabled, their written opinion shall,
except as otherwise set forth in this subsection, be conclusive on the issue of
disability.
6
<PAGE> 7
iv) If the First and Second Physicians disagree on the disability
of the Employee, is not Totally Disabled, EPW shall have the right to request
additional Disability Determinations provided it agrees to pay all the expenses
of the Disability Determinations and does not request an additional Disability
Determination more frequently than once every six (6) months.
v) If there is a conclusive finding that the Employee is not
Totally Disabled, EPW shall have the right to request additional Disability
Determinations provided it agrees to pay all the expenses of the Disability
Determinations and does not request an additional Disability Determination more
frequently than once every six (6) months.
vi) In conjunction with a Disability Determination, the Employee
hereby consents to any required medical examination, and agrees to furnish any
medical information requested by any examining physician and to waive any
applicable physician-patient privilege that may arise because of such
examination.
vii) All physicians except the First Physician must be
board-certified in the specialty most closely related to the nature of the
disability alleged to exist.
(c) At the election of the Employee upon six (6) months advance
notice.
(d) By mutual agreement of the Employee and EPW.
(e) By EPW for Just Cause. For purposes of this Agreement, "Just
Cause" shall mean only the following:
i) a final non-appealable conviction of or a plea of guilty or nolo
contendere by the Employee to a felony or misdemeanor involving fraud,
embezzlement, theft, or dishonesty or other such criminal conduct against EPW or
others.
ii) habitual neglect of the Employee's duties or failure by the
Employee to perform or observe any substantial lawful obligation of such
employment that is not remedied within thirty (3) days after written notice
thereof from EPW or its Board of Directors, or
iii) any material breach by the Employee of this Agreement that is
not remedied within thirty (30) days after written notice thereof from EPW or
its Board of Directors.
(f) On December 31, 1999 if the Employee has not renewed the
Employment Agreement in writing by July 1, 1999. Employee may renew this
Agreement for a 3 year term from December 31, 1999 if Employee affirmatively
states (prior to or on July 1, 1999), in writing, to the Board of EPW that
Employee wishes to renew this Agreement. In the event of such renewal, Employee
will no longer participate in the EPW Stock Option Plan or the cash bonus
provided in Section 7 of this Agreement but shall participate in any bonus plan
for the Trust Department of unite] Bank and Trust Company and EPW will be
treated as part of the
7
<PAGE> 8
Trust Department for these purposes.
(g) On or after December 31, 2002, by either party upon three (3) months
notice to the other.
15. LIFE INSURANCE. EPW shall provide a minimum of $900,000.00 (WAE), $900,000
(JHP), $675,000.00 (JPW) in life insurance which shall include the
(convertible) whole life policy issued by Massachusetts Mutual, policy number
7041723 (WAE), policy number 7041733 (JHP), and policy number 9754602 (JPW)
with a current death benefit of $265,061.00 (WAE), $267,938.00 (JHP) and
$200,756.00 (JPW). Upon termination of employment, employee, at its option, may
require EPW to assign the life insurance policies to such Employee provided any
such policies are assignable at no cost to EPW.
16. RESIGNATION FROM OFFICES UPON TERMINATION. In the event of termination of
this Agreement other than for death, the Employee hereby agrees to resign from
all positions held in EPW. Positions to be resigned include without
limitations, any position as officer, agent, trustee or consultant of EPW or
any affiliate of EPW (excluding PBC). If at the time of termination the
Employee is a member of the Board of Directors of PBC the Employee shall remain
as director thereof.
17. WAIVER. A Party's failure to insist on compliance or enforcement of any
provision of this Agreement, shall not affect the validity or enforceability or
constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement by that party or any other party.
18. GOVERNING LAW. This Agreement shall in all respects be subject to, and
governed by, the laws of the State of Florida.
19. SEVERABILITY. The invalidity or enforceability of any provision in the
Agreement shall not in any way affect the validity or enforceability of any
other provision and this Agreement shall be construed in all respects as if
such invalid or enforceable provision had never been in the Agreement.
20. NOTICE. Any and all notices required or permitted herein shall be deemed
delivered if delivered personally or if mailed by registered or certified mail
to EPW at its principal place of business and to the Employee at the address
hereinafter set forth following the Employee's signature, or at such other
address or addresses as either party may hereafter designate in writing to the
other.
21. ASSIGNMENT. The rights and benefits of either of the parties under this
Agreement may not be assigned, nor the burdens delegated, without the prior
written consent of the other party.
22. AMENDMENTS. This Agreement may be amended at any time by mutual consent of
the parties hereto, with any such amendment to be invalid unless in writing,
signed by EPW and the
8
<PAGE> 9
Employee.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between the Employee and EPW with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, relating to the employment of the Employee by
EPW not contained herein shall be of any force or effect. The terms and
provisions of any employee manual or handbook are not a part of this Agreement.
24. BURDEN AND BENEFIT. This Agreement shall be binding upon, and shall inure
to the benefit of, EPW and Employee, and their respective heirs, personal and
legal representatives, successors, and assigns.
25. REFERENCES TO GENDER AND NUMBER TERMS. In construing this Agreement,
feminine or number pronouns shall be substituted for those masculine in form
and vice versa, and plural terms shall be substituted for singular and singular
for plural in any place in which the context so requires.
26. HEADINGS. The various headings in this Agreement are inserted for
convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate at
St. Petersburg, Florida, effective the day and year first above written.
EICKHOFF, PIEPER & WILLOUGHBY, INC.
By:________________________________
William A. Eickhoff, as its CEO
(Corporate Seal)
Address of EPW for notice purposes: ____________________________
____________________________
9
<PAGE> 10
EMPLOYEE:
____________________________________ (Seal)
William A. Eickhoff
Address of Employee for notice purposes: ____________________________
____________________________
Exhibits:
10 - EPW Stock Option Plan
10
<PAGE> 1
EXHIBIT 10.12
UNITED BANK AND TRUST COMPANY
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this ______ day of ____________, 1997, by and between
UNITED BANK AND TRUST COMPANY, a state commercial bank located in St.
Petersburg, Florida (the "Company") and HAROLD J. WINNER (the "EXECUTIVE").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Benefit Percentage" means 50 percent.
1.1.2 "Change of Control" means: (i) a tender offer made and
consummated for the ownership of 25% or more of the outstanding voting
securities of the Company; (ii) a merger or consolidation of the Company with
another bank or corporation and as a result of such merger or consolidation
less than 75% of the outstanding voting securities of the surviving or
resulting bank or shareholders of the Company, other than affiliates (within
the meaning of the Securities Exchange Act of 1934) of any party to such merger
or consolidation, as the same shall have existed immediately prior to such
merger or consolidation, (iii) a sale of substantially all of the Company's
assets to another bank or corporation which is not a wholly owned subsidiary;
or (iv) an acquisition of the Company by a person, within the meaning of
Section 3(a)(9) or Section 13 (d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, of 25% or more of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant to the
Securities and Exchange Act of 1934.
1.1.3 "Code" means the Internal Revenue Code of 1986, as
amended.
<PAGE> 2
1.1.4 "Disability" means, if the Executive is covered by a
Company sponsored disability policy, total disability as defined in such policy
without regard to any waiting period. If the Executive is not covered by such a
policy, Disability means the Executive suffering a sickness, accident, or
injury which, in the judgment of a physician satisfactory to the Company,
prevents the Executive from performing substantially all of the Executive's
normal duties for the Company. As a condition to any benefits, the Company may
require the Executive to submit to such physical or mental evaluations and
tests as the Company's Board of Directors deems appropriate.
1.1.5 "Early Termination" means the Termination of Employment
before Normal Retirement Age for reasons other than Death, Disability,
Termination for Cause or following a Change of Control.
1.1.6 "Early Termination Date" means the month, day and year
in which Early Termination occurs.
1.1.7 "Final Pay" means the total annual base salary payable
to the Executive at the rate in effect on the date specified. Final Pay shall
not be reduced for any salary reduction contributions: (i) to cash or deferred
arrangements under Section 401(k) of the Code; (ii) to a cafeteria plan under
Section 125 of the Code; (iii) to a deferred compensation plan that is not
qualified under Section 401(a) of the Code.
1.1.8 "Normal Retirement Age" means the Executive's 65th
birthday.
1.1.9 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.10 "Plan Year" means a twelve-month period commencing on
____________ and ending on ___________ of each year. The initial Plan Year
shall commence on the effective date of this Agreement, which shall be January
1, 1997.
1.1.11 "Termination for Cause" See Section 4.1.
1.1.12 "Termination of Employment" means that the Executive
ceases to be employed by the Company for any reason whatsoever other than by
reason of a leave of absence which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the Company
shall have the sole and absolute right to decide the dispute.
2
<PAGE> 3
ARTICLE 2
LIFETIME BENEFITS
2.1 Normal Retirement Benefit. Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this
Section 2.1 is the Executive's Final Pay multiplied by the Benefit Percentage.
2.1.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on the first
day of each month commencing with the month following the Executive's Normal
Retirement Date and continuing for 239 additional months.
2.1.3 Benefit Increases. Commencing on the first anniversary
of the first benefit payment, and continuing on each subsequent anniversary,
the Company's Board of Directors, in its sole discretion, may increase the
benefit.
2.2 Early Termination Benefit. Upon Early Termination, the Company
shall pay to the Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Agreement.
2.2.1 Amount of Benefit. The annual benefit under this
Section 2.2 is the Executive's Final Pay multiplied by the Benefit Percentage
times the vesting schedule as shown in Schedule A.
2.2.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on the first
day of each month commencing with the month following the later of the
Executive's termination or attainment of age fifty-nine (59) and continuing for
239 additional months.
2.2.3 Benefit Increases. Benefit payments may be increased as
provided in Section 2.1.3.
2.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.
2.3.1 Amount of Benefit. The annual benefit under this
Section 2.3 is the Executive's Final Pay multiplied by the Benefit Percentage.
2.3.2 Payment of Benefit. The Company shall pay the annual
benefit amount to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Termination of
Employment and continuing for 239 additional months.
3
<PAGE> 4
2.3.3 Benefit Increases. Benefit payments may be increased as
provided in Section 2.1.3.
2.4 Change of Control Benefit. Upon a Change of Control, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu of
any other benefit under this Agreement.
2.4.1 Amount of Benefit. The annual benefit under this
Section 2.4 is the Executive's Final Pay multiplied by the Benefit Percentage
at the time of the Executive's Termination of Employment.
2.4.2 Payment of Benefit. The Company shall pay the annual
benefit amount to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the later of age
fifty-nine (59) or Termination of Employment and continuing for 239 additional
months.
2.4.3 Benefit Increases. Benefit payments may be increased as
provided in Section 2.1.3.
ARTICLE 3
DEATH BENEFITS
3.1 Death. Upon the death of the Executive, this Agreement shall
immediately terminate. Upon the termination of this Agreement, all benefit
payments shall cease and the Company shall not be obligated to pay any more
benefits. This includes, but is not limited to, the situations where the death
of the Executive occurs after benefit payments have commenced and the death of
the Executive has occurred after Termination of Employment but before benefit
payments have commenced.
ARTICLE 4
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not pay any benefit under this Agreement:
4.1 Termination for Cause. If the Company terminates the Executive's
employment for "cause", which shall be restricted to the following:
4.1.1 Gross negligence or gross neglect of duties
which continue to occur after thirty (30) days from the date Executive has
received written notice from Company:
4
<PAGE> 5
4.1.2 Commission of a felony or of a gross
misdemeanor involving moral turpitude; or
4.1.3 Fraud, disloyalty, dishonesty or willful
violation of any law or significant Company policy committed in connection with
the Executive's employment and resulting in an adverse effect on the Company.
4.2 Competition After Termination of Employment. No benefits
shall be payable if the Executive, without the prior written consent of the
Company, engages in, becomes interested in, directly or indirectly, as a sole
proprietor, as a partner in partnership, or as a substantial shareholder in a
corporation, or becomes associated with, in the capacity of employee, director,
officer, principal, agent, trustee or in any other capacity whatsoever, any
enterprise conducted in the trading area (a 50 mile radius) of the business of
the Company, which enterprise is, or may deemed to be, competitive with any
business carried on by the Company as of the date of termination of the
Executive's employment or his retirement. This section shall not apply
following a Change of Control.
4.3 Suicide or Misstatement. No benefits shall be payable if
the Executive commits suicide within two years after the date of this
Agreement, or if the Executive has made any material misstatement of fact on
any application for life insurance purchased by the Company.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. The Company shall notify any person or
entity that makes a claim against the Agreement (the "Claimant") in writing,
within ninety (90) days of Claimant's written application for benefits, of his
or her eligibility or noneligibility for benefits under the Agreement. If the
Company determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the Claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of the Agreement's claims review procedure and
other appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed. If the Company determines that there are
special circumstances requiring additional time to make a decision, the Company
shall notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an
additional ninety-day period.
5.2 Review Procedure. If the Claimant is determined by the
Company not to be eligible for benefits, or if the Claimant believes that he or
she is entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by
5
<PAGE> 6
filing a petition for review with the Company within sixty (60) days after
receipt of the notice issued by the Company. Said petition shall state the
specific reasons which the Claimant believes entitle him or her to benefits or
to greater or different benefits. Within sixty (60) days after receipt by the
Company of the petition, the Company shall afford the Claimant (and counsel, if
any) an opportunity to present his or her position to the Company orally or in
writing, and the Claimant (or counsel) shall have the right to review pertinent
documents. The Company shall notify the Claimant of its decision in writing
within the sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant and the
specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 6
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
ARTICLE 7
MISCELLANEOUS
7.1 Binding Effect. This Agreement shall bind the Executive
and the Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
7.2 No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.
7.3 Non-Transferability. Benefits under this Agreement cannot
be sold, transferred, assigned, pledged, attached or encumbered in any manner.
7.4 Reorganization. The Company shall not merge or
consolidate into or with another company, or reorganize, or sell substantially
all of its assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume and discharge the
obligations of the Company under this Agreement. Upon the occurrence of such
6
<PAGE> 7
event, the term "Company" as used in this Agreement shall be deemed to refer to
the successor or survivor company.
7.5 Tax Withholding. The Company shall withhold any taxes
that are required to be withheld from the benefits provided under this
Agreement.
7.6 Applicable Law. The Agreement and all rights hereunder
shall be governed by the laws of the State of Florida, except to the extent
preempted by the laws of the United States of America.
7.7 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Company for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Company to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's life
is a general asset of the Company to which the Executive and beneficiary have
no preferred or secured claim.
7.8 Recovery of Estate Taxes. If the Executive's gross estate
for federal estate tax purposes includes any amount determined by reference to
and on account of this Agreement, and if the beneficiary is other than the
Executive's estate, then the Executive's estate shall be entitled to recover
from the beneficiary receiving such benefit under the terms of the Agreement,
an amount by which the total estate tax due by the Executive's estate, exceeds
the total estate tax which would have been payable if the value of such benefit
had not been included in the Executive's gross estate. If there is more than
one person receiving such benefit, the right of recovery shall be against each
such person. In the event the beneficiary has a liability hereunder, the
beneficiary may petition the Company for a lump sum payment in an amount not to
exceed the beneficiary's liability hereunder.
7.9 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive as to the subject matter
hereof. No rights are granted to the Executive by virtue of this Agreement
other than those specifically set forth herein.
7.10 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
7.10.1 Interpreting the provisions of this
Agreement;
7.10.2 Establishing and revising the method of
accounting for the Agreement;
7.10.3 Maintaining a record of benefit payments; and
7
<PAGE> 8
7.10.4 Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
7.11 Designated Fiduciary. For purposes of the Employee
Retirement Income Security Act of 1974, if applicable, the Company shall be the
named fiduciary and plan administrator under the Agreement. The named fiduciary
may delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized
Company officer have signed this Agreement.
EXECUTIVE: COMPANY:
UNITED BANK AND TRUST COMPANY
______________________________ By:____________________________________
Harold J. Winner
Title:________________________
GUARANTY: Any obligations of the Company under this Agreement are guaranteed by
United Financial Holdings, Inc.
By:______________________________
Title:___________________________
8
<PAGE> 9
SCHEDULE A
VESTING SCHEDULE
<TABLE>
<CAPTION>
Years Completed * Vesting Percentage
- ----------------- ------------------
<S> <C>
1 30%
2 40%
3 50%
4 60%
5 70%
6 80%
7 90%
8 100%
</TABLE>
* Years of service following the date of execution of this Agreement.
9
<PAGE> 1
Exhibit 10.13
UNITED BANK AND TRUST COMPANY
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this ______ day of ____________, 1997, by and between
UNITED BANK AND TRUST COMPANY, a state commercial bank located in St.
Petersburg, Florida (the "Company") and NEIL W. SAVAGE (THE "EXECUTIVE").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Benefit Percentage" means 60 percent.
1.1.2 "Change of Control" means: (i) a tender offer made and
consummated for the ownership of 25% or more of the outstanding voting
securities of the Company; (ii) a merger or consolidation of the Company with
another bank or corporation and as a result of such merger or consolidation
less than 75% of the outstanding voting securities of the surviving or
resulting bank or shareholders of the Company, other than affiliates (within
the meaning of the Securities Exchange Act of 1934) of any party to such merger
or consolidation, as the same shall have existed immediately prior to such
merger or consolidation, (iii) a sale of substantially all of the Company's
assets to another bank or corporation which is not a wholly owned subsidiary;
or (iv) an acquisition of the Company by a person, within the meaning of
Section 3(a)(9) or Section 13 (d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, of 25% or more of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant to the
Securities and Exchange Act of 1934.
1.1.3 "Code" means the Internal Revenue Code of 1986, as
amended.
<PAGE> 2
1.1.4 "Disability" means, if the Executive is covered by a
Company sponsored disability policy, total disability as defined in such policy
without regard to any waiting period. If the Executive is not covered by such a
policy, Disability means the Executive suffering a sickness, accident, or
injury which, in the judgment of a physician satisfactory to the Company,
prevents the Executive from performing substantially all of the Executive's
normal duties for the Company. As a condition to any benefits, the Company may
require the Executive to submit to such physical or mental evaluations and
tests as the Company's Board of Directors deems appropriate.
1.1.5 "Early Termination" means the Termination of Employment
before Normal Retirement Age for reasons other than Death, Disability,
Termination for Cause or following a Change of Control.
1.1.6 "Early Termination Date" means the month, day and year
in which Early Termination occurs.
1.1.7 "Final Pay" means the total annual base salary payable
to the Executive at the rate in effect on the date specified. Final Pay shall
not be reduced for any salary reduction contributions: (i) to cash or deferred
arrangements under Section 401(k) of the Code; (ii) to a cafeteria plan under
Section 125 of the Code; (iii) to a deferred compensation plan that is not
qualified under Section 401(a) of the Code.
1.1.8 "Normal Retirement Age" means the Executive's 65th
birthday.
1.1.9 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.10 "Plan Year" means a twelve-month period commencing on
____________ and ending on ___________ of each year. The initial Plan Year
shall commence on the effective date of this Agreement, which shall be January
1, 1997.
1.1.11 "Termination for Cause" See Section 4.1.
1.1.12 "Termination of Employment" means that the Executive
ceases to be employed by the Company for any reason whatsoever other than by
reason of a leave of absence which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the Company
shall have the sole and absolute right to decide the dispute.
2
<PAGE> 3
ARTICLE 2
LIFETIME BENEFITS
2.1 Normal Retirement Benefit. Upon Termination of Employment
on or after the Normal Retirement Age for reasons other than death, the Company
shall pay to the Executive the benefit described in this Section 2.1 in lieu of
any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under
this Section 2.1 is the Executive's Final Pay multiplied by the Benefit
Percentage.
2.1.2 Payment of Benefit. The Company shall pay the
annual benefit to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Executive's
Normal Retirement Date and continuing for 239 additional months.
2.1.3 Benefit Increases. Commencing on the first
anniversary of the first benefit payment, and continuing on each subsequent
anniversary, the Company's Board of Directors, in its sole discretion, may
increase the benefit.
2.2 Early Termination Benefit. Upon Early Termination, the Company
shall pay to the Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Agreement.
2.2.1 Amount of Benefit. The annual benefit under
this Section 2.2 is the Executive's Final Pay multiplied by the Benefit
Percentage.
2.2.2 Payment of Benefit. The Company shall pay the
annual benefit to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the later of the
Executive's termination or attainment of age fifty-nine (59) and continuing for
239 additional months.
2.2.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
2.3 Disability Benefit. If the Executive terminates
employment due to Disability prior to Normal Retirement Age, the Company shall
pay to the Executive the benefit described in this Section 2.3 in lieu of any
other benefit under this Agreement.
2.3.1 Amount of Benefit. The annual benefit under
this Section 2.3 is the Executive's Final Pay multiplied by the Benefit
Percentage.
2.3.2 Payment of Benefit. The Company shall pay the
annual benefit amount to the Executive in 12 equal monthly installments payable
on the first day of each month commencing with the month following the
Termination of Employment and continuing for 239 additional months.
3
<PAGE> 4
2.3.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
2.4 Change of Control Benefit. Upon a Change of Control, the
Company shall pay to the Executive the benefit described in this Section 2.4 in
lieu of any other benefit under this Agreement.
2.4.1 Amount of Benefit. The annual benefit under
this Section 2.4 is the Executive's Final Pay multiplied by the Benefit
Percentage at the time of the Executive's Termination of Employment.
2.4.2 Payment of Benefit. The Company shall pay the
annual benefit amount to the Executive in 12 equal monthly installments payable
on the first day of each month commencing with the month following the later of
age fifty-nine (59) or Termination of Employment and continuing for 239
additional months.
2.4.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
ARTICLE 3
DEATH BENEFITS
3.1 Death. Upon the death of the Executive, this Agreement
shall immediately terminate. Upon the termination of this Agreement, all
benefit payments shall cease and the Company shall not be obligated to pay any
more benefits. This includes, but is not limited to, the situations where the
death of the Executive occurs after benefit payments have commenced and the
death of the Executive has occurred after Termination of Employment but before
benefit payments have commenced.
ARTICLE 4
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not pay any benefit under this Agreement:
4.1 Termination for Cause. If the Company terminates the
Executive's employment for "cause", which shall be restricted to the following:
4.1.1 Gross negligence or gross neglect of
duties which continue to occur after thirty (30) days from the date Executive
has received written notice from Company:
4
<PAGE> 5
4.1.2 Commission of a felony or of a gross
misdemeanor involving moral turpitude; or
4.1.3 Fraud, disloyalty, dishonesty or
willful violation of any law or significant Company policy committed in
connection with the Executive's employment and resulting in an adverse effect
on the Company.
4.2 Competition After Termination of Employment. No benefits
shall be payable if the Executive, without the prior written consent of the
Company, engages in, becomes interested in, directly or indirectly, as a sole
proprietor, as a partner in partnership, or as a substantial shareholder in a
corporation, or becomes associated with, in the capacity of employee, director,
officer, principal, agent, trustee or in any other capacity whatsoever, any
enterprise conducted in the trading area (a 50 mile radius) of the business of
the Company, which enterprise is, or may deemed to be, competitive with any
business carried on by the Company as of the date of termination of the
Executive's employment or his retirement. This section shall not apply
following a Change of Control.
4.3 Suicide or Misstatement. No benefits shall be payable if
the Executive commits suicide within two years after the date of this
Agreement, or if the Executive has made any material misstatement of fact on
any application for life insurance purchased by the Company.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. The Company shall notify any person or
entity that makes a claim against the Agreement (the "Claimant") in writing,
within ninety (90) days of Claimant's written application for benefits, of his
or her eligibility or noneligibility for benefits under the Agreement. If the
Company determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the Claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of the Agreement's claims review procedure and
other appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed. If the Company determines that there are
special circumstances requiring additional time to make a decision, the Company
shall notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an
additional ninety-day period.
5.2 Review Procedure. If the Claimant is determined by the
Company not to be eligible for benefits, or if the Claimant believes that he or
she is entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by
5
<PAGE> 6
filing a petition for review with the Company within sixty (60) days after
receipt of the notice issued by the Company. Said petition shall state the
specific reasons which the Claimant believes entitle him or her to benefits or
to greater or different benefits. Within sixty (60) days after receipt by the
Company of the petition, the Company shall afford the Claimant (and counsel, if
any) an opportunity to present his or her position to the Company orally or in
writing, and the Claimant (or counsel) shall have the right to review pertinent
documents. The Company shall notify the Claimant of its decision in writing
within the sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant and the
specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 6
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
ARTICLE 7
MISCELLANEOUS
7.1 Binding Effect. This Agreement shall bind the Executive
and the Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
7.2 No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.
7.3 Non-Transferability. Benefits under this Agreement cannot
be sold, transferred, assigned, pledged, attached or encumbered in any manner.
7.4 Reorganization. The Company shall not merge or
consolidate into or with another company, or reorganize, or sell substantially
all of its assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume and discharge the
obligations of the Company under this Agreement. Upon the occurrence of such
6
<PAGE> 7
event, the term "Company" as used in this Agreement shall be deemed to refer to
the successor or survivor company.
7.5 Tax Withholding. The Company shall withhold any taxes
that are required to be withheld from the benefits provided under this
Agreement.
7.6 Applicable Law. The Agreement and all rights hereunder
shall be governed by the laws of the State of Florida, except to the extent
preempted by the laws of the United States of America.
7.7 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Company for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Company to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's life
is a general asset of the Company to which the Executive and beneficiary have
no preferred or secured claim.
7.8 Recovery of Estate Taxes. If the Executive's gross estate
for federal estate tax purposes includes any amount determined by reference to
and on account of this Agreement, and if the beneficiary is other than the
Executive's estate, then the Executive's estate shall be entitled to recover
from the beneficiary receiving such benefit under the terms of the Agreement,
an amount by which the total estate tax due by the Executive's estate, exceeds
the total estate tax which would have been payable if the value of such benefit
had not been included in the Executive's gross estate. If there is more than
one person receiving such benefit, the right of recovery shall be against each
such person. In the event the beneficiary has a liability hereunder, the
beneficiary may petition the Company for a lump sum payment in an amount not to
exceed the beneficiary's liability hereunder.
7.9 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive as to the subject matter
hereof. No rights are granted to the Executive by virtue of this Agreement
other than those specifically set forth herein.
7.10 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
7.10.1 Interpreting the provisions of this
Agreement;
7.10.2 Establishing and revising the method of
accounting for the Agreement;
7.10.3 Maintaining a record of benefit payments; and
7
<PAGE> 8
7.10.4 Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
7.11 Designated Fiduciary. For purposes of the Employee
Retirement Income Security Act of 1974, if applicable, the Company shall be the
named fiduciary and plan administrator under the Agreement. The named fiduciary
may delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized
Company officer have signed this Agreement.
EXECUTIVE: COMPANY:
UNITED BANK AND TRUST COMPANY
______________________________ By:________________________________
Neil W. Savage
Title:_____________________________
GUARANTY: Any obligations of the Company under this Agreement are guaranteed by
United Financial Holdings, Inc.
UNITED FINANCIAL HOLDINGS, INC.
By:________________________________
Title:_____________________________
8
<PAGE> 1
EXHIBIT 10.14
UNITED BANK AND TRUST COMPANY
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this ______ day of ____________, 1997, by and
between UNITED BANK AND TRUST COMPANY, a state commercial bank located in St.
Petersburg, Florida (the "Company") and CYNTHIA A. STOKES (THE "EXECUTIVE").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Benefit Percentage" means 40 percent.
1.1.2 "Change of Control" means: (i) a tender offer made and
consummated for the ownership of 25% or more of the outstanding voting
securities of the Company; (ii) a merger or consolidation of the Company with
another bank or corporation and as a result of such merger or consolidation
less than 75% of the outstanding voting securities of the surviving or
resulting bank or shareholders of the Company, other than affiliates (within
the meaning of the Securities Exchange Act of 1934) of any party to such merger
or consolidation, as the same shall have existed immediately prior to such
merger or consolidation, (iii) a sale of substantially all of the Company's
assets to another bank or corporation which is not a wholly owned subsidiary;
or (iv) an acquisition of the Company by a person, within the meaning of
Section 3(a)(9) or Section 13 (d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, of 25% or more of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant to the
Securities and Exchange Act of 1934.
1.1.3 "Code" means the Internal Revenue Code of 1986, as
amended.
1.1.4 "Disability" means, if the Executive is covered by a
Company sponsored disability policy, total disability as defined in such policy
without regard to any waiting period. If the Executive is not covered by such a
policy, Disability means the Executive suffering a
<PAGE> 2
sickness, accident, or injury which, in the judgment of a physician
satisfactory to the Company, prevents the Executive from performing
substantially all of the Executive's normal duties for the Company. As a
condition to any benefits, the Company may require the Executive to submit to
such physical or mental evaluations and tests as the Company's Board of
Directors deems appropriate.
1.1.5 "Early Termination" means the Termination of Employment
before Normal Retirement Age for reasons other than Death, Disability,
Termination for Cause or following a Change of Control.
1.1.6 "Early Termination Date" means the month, day and year
in which Early Termination occurs.
1.1.7 "Final Pay" means the total annual base salary payable
to the Executive at the rate in effect on the date specified. Final Pay shall
not be reduced for any salary reduction contributions: (i) to cash or deferred
arrangements under Section 401(k) of the Code; (ii) to a cafeteria plan under
Section 125 of the Code; (iii) to a deferred compensation plan that is not
qualified under Section 401(a) of the Code.
1.1.8 "Normal Retirement Age" means the Executive's 65th
birthday.
1.1.9 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.10 "Plan Year" means a twelve-month period commencing on
____________ and ending on ___________ of each year. The initial Plan Year
shall commence on the effective date of this Agreement, which shall be January
1, 1997.
1.1.11 "Termination for Cause" See Section 4.1.
1.1.12 "Termination of Employment" means that the Executive
ceases to be employed by the Company for any reason whatsoever other than by
reason of a leave of absence which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the Company
shall have the sole and absolute right to decide the dispute.
ARTICLE 2
LIFETIME BENEFITS
2.1 Normal Retirement Benefit. Upon Termination of Employment
on or after the Normal Retirement Age for reasons other than death, the Company
shall pay to the Executive the benefit described in this Section 2.1 in lieu of
any other benefit under this Agreement.
<PAGE> 3
2.1.1 Amount of Benefit. The annual benefit under
this Section 2.1 is the Executive's Final Pay multiplied by the Benefit
Percentage.
2.1.2 Payment of Benefit. The Company shall pay the
annual benefit to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Executive's
Normal Retirement Date and continuing for 239 additional months.
2.1.3 Benefit Increases. Commencing on the first
anniversary of the first benefit payment, and continuing on each subsequent
anniversary, the Company's Board of Directors, in its sole discretion, may
increase the benefit.
2.2 Early Termination Benefit. Upon Early Termination, the Company
shall pay to the Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Agreement.
2.2.1 Amount of Benefit. The annual benefit under
this Section 2.2 is the Executive's Final Pay multiplied by the Benefit
Percentage times the vesting schedule as shown in Schedule A.
2.2.2 Payment of Benefit. The Company shall pay the
annual benefit to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the later of the
Executive's termination or attainment of age fifty-nine (59) and continuing for
239 additional months.
2.2.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
2.3 Disability Benefit. If the Executive terminates
employment due to Disability prior to Normal Retirement Age, the Company shall
pay to the Executive the benefit described in this Section 2.3 in lieu of any
other benefit under this Agreement.
2.3.1 Amount of Benefit. The annual benefit under
this Section 2.3 is the Executive's Final Pay multiplied by the Benefit
Percentage.
2.3.2 Payment of Benefit. The Company shall pay the
annual benefit amount to the Executive in 12 equal monthly installments payable
on the first day of each month commencing with the month following the
Termination of Employment and continuing for 239 additional months.
2.3.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
2.4 Change of Control Benefit. Upon a Change of Control, the
Company shall pay to the Executive the benefit described in this Section 2.4 in
lieu of any other benefit under this Agreement.
<PAGE> 4
2.4.1 Amount of Benefit. The annual benefit under
this Section 2.4 is the Executive's Final Pay multiplied by the Benefit
Percentage at the time of the Executive's Termination of Employment.
2.4.2 Payment of Benefit. The Company shall pay the
annual benefit amount to the Executive in 12 equal monthly installments payable
on the first day of each month commencing with the month following the later of
age fifty-nine (59) or Termination of Employment and continuing for 239
additional months.
2.4.3 Benefit Increases. Benefit payments may be
increased as provided in Section 2.1.3.
ARTICLE 3
DEATH BENEFITS
3.1 Death. Upon the death of the Executive, this Agreement
shall immediately terminate. Upon the termination of this Agreement, all
benefit payments shall cease and the Company shall not be obligated to pay any
more benefits. This includes, but is not limited to, the situations where the
death of the Executive occurs after benefit payments have commenced and the
death of the Executive has occurred after Termination of Employment but before
benefit payments have commenced.
ARTICLE 4
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not pay any benefit under this Agreement:
4.1 Termination for Cause. If the Company terminates the
Executive's employment for "cause", which shall be restricted to the following:
4.1.1 Gross negligence or gross neglect of duties
which continue to occur after thirty (30) days from the date Executive has
received written notice from Company:
4.1.2 Commission of a felony or of a gross
misdemeanor involving moral turpitude; or
4.1.3 Fraud, disloyalty, dishonesty or willful
violation of any law or significant Company policy committed in connection with
the Executive's employment and resulting in an adverse effect on the Company.
4.2 Competition After Termination of Employment. No benefits
shall be payable if the Executive, without the prior written consent of the
Company, engages in, becomes interested in, directly or indirectly, as a sole
proprietor, as a partner in partnership, or as a
<PAGE> 5
substantial shareholder in a corporation, or becomes associated with, in the
capacity of employee, director, officer, principal, agent, trustee or in any
other capacity whatsoever, any enterprise conducted in the trading area (a 50
mile radius) of the business of the Company, which enterprise is, or may deemed
to be, competitive with any business carried on by the Company as of the date
of termination of the Executive's employment or his retirement. This section
shall not apply following a Change of Control.
4.3 Suicide or Misstatement. No benefits shall be payable if
the Executive commits suicide within two years after the date of this
Agreement, or if the Executive has made any material misstatement of fact on
any application for life insurance purchased by the Company.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. The Company shall notify any person or
entity that makes a claim against the Agreement (the "Claimant") in writing,
within ninety (90) days of Claimant's written application for benefits, of his
or her eligibility or noneligibility for benefits under the Agreement. If the
Company determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the Claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of the Agreement's claims review procedure and
other appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed. If the Company determines that there are
special circumstances requiring additional time to make a decision, the Company
shall notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an
additional ninety-day period.
5.2 Review Procedure. If the Claimant is determined by the
Company not to be eligible for benefits, or if the Claimant believes that he or
she is entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
Claimant (or counsel) shall have the right to review pertinent documents. The
Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Agreement on which the decision is based. If, because of the need for a
hearing, the sixty-day period is not sufficient, the decision may be deferred
for up to another sixty-day period at the election of the Company, but notice
of this deferral shall be given to the Claimant.
<PAGE> 6
ARTICLE 6
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
ARTICLE 7
MISCELLANEOUS
7.1 Binding Effect. This Agreement shall bind the Executive
and the Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
7.2 No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.
7.3 Non-Transferability. Benefits under this Agreement cannot
be sold, transferred, assigned, pledged, attached or encumbered in any manner.
7.4 Reorganization. The Company shall not merge or
consolidate into or with another company, or reorganize, or sell substantially
all of its assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume and discharge the
obligations of the Company under this Agreement. Upon the occurrence of such
event, the term "Company" as used in this Agreement shall be deemed to refer to
the successor or survivor company.
7.5 Tax Withholding. The Company shall withhold any taxes
that are required to be withheld from the benefits provided under this
Agreement.
7.6 Applicable Law. The Agreement and all rights hereunder
shall be governed by the laws of the State of Florida, except to the extent
preempted by the laws of the United States of America.
7.7 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Company for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Company to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's life
is a general asset of the Company to which the Executive and beneficiary have
no preferred or secured claim.
<PAGE> 7
7.8 Recovery of Estate Taxes. If the Executive's gross estate
for federal estate tax purposes includes any amount determined by reference to
and on account of this Agreement, and if the beneficiary is other than the
Executive's estate, then the Executive's estate shall be entitled to recover
from the beneficiary receiving such benefit under the terms of the Agreement,
an amount by which the total estate tax due by the Executive's estate, exceeds
the total estate tax which would have been payable if the value of such benefit
had not been included in the Executive's gross estate. If there is more than
one person receiving such benefit, the right of recovery shall be against each
such person. In the event the beneficiary has a liability hereunder, the
beneficiary may petition the Company for a lump sum payment in an amount not to
exceed the beneficiary's liability hereunder.
7.9 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive as to the subject matter
hereof. No rights are granted to the Executive by virtue of this Agreement
other than those specifically set forth herein.
7.10 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
7.10.1 Interpreting the provisions of this
Agreement;
7.10.2 Establishing and revising the method of
accounting for the Agreement;
7.10.3 Maintaining a record of benefit payments; and
7.10.4 Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
7.11 Designated Fiduciary. For purposes of the Employee
Retirement Income Security Act of 1974, if applicable, the Company shall be the
named fiduciary and plan administrator under the Agreement. The named fiduciary
may delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized
Company officer have signed this Agreement.
EXECUTIVE: COMPANY:
UNITED BANK AND TRUST COMPANY
______________________________ By:____________________________________
Cynthia A. Stokes
Title:__________________________
<PAGE> 8
GUARANTY: Any obligations of the Company under this Agreement are guaranteed by
United Financial Holdings, Inc.
By:___________________________________
Title:________________________________
SCHEDULE A
VESTING SCHEDULE
<TABLE>
<CAPTION>
Years Completed * Vesting Percentage
- ----------------- ------------------
<S> <C>
1 30%
2 40%
3 50%
4 60%
5 70%
6 80%
7 90%
8 100%
</TABLE>
* Years of service following the date of execution of this Agreement.
<PAGE> 1
EXHIBIT 10.15
PINELLAS BANCSHARES CORPORATION
CONVERTIBLE DEBENTURES
SERIES 1996
Number 00002 Principal Amount $380,000.00
<TABLE>
<CAPTION>
Rate of
Interest: Maturity Date: Dated:
- --------- -------------- ------
<S> <C> <C>
8.00% January 31, 2006 January 31, 1996
</TABLE>
Name and Address of Registered Owner:
Eickhoff & Pieper, a Florida General Partnership
111 Madison Street, Suite 2650
Tampa, Florida 33602
This Debenture has not been registered under the Securities Act of
1933 or Chapter 517, Florida Statutes. This Debenture has not been acquired by
the holder hereof with a view to, or in connection with, any distribution
thereof and may not be sold, pledged, hypothecated, transferred or otherwise
disposed of in the absence of an effective registration statement for the
Debenture under the Securities Act of 1933 and Chapter 517 or consent of the
Borrower and an opinion of counsel satisfactory to the Borrower that
registration is not required under said Act and Chapter.
In the event any shares of Borrower's common stock are issued upon
conversion of this Debenture, certificates representing such shares will bear a
legend similar to the foregoing.
NOW ALL MEN BY THESE PRESENTS that Pinellas Bancshares Corporation, a
Florida corporation (hereinafter called the "Borrower"), for value received,
hereby promises to pay to the registered owner shown above, or registered
assigns, on the Maturity Date specified above (unless this Debenture shall have
been called for redemption and payment of the redemption price shall have been
duly made), the principal sum stated above and to pay interest on said
principal sum from time to time remaining unpaid from the date of registration
and authentication of this Debenture (unless, as shown by the records of the
Borrower, interest on the hereinafter referred to Series 1996 Debentures shall
be in default, in which event this Debenture shall bear interest from the date
to which interest has been paid in full), at the rate shown on the face hereof,
on July 1, 1996, and semiannually thereafter on July 1 and January 1 of each
year until said principal sum is paid, except as the provisions hereinafter set
forth with respect to redemption prior to maturity may become applicable
hereto. This Debenture shall bear interest on overdue principal at the
aforesaid rate. Principal of and premium, if any, on this Debenture are payable
by presentation and surrender of this Debenture at the principal corporate
office of the Borrower.
Interest on this Debenture is computed on the basis of a 360-day year
consisting of twelve 30-day months. Payment of interest on this Debenture shall
be made to the registered owner hereof and shall be paid in lawful money of the
United States of America by check or draft mailed to the person in whose name
this Debenture is registered, at his address as it appears on the registration
books of the borrower, at the close of business on the fifteenth (15th) day of
the month (whether or not a business day) next preceding each interest payment
date (the "Record Date"), unless the Borrower shall be in default in the
payment of interest due on such interest payment date.
This Debenture is one of the Debentures issued by the Borrower
pursuant to a resolution duly adopted by the Borrower in the aggregate
principal amount of $630,000 (hereinafter referred to as the "Series 1996
Debentures"). Each of the Debentures constituting the Series 1996 Debentures is
equally and ratably issued by the Borrower.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS DEBENTURE
SET FORTH ON THE FOLLOWING THREE PAGES HERETO, WHICH PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH FULLY AT THIS PLACE. EACH OF SUCH
PAGES HAS BEEN EXECUTED BY THE BORROWER.
IN WITNESS WHEREOF, Pinellas Bancshares Corporation has caused this
Debenture to be executed by its president and secretary by their manual or
facsimile signature,as of the date of this Series 1996 Debenture shown above.
PINELLAS BANCSHARES CORPORATION
By:
-------------------------------------
President
By:
-------------------------------------
Secretary
January 31, 1996
<PAGE> 2
Pinellas Bancshares Corporation $380,000.00
Convertible Debentures, Series 1996 Principal Amount
- -------------------------------------------------------------------------------
This Debenture is one of an authorized issue of parity Debentures in
the original aggregate principal amount of $630,000. This Debenture is not
negotiable.
The Series 1996 Debentures are issuable only in the form of fully
registered Debentures without coupons in the denominations of $5,000 each or
any integral multiple thereof. Subject to compliance with applicable federal
and state securities laws, this Debenture is transferable by the registered
owner in a person or by the owner's attorney duly authorized in writing at the
principal corporate office of the Borrower, upon surrender of this Debenture
accompanied by a duly executed instrument of transfer, in form satisfactory to
the Borrower, and upon payment of any governmental charges or taxes incident to
such transfer. Upon any such transfer, a new Debenture or Debentures in the
same aggregate principal amount and of the same series, interest rate, and
maturity will be issued to the transferee. The Borrower may deem and treat the
person in whose name this Debenture is registered as the absolute owner hereof
for the purpose of receiving payment of, or on account of, the principal of,
premium, if any, and interest due on this Debenture and for all other purposes,
and the Borrower shall not be affected by any notice to the contrary.
At any time on or after January 1, 2001, the Series 1996 Debentures
are subject to optional redemption, in whole or in part, prior to maturity by
the borrower at the redemption prices (expressed as percentages of principal
amount) set forth in the following table plus accrued interest to the
redemption date:
<TABLE>
<CAPTION>
Redemption
Redemption Dates Price
- ---------------- ----------
<S> <C>
January 1, 2001 through December 31, 2001 103%
January 1, 2002 through December 31, 2002 102%
January 1, 2003 through December 31, 2003 101%
January 1, 2004 and thereafter 100%
</TABLE>
If less than all of the Series 1996 Debentures are called for
redemption, the selection of Series 1996 Debentures to be redeemed shall be
made by the Borrower in any manner that it, in its sole and absolute
discretion, deems to be appropriate. If a Series 1996 Debenture is of a
denomination larger than $5,000, a portion of such Series 1996 Debenture
($5,000 or any integral multiple thereof) may be redeemed, but Series 1996
Debentures shall be redeemed only in the principal amount of $5,000 or any
integral multiple thereof.
Notice of redemption shall be given by the Borrower by mailing a copy
of the redemption notice by first class mail (Postage prepaid) not less than
thirty (30) nor more than forty-five (45) days prior to the date fixed for
redemption to the registered owner of each Series 1996 Debenture to be redeemed
in whole or in part at the address shown on the registration books at the close
of business on the fifth day preceding the date of mailing; provided, however,
that failure to give such notice by mailing, or any defect therein, shall not
affect the validity of any proceedings for the redemption of any other Series
1996 Debentures. All Series 1996 Debentures or portions thereof so called for
redemption shall cease to bear interest on the specified redemption date.
At any time prior to redemption (whether at maturity or prior optional
redemption by the Borrower) this Debenture may, at the option of the holder, be
converted into shares of common stock of the Borrower. The number of shares of
Borrower's common stock into which this Debenture may be converted shall be
determined by dividing the principal amount of this Debenture by the figure
12.6176.
In case the Borrower shall (i) pay a dividend in shares of its common
stock, (ii) subdivide its outstanding shares of common stock, (iii) combine its
outstanding shares of common stock into a smaller number of shares of common
stock or (iv) issue by reclassification of its shares of common stock other
securities, the number of shares of common stock into which this Debenture
shall be converted shall be adjusted so that the holder shall be entitled to
the number of shares of the Borrower which the holder would have owned or have
been entitled to receive after the happening of any of such event or any record
date with respect thereto had this Debenture been converted into shares of
common stock immediately prior to such dividend, subdivision, combination or
reclassification.
The payment obligations of Borrower under this Debenture shall be
subordinated to all other payment obligations of Borrower and nothing herein
shall be interpreted to prohibit or otherwise limit the right of Borrower to
borrower money or issue additional debt obligations superior to, or on a parity
with, its obligations under this Debenture.
PINELLAS BANCSHARES CORPORATION
By:
---------------------------------------------
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<PAGE> 3
Pinellas Bancshares Corporation $380,000.00
Convertible Debentures, Series 1996 Principal Amount
- -------------------------------------------------------------------------------
If the Borrower fails to make any payment of interest within 30 days
of the due date thereof, then an event of default under this Debenture shall
have occurred and the entire principal amount hereof, together with accrued and
unpaid interest to the date of payment, shall be immediately due and payable.
In the event the Borrower should default under any of the provision of this
Debenture and the holder should employ attorneys or incur other expenses for
the collection of payments or the enforcement of performance or observance of
any obligation or agreement on the part of the Borrower contained in or
represented by this Debenture, the Borrower shall on demand therefor reimburse
the reasonable fee of such attorneys and such other expenses so incurred.
All acts, conditions, and things required to exist, happen, and be
performed precedent to and in the issuance of this Debenture do exist, have
happened, and have been performed in due time, form, and manner as required by
law in order to make this Debenture a valid and legal obligation of the
Borrower.
-----------------------------------------------------
The undersigned, _____________________, hereby sells, assigns, and
transfers unto ____________________________ (Tax Identification or Social
Security No. _____________________ the within Debenture and all rights
thereunder and hereby irrevocably constitutes and appoints _____________________
attorney to transfer the within Debenture on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
-------------------------- ---------------------------------
Signature
----------------------------------
Signature Guaranteed
PINELLAS BANCSHARES CORPORATION
By:
-------------------------------
Page 3 of 4
<PAGE> 4
Pinellas Bancshares Corporation $380,000.00
Convertible Debentures, Series 1996 Principal Amount
- -------------------------------------------------------------------------------
PINELLAS BANCSHARES CORPORATION
FORM OF NOTICE OF EXERCISE OF CONVERTIBLE DEBENTURE
(To be signed only upon exercise of conversion right)
TO: PINELLAS BANCSHARES CORPORATION
The undersigned, the holder of the Series 1996 Debenture tendered
herewith, hereby irrevocably elects to exercise the conversion rights set forth
in such Debenture for, and to purchase thereunder, ________ shares of the
Common Stock of Pinellas Bancshares Corporation, par value $0.01 per share, and
requests that the certificates for such shares be issued in the name of
__________________________, and delivered to _________________________________,
whose address is ___________________.
DATED:
--------------------------------
----------------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Debenture.)
PINELLAS BANCSHARES CORPORATION
By:
-------------------------------
Page 4 of 4
<PAGE> 5
BOND POWER
The undersigned, EICKHOFF & PIEPER, a Florida General Partnership,
hereby sells, assigns, and transfers unto PINELLAS COMMUNITY BANK, Tax
Identification Number 59-2577296, Pinellas Bancshares Corporation, Convertible
Debentures, Series 1996, Number 00002, in the face amount of $380,000.00, and
all rights thereunder and hereby irrevocably constitutes and appoints _________
attorney to transfer the within Debenture on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: EICKHOFF & PIEPER
--------------------------------
By:
--------------------------------
WILLIAM A. EICKHOFF
By:
--------------------------------
JOHN H. PIEPER
-----------------------------------
Signature Guaranteed
<PAGE> 1
EXHIBIT 10.16
LOAN AGREEMENT
AGREEMENT dated as of November 21, 1997, between AMSOUTH BANK f/k/a
AMSOUTH BANK OF FLORIDA (the "Lender") and UNITED FINANCIAL HOLDINGS, INC.
f/k/a PINELLAS BANCSHARES CORPORATION (the "Borrower");
IN CONSIDERATION OF THE PREMISES AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS
FOLLOWS:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Advance" shall mean the amount lent by the Lender to the Borrower
hereunder, or where the context so requires, the amount thereof then
outstanding, which is senior to all other indebtedness of Borrower. The term
advance shall include the advance made on June 13, 1994 (the "1994 Advance")
and any future advances granted to Borrower hereunder.
"Agreement" shall mean this Loan Agreement, as the same may from time
to time be amended. Upon satisfaction by Borrower of the conditions precedent
set forth in Section 3 and the making of the 1997 Advance to Borrower by
Lender, this Loan Agreement shall supersede and replace that certain Loan
Agreement dated June 13, 1994 between AmSouth Bank of Florida and Pinellas
Bancshares Corporation.
"Assets" shall have the meaning given to it on the financial
statements of the Bank referred to in Section 4(g).
"Bank" shall mean United Bank and Trust Company f/k/a United Bank of
Pinellas, a Florida banking corporation and its subsidiaries.
"Borrowing Date" shall mean the date as of which the Borrower draws
down the Advance.
"Business Day" shall mean a day other than a Saturday, Sunday or a
legal holiday for commercial banks under the laws of the State of Florida.
"Capital" shall have the meaning given to it on the financial
statements of the Bank referred to in Section 4(g).
"Company" means the Borrower, a bank holding company.
"Deposit" shall have the meaning given to it on the financial
statements of the Bank referred to in Section 4(g).
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1
<PAGE> 2
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Indebtedness" shall mean, as to any Person, all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase
price of property or services, and all indebtedness or other obligations of
third parties for which such Person is liable or contingently liable, directly
or indirectly, or which is secured by or benefits from a Lien on the assets or
revenues of such Person.
"Lien" shall mean any lien, attachment, set-off, charge, mortgage,
encumbrance or other security interest or segregation of assets or revenues or
other preferential arrangement (whether or not constituting a security interest
and whether or not enforceable at law) with respect to any present or future
assets, revenues or rights to the receipt of income of the Person referred to
in the context in which the term is used, but excluding (i) any purchase money
security interest or mortgage on any real or personal property when the
obligation secured in incurred for the purchase of such property and does not
exceed the lesser of the cost or fair market value thereof at the time of
acquisition, and the security interest applies only to such property; (ii)
mechanics', materialmen's and similar liens which do not in the aggregate
materially interfere with the conduct of such Person's business; (iii) deposits
or pledges to secure any statutory obligations or appeals, or any release of an
attachment, stay of execution, or injunction, or the performance of bids,
tenders, contracts (other than for borrower money) or leases; (iv) liens for
current taxes, assessments and governmental charges which are not delinquent
(and remain payable without penalty) or are being contested in good faith by
appropriate proceedings, adequate reserves having been set aside for the
payment thereof; (v) rights or garnishors under writs of garnishment issued
with respect to deposits with the Bank; (vi) the contingent right of the
holders of Subordinated Debentures to elect two directors of the Company; (vii)
liens, mortgages, encumbrances, charges or other security interests existing on
property prior to the acquisition of such property by such Person; and (viii)
reserves and segregation of assets or stockholders' equity required by banking
laws and regulations.
"Loan(s)" shall have the meaning given to it on the financial
statements of the Bank referred to in Section 4(g).
"Note(s)" shall mean the promissory note(s) described in Section 2.2,
as the same may from time to time be amended, modified, extended or renewed by
Lender.
"UFH Shares" shall mean shares of the issued and outstanding shares of
common stock, one cent ($0.01) par value, of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
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2
<PAGE> 3
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or any agency
or political subdivision thereof or any other entity whatsoever.
"Plan" shall mean any plan deemed in Section 4021(a) of ERISA in
respect of which the Bank or the Company is and "employer" or a "substantial
employer" as said terms are defined in Sections 3(5) and 4001(a) (2) of ERISA,
respectively.
"Prime Rate" shall mean the Prime Rate as determined to be in effect
and announced from time to time by Lender.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA.
"Security Agreement" shall mean the security agreement to be delivered
by the Borrower to the Lender pursuant to Section 3(b), as the same may from
time to time be amended.
"Shares" means the 150,000 shares of common stock, $5.00 par value, of
the Bank, representing 100% of the issued and outstanding common stock of the
Bank owned by the Company.
1.2 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles in the United States consistent with those applied in the
preparation of the financial statements referred to in Section 4(g), and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
SECTION 2. AMOUNT AND TERMS OF ADVANCES
2.1 Amount. Subject to the terms and conditions of this Agreement, the
Lender shall make an Advance to the Borrower on November __, 1997, (herein
called the "Borrowing Date") in the principal amount of $3,000,000.00 (the
"1997 Advance"). The unpaid principal balance of the 1994 Advance shall be
consolidated into the Note upon satisfaction of the conditions precedent set
forth in Section 3 and is, as of this date, $625,199.99.
2.2 Note(s). Both the 1997 Advance and the 1994 Advance shall be
evidenced by a Promissory Note substantially in the form of Exhibit "A."
2.3 Repayment. The Borrower will pay interest, in monthly
installments, beginning December 1, 1997, followed by ninety-five (95)
consecutive principal installments of $31,250.00 each, plus interest, beginning
December 1, 1999, and a final installment equal to all of the principal of and
interest on the Loan then remaining unpaid.
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Borrower's Initials
3
<PAGE> 4
2.4 Prepayments.
(a) The Borrower may at any time at its option prepay the
Advance without penalty, in whole or in part, provided, however, that partial
prepayments shall be in an aggregate amount of $10,000 or an event multiple
thereof.
(b) All partial prepayments shall be applied to installments
of the Advances in the inverse order of their maturities.
(c) The Borrower may prepay the Advances without penalty, in
a minimum amount of $100,000 and in $50,000 increments above $100,000, at which
time the Lender will, at the request of Borrower and not more often than once
in any calendar year, reduce the monthly scheduled payments, to reflect the
reduced Advance amount, based on an eight (8) year amortization from the
Borrowing Date.
2.5 Interest. Interest shall accrue on the Renewal Note at the
Lender's prime rate per annum. The rate of interest shall change effective upon
the day Lender changes or announces its Prime Rate.
2.6 Default Interest. Following the occurrences of an Event of
Default, Lender may, in its sole discretion, determine that all amounts owing
to Lender shall bear interest at the Lesser of: Eighteen percent (18.0%) per
annum or the maximum interest rate Lender is permitted to charge by law, until
such Event of Default is cured. If Lender obtains a judgment for any amount due
under the Note, interest will accrue on the judgment at the judgment rate of
interest permitted by law.
2.7 Use of the 1997 Advance. Borrower shall apply the loan proceeds
from the 1997 Advance to capitalize Borrower's trust company subsidiary and for
general corporate purposes.
2.8 Payments and Advances. Any payments made by the Borrower hereunder
shall be applied first against costs, expenses and indemnities due to the
Lender hereunder and under the Security Agreement; then against default
interest if any; then against interest due on the Advance; then against
principal of the Advances due; and thereafter in prepayment of the Advances set
forth in Section 2.4(b).
2.9 Loan Account. The Lender shall open and maintain on its books a
loan account in the Borrower's name showing advances, prepayments, and
repayments of the Advances, the computation and payment of interest and other
amounts due and sums paid hereunder and under the Security Agreement. Such loan
account shall be conclusive and binding on the Borrower absent manifest error.
SECTION 3. CONDITIONS PRECEDENT TO THE 1997 ADVANCE
The Lender shall not be required to make the 1997 Advance unless the
following conditions shall have been fulfilled on or prior to the Borrowing
Date to the satisfaction of the Lender and its counsel:
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4
<PAGE> 5
(a) The Borrower shall deliver to the Lender a duly executed
Note pursuant to Section 2.2, dated the Borrowing Date,
(b) The Borrower shall have delivered to the Lender the duly
executed Security Agreement dated the Borrowing Date pledging the Shares to the
Lender as security for the Notes substantially in the Form attached hereto as
Exhibit "B,"
(c) The Borrower shall have delivered to Lender an opinion of
Borrower's counsel, dated the Borrowing Date, substantially in the form
attached hereto as Exhibit "C,"
(d) The Borrower shall have delivered a duly-executed
certificate to the Lender, dated the Borrowing Date, stating that as of such
date the representations and warranties set forth in this Agreement remain true
and correct as of such date and no Event of Default, or event which with the
giving of notice or the passage of time would constitute an Event of Default,
has occurred or is continuing substantially in the form attached hereto as
Exhibit "D," and
(e) All representations and warranties contained herein shall
be true and correct.
SECTION 4. REPRESENTATIONS AND WARRANTIES AS OF THIS DATE HEREOF
In order to induce the Lender to enter into this Agreement and to make
the 1997 Advance, the Borrower represents and warrants to the Lender that:
(a) The Bank is a federally insured bank duly organized and
chartered, validly existing and in good standing under the laws of the State of
Florida, has the corporate power to own its assets and to transact the business
in which it is engaged, and is duly qualified as a foreign corporation and in
good standing under the laws of each other jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification. To the
knowledge of the Borrower, the Bank is conducting its operations substantially
in accordance with all applicable laws, regulations, memorandums and agreements
to which Bank is subject. The Bank has no subsidiaries other than those
disclosed.
(b) The Borrower has all necessary right, title and authority
to execute, deliver and perform this Agreement, the Security Agreement and the
Note. No consent of any other Person (including any other current or former
stockholder of the Company or the Bank) and no license, approval or
authorization of, or registration or declaration with, any governmental body,
authority or agency is required in connection with the execution, delivery or
performance of this Agreement by the Borrower, except as previously obtained,
(c) The UFH Shares and the Shares have been duly and validly
authorized and issued and are fully paid and non-assessable,
(d) This Agreement has been duly executed and delivered by
the Borrower and when executed and delivered by the Borrower in accordance with
the terms of this Agreement,
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5
<PAGE> 6
each of the Note and the Security Agreement will constitute legal, valid and
binding obligations of the Borrower, enforceable against Borrower in accordance
with their respective terms, except that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, or similar laws affecting
creditors' rights,
(e) The execution, delivery and performance by the Borrower
of this Agreement, the Note and the Security Agreement will not violate any
provision of any applicable law or regulation on the part of Borrower, or of
any writ or decree of any court or governmental authority binding upon Borrower
or Bank, or of the Articles of Incorporation or Bylaws of the Borrower or Bank,
or of any material provision of any indenture, contract, agreement or other
undertaking to which the Borrower or Bank is a party or which purports to be
binding upon the Borrower or Bank or any of their respective assets, and will
not result in the creation of imposition of any Lien on any of the assets of
the Borrower or Bank except in favor of Lender. Neither the Borrower nor the
Bank is in default in any material respect in the performance of any agreement
or understanding to which either is a party or which purports to bind any of
its or their respective assets, except as disclosed in the audited financial
statements of the Borrower and the Bank at and for the year ended December 31,
1996,
(f) Except as set forth in Exhibit "E" to this Agreement,
there is no action, suit, investigation or proceeding pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or Bank
or any of their respective assets which, upon its ultimate resolution, could
have a material adverse effect on the financial condition, business or
operations of the Borrower or the Bank exclusive, however, of matters affecting
financial institutes in general,
(g) The financial statements of the Borrower and Bank that
have been delivered by the Borrower to Lender, are complete and correct,
present fairly their financial condition for the periods set forth therein, and
have been prepared in accordance with generally accepted accounting principals
if the United States consistently applied. There are not material contingent
liabilities of the Borrower and Bank as of the date hereof that are not
reflected in said financial statement. There has been no material adverse
change in the financial statements were furnished to Lender. All information
provided by the Borrower to the Lender in connection with this transaction are
true and correct in all material respects, and the Borrower has not omitted any
material fact in order to make such information misleading,
(h) The Borrower and Bank have filed all federal, state and
local tax returns that are required to be filed (except such returns for which
extensions have been secured), and have paid all taxes as shown on said returns
and all assessments received by them to the extent that such taxes and
assessment have become due (except such taxes or assessments as are being
contested in good faith by appropriate proceedings diligently pursued),
(i) The Borrower and Bank have good title to their respective
properties and assets, including the properties and assets reflected in the
financial statements of the Bank, subject to no liens other than those
reflected in said financial statements and except for any covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially
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6
<PAGE> 7
interfere with the occupation, use and enjoyment by the Borrower or the Bank of
such properties and assets, or materially impair the value thereof,
(j) Based on ERISA and the regulations and published
interpretations thereunder, the Bank is in compliance in all material respects
with all applicable provisions or ERISA at such time as such compliance shall
have been legally required. No Reportable Event has occurred and is continuing
with respect;to any Plan, and the Bank has not incurred any liability to PBGC
under Section 4062 of ERISA,
(k) As of the Borrowing Date, the Borrower is the legal and
equitable owner of the Shares, free and clear of all liens (other than as
created by this Agreement and the Security Agreement), and has all necessary
right and authority to pledge, assign and deliver the Shares in the manner
contemplated herein and in the Security Agreement. The Shares constitute 100%
of the issued and outstanding common stock of the Bank. There are no other
classes of stock of the Bank issued and outstanding,
(l) The Shares are not "margin stock" as such term is defined
in Regulation U of the Board of Governors of the Federal Revenue System,
(m) The Borrower and Bank are in compliance with any and all
memorandums, letters or other documents issued to either Borrower or Bank, or
both by any regulatory body having jurisdiction over Borrower or Bank, or both,
and
(n) No Event of Default has occurred and is continuing.
SECTION 5. OTHER REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and make
the 1997 Advance, the Borrower represents and warrants to the Lender that on
the Borrowing Date:
(a) The Borrower is a bank holding company (as such term is
defined in the Bank Holding Company Act of 1956, as amended) validly existing
and in good standing under the laws of the State of Florida, has the corporate
power to own the Shares, and is duly qualified as a foreign corporation and in
good standing under the laws of each other jurisdiction in which the ownership
of the Shares requires such qualifications.
(b) The Company shall have good title to the Shares, subject
to no Liens other than pursuant to this Agreement and the Security Agreement.
(c) The Borrower shall have no Indebtedness except for the
Subordinated Debentures, Convertible Subordinated Debentures and the Advance,
and other Indebtedness not in excess of $25,000.
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Borrower's Initials
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<PAGE> 8
SECTION 6. COVENANTS EFFECTIVE UPON EXECUTION OF THIS AGREEMENT
6.1 The Borrower covenants and agrees that from the date of this
Agreement and so long as any amount shall be owed to the Lender hereunder or
under the Security Agreement, Borrower shall:
(a) Cause the Bank to furnish to the Lender:
(i) as soon as practicable and in any event within
45 days after the close of each of the first three quarters of each of the
Bank's fiscal years, balance sheets (or statements of condition) of the Bank as
of the end of such quarter, and statements of income and stockholders' equity
for such quarter and for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth in
comparative form in the cases of balance sheets (or statements of condition) of
the Bank as of the end of such quarter and the related statements of income and
stockholders' equity, the corresponding figures for the corresponding periods
of the preceding fiscal year, all in reasonable detail and certified by an
authorized owner of the Bank as having been prepared in accordance with
generally accepted accounting principles in the United States consistent with
those applied in the preparation of the financial statements referred to in
Section 4(g);
(ii) as soon as practicable and in any event within
90 days after the close of each of the Bank's fiscal years, a copy of the
annual audit report of the Bank, prepared by independent certified public
accountants reasonably satisfactory to the Lender, including therein financial
statements consisting of balance sheets (or statements of conditions) of the
Bank as of the end of such fiscal year, and statements of income, changes in
financial position and stockholders' equity of the Bank, for such fiscal year,
all in reasonable detail and certified by an authorized officer of the Bank as
having been prepared in accordance with generally accepted accounting
principles in the United States consistent with those applied in the
preparation of the financial statements referred to in Section 4(g), and a
listing as of the end of such fiscal year of the Bank's contingent liabilities
and guarantees, certified by an authorized officer of the Bank,
(iii) concurrently with the delivery of the
financial statements referred to in clauses (i) and (ii) above, a certificate
by an authorized officer of the Bank setting forth calculations showing
compliance with all financial tests for the Bank contained herein and stating
that to the best of his knowledge (A) the Bank has satisfied and continues to
satisfy each such test except as specifically indicated, and (B) to the best of
his knowledge no Event of Default exists, or if an Event of Default does exist,
specifying such Event of Default and the nature thereof;
(iv) to the full extent permitted by applicable laws
and regulations, promptly after the same are available, copies of all
regulatory or periodic reports that the Bank may file with any governmental
body, authority, or agency, to include but not be limited to Call Reports and
Uniform Bank Performance Reports;
(v) as soon as practicable and in any event within
five Business Days after the existence of an Event of default comes to the
attention of an officer of the Bank, written notice of such occurrence;
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<PAGE> 9
(vi) immediately after the commencement thereof,
notice in writing of all actions or proceedings of the type described in
Section 4(f);
(vii) such other information with respect to the
financial condition and operations of the Borrower or Bank, as the Lender may
from time to time reasonably request.
(b) Furnish to the Lender:
(i) as soon as practicable and in any event within
45 days after the close of each of the first three quarters of each of the
Borrower's fiscal years, balance sheets (or statements of condition) of the
Borrower as of the end of such quarter, and statements of income and
stockholders' equity for such quarter and for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter, setting
forth in comparative form in the cases of balance sheets (or statements of
condition) of the Borrower as of the end of such quarter and the related
statements of income and stockholders' equity, the corresponding figures for
the corresponding periods of the preceding fiscal year, all in reasonable
detail and certified by an authorized officer of the Borrower as having been
prepared in accordance with generally accepted accounting principles in the
United States consistent with those applied in the preparation of the financial
statements referred to in Section 4(g);
(ii) as soon as practicable and in any event within
90 days after the close of each of the Borrower's and Bank's fiscal years, (A)
a copy of the annual, consolidated, audit report of the Borrower and Bank
prepared by independent certified public accountants reasonably satisfactory to
the Lender, including therein financial statements consisting of consolidated
balance sheets (or statements of condition) of the Borrower and Bank as of the
end of such fiscal year, and consolidated statements of income, changes in
financial position and stockholders' equity of the Borrower and Bank for such
fiscal year, (B) consolidating balance sheets (or statements of condition) of
the Borrower and Bank as of the end of such fiscal year and consolidating
statements of income, changes in financial position and stockholder's equity of
the Borrower and Bank for such fiscal year, all in reasonable detail and
certified by an authorized officer of the Borrower as having been prepared in
accordance with generally accepted accounting principles in the United States
consistent with those applied in the preparation of the financial statements
referred to in Section 4(g); and
(iii) as soon as practicable and in any event within
120 days after the close of each of the Borrower's fiscal years, a complete
copy of Borrower's consolidated tax return.
(c) Duly pay and discharge, and cause the Bank to duly pay
and discharge, when due, all taxes, assessments, and governmental charges or
levies imposed upon it or upon its income or profits or upon its properties
unless and to the extent only that the same shall be contested in good faith
and by appropriate proceedings diligently pursued which will not, in Lender's
opinion, have or result in a material adverse effect on Borrower or Bank,
(d) Maintain, and cause the Bank to maintain, with
financially sound and reputable insurance companies or associations, insurance
on its properties in such amounts and
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Borrower's Initials
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<PAGE> 10
covering such risks as is usually carried covering similar properties in the
same geographical areas in which such properties are located,
(e) Cause the Bank to perform all obligations to be performed
by it pursuant to the terms of each indenture, agreements, contract or other
instrument by which Borrower or the Bank or their respective properties are
bound, noncompliance with which would have a material adverse effect on its
business, financial condition or properties,
(f) Observe, conform and comply with in all material
respects, and cause the Bank to observe, conform and to comply with in all
material respects, and cause the Bank to observe, conform and to comply with in
all material respects, the requirements of all applicable laws, decisions,
judgments, rules, regulations and orders of any governmental authority, and
with any agreements or understandings with any governmental authority having
jurisdiction over Borrower or the Bank, except such as are being contested in
good faith by appropriate proceedings diligently pursued and which will not, in
Lender's opinion, have or result in a material adverse effect, financial or
otherwise on Borrower or Bank,
(g) Cause the Bank to maintain corporate books and financial
records,
(h) Cause the Bank to permit any attorney, agent, employee,
accountant or officer designated by the Lender, at the expense of the Lender,
to visit and inspect any of the properties of the Borrower and the Bank, to
examine the corporate books and financial records of the Borrower and the Bank
and make copies thereof or extracts therefrom, and to discuss its affairs,
finances and accounts with officers of the Lender, all at such times as the
Lender may reasonably request,
(i) Not incur, and cause Bank not to incur any new
indebtedness, liability or debt in excess of $25,000 per year, except in the
ordinary course of business and except for subordinated debentures and
convertible subordinated debentures
(j) Cause the Bank to comply in all material respects with
ERISA,
(k) Cause the Bank to deliver, as soon as possible, and in
any event within 30 days after the Bank knows or has reason to know that any
Reportable Event involving in excess of o of the assets of any Plan has
occurred with respect to such Plan or that PBGC or the Bank has instituted or
will institute proceedings under Title IV of ERISA to terminate any Plan, to
the Lender a certificate of the chief financial officer of the Bank setting
forth details as to such Reportable Event and the action that the Bank proposes
to take with respect thereto, together with a copy of any notice of such
Reportable Event that may be required to be filed with PBGC, or any notice
delivered by PBGC evidencing its intent to institute such termination
proceedings, or any notice delivered by the Bank to the PBGC, that such Plan is
to be terminated, as the case may be. For all purposes of this paragraph, the
Bank shall be deemed to have all knowledge of all facts attributable to the
administrator of such Plan,
(l) Not permit the issuance of additional shares or any other
classes of stock of the Bank, without prior written consent of Lender,
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<PAGE> 11
(m) Pledge, assign and deliver to the Lender pursuant to the
Security Agreement any additional stock in the Bank which Borrower may acquire,
(n) At all times continue to own 100% of the issued and
outstanding stock of the Bank, free and clear of all Liens except for any Lien
in favor of the Lender,
(o) Cause the Bank not to permit, without the Lender's prior
written consent:
(i) any merger or consolidation of the Bank with
another entity; or
(ii) any transfer, lease, or disposition of, or
creation of any Lien upon, any of the property or assets of the Bank except in
the ordinary course of business,
(p) Cause the Bank not to permit:
(i) any event which would prohibit the Bank from
continuing to conduct its banking business;
(ii) any transaction between the Bank and any of
Borrower's stockholders, or any entity in which any such stockholders own an
equity interest, in which the terms of such transactions would be less
favorable to the Bank than in an arm's length transaction; or
(iii) any liquidation or dissolution of the Bank,
(q) Except as expressly contemplated by this Agreement, not
sell, transfer or otherwise dispose of, or convey any interest in, or permit
any Lien upon, the Shares,
(r) Cause the Bank to at all times maintain at least the
minimum capital required by state and federal regulators to avoid regulatory or
supervisory action,
(s) Deliver to the Lender (i) immediately after the
commencement thereof, notice in writing of all actions or proceedings of the
type described in Section 4(0 or where damages in excess of $100,000 are sought
against either Borrower or the Banks, and (ii) as soon as the existence of any
Event of Default, or event which with the giving of notice or the passage of
time would constitute an Event of Default, comes to Borrower's attention,
written notice thereof.
(t) Maintain an annual debt service coverage ratio at 1.20:1.
This ratio is defined as the sum of net income plus interest expense divided by
the sum of principal payments of debt plus interest expense.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. Each of the following events shall constitute
an event of Default under this Agreement.
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<PAGE> 12
(a) The Borrower shall, for any reason whatsoever, whether
voluntarily or involuntarily, fail to make payment in full of any amount due
under this Agreement, the Note, or the Security Agreement when and as due, and
such default in payment shall continue for a period of 10 days after notice to
the Borrower by the Lender. Acceptance of partial payment by the Lender shall
not constitute a waiver of failure to make payment in full,
(b) Any representation or warranty made by the Borrower in
this Agreement or the Security Agreement shall prove to have been incorrect,
untrue or misleading in any material respect on the date when made or the date
of any certificate confirming such representation or warranty, or any
information, certificate or opinion furnished by or on behalf of the Borrower
or the Bank to the Lender under this Agreement shall prove to have been
incorrect, untrue or misleading in any material respect as of its date,
(c) Other than as specified in Section 7.1(a), the Borrower
shall, for any reason whatsoever, whether voluntarily or involuntarily, fail to
perform or breach any provision of this Agreement, the Note, or the Security
Agreement, and such failure or violation shall not be curable or, if curable,
shall continue uncured for a period exceeding 30 days,
(d) Any governmental approval, authorization, license or
registration now or hereafter required in connection with the performance of
this Agreement, the Security Agreement, or the Note by Borrower shall not be
granted, or if granted, shall be terminated or revoked and not reinstated
within 30 days of such termination or revocation,
(e) The Borrower or Bank shall deny or contest the validity,
enforceability or legality of any material provision of this Agreement, the
Security Agreement, or the Note, or shall deny any responsibility with respect
thereto, or it shall become unlawful for the Borrower to perform its
obligations hereunder or thereunder, or any action by an governmental authority
or enactment, modification or final and binding change in the interpretation of
any applicable laws subsequent to the date hereof shall, in any material
respect, restrict, interfere with or prohibit the full and faithful performance
by the Borrower of its obligations hereunder and the thereunder,
(f) The Borrower or Bank shall fail to pay in full, and when
and as due (including any applicable grace period or period for cure), any
amount owed in respect of any of its other Indebtedness, or there shall occur
any other material event of default under any agreement or instrument relating
to such other Indebtedness the effect of which is to accelerate the maturity
thereof,
(g) With respect to any Plan, the occurrence of a Reportable
Event or any failure to satisfy minimum funding requirements (excluding any
waiver which might be granted by the Internal Revenue Service and any cure
effected within any period of time provided by ERISA),
(h) The determination by any regulatory body having
jurisdiction over Bank of a CAMEL rating other than a 1, 2, 3 or 4 for the
Bank, and
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<PAGE> 13
7.2 Consequences. If an Event of Default shall occur and be continuing
beyond any grace period permitted therefor hereunder, the Lender may by notice
to the Borrower: (i) declare the entire amount of the Advance together with
accrued interest and all other sums payable hereunder and under the Security
Agreement to be immediately due and payable, and/or (ii) terminate its
obligation to advance any sums hereunder. such termination to be effective upon
the giving of such notice.
In the event that the Advance shall become due and payable by
acceleration as provided above, the advance shall, upon the giving of such
notice by the Lender, become immediately due and payable (together with any
accrued interest thereof to the date of such prepayment) without presentment,
demand, protest or notice of any kind other than the notice specifically
required by this Section, all other notice being expressly waived by the
Borrower. If any Event of Default shall occur, it may only be waived by a
notice from the Lender in writing.
SECTION 8. LOAN ADMINISTRATION
8.1 Entire Agreement and Amendment. This Agreement, the Security
Agreement, together with the Note and the certificates, opinions, and other
documents to be executed and delivered in connection herewith, constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes any prior expressions of intent or understanding with respect to
this transaction. This Agreement may be amended, but only by an instrument in
writing executed by the party or parties to be bound or burdened thereby.
8.2 Cumulative Rights and Waiver. The failure or delay of tile Lender
to require performance by the Borrower, or to enforce its rights under any
provision of this Agreement, the Security Agreement or the Note, shall not
affect its right to require performance thereof and to enforce its rights with
respect to such provision unless and until such performance has been waived in
writing by the Lender. Any waiver of an Event of Default shall be effective
only in strict accordance with its teens and may be restricted or conditioned
in any way. No waiver of any Event of Default shall constitute a waiver of the
continuance or recurrence of such Event of Default or of any other Event of
Default, except as provided in such waiver. The rights granted to the Lender
hereunder, under the Note, the Security Agreement or under any other document
or instrument delivered hereunder, and any rights available to it at law or in
equity, shall be cumulative and may be exercised in part or in whole from time
to time.
8.3 Assignment. This Agreement shall be binding upon and shall be
enforceable by the Borrower, the Lender and their respective successors and
assigns. The Borrower shall not have the right to assign or transfer its rights
or obligations hereunder without the prior written consent of the Lender.
8.4 Indemnification. The Borrower shall indemnify, save and hold
harmless the Lender from and against any and all losses, claims, damages,
liabilities and costs caused by, resulting from or arising out of any untrue or
incorrect representation or warranty contained herein or in any document,
opinion or certificate delivered to the Lender in connection with this
Agreement.
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<PAGE> 14
8.5 Notices. All notices, requests and demands to or upon any party
hereto shall be deemed to have been given or made (i) upon delivery in person,
(ii) five days after it is mailed, first class, postage prepaid, (iii) upon
receipt, when mailed Certified Return Receipt, postage paid, or (iv) in the
case of telegraphic notice, when delivered to the telegraph company and
transmitted to the intended recipient, addressed to such party as follows or to
such other address as may be hereafter designated in writing by such party to
the other parties hereto:
The Lender: Commercial Banking
AmSouth Bank
P.O. Box 3370
Tampa, FL 33601
(street address:
100 North Tampa
Tampa, FL 33602)
The Borrower: President
United Financial Holdings
Post Office Box 14517
St. Petersburg, FL 33733
8.6 Payment of Expenses and Taxes. The Borrower agrees to pay upon
demand all costs and expenses of the Lender in connection with the preparation,
execution and delivery of this Agreement, the Security Agreement, and the Note,
including, without limitation, the fees and disbursements for counsel for the
Lender, and to pay all costs and expenses of the Lender in connection with the
enforcement of this Agreement, the Security Agreement, and the Note, including
legal fees and disbursements arising in connection therewith, from and after
the occurrence of an Event of Default. The Borrower also agrees to pay, and to
hold the Lender harmless from any delay in paying, stamp and other taxes, if
any, which may be payable in connection with the execution and delivery of this
Agreement, the Security Agreement, or the Note, or any modification thereof. In
the event that any judicial authority, regulatory authority or Lender
determines that any documentary stamp tax must be paid on or in connection with
the execution and/or delivery of this Agreement, the Security Agreement, the
Note or any other document related to this transaction, Borrower shall
indemnify, save and hold harmless and promptly reimburse Lender upon demand for
such stamps or taxes and all costs and expenses associated therewith,
including, but not limited to, interest, penalties, fines or any other charges
associated with or arising from such tax.
8.7 Representation by the Lender. The Lender represents that it is
acquiring the Note for its own account in the ordinary course of extending
credit as a banking institution and not with a view to the distribution or
resale thereof.
8.8 Survival of Representations and Warranties. All representations
and warranties made in this Agreement and in any certificates or documents
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the Note, Security Agreement and the making of the Advance.
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<PAGE> 15
8.9 Governing Law; Venue. This Agreement and the Note shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of Florida. Any legal action arising out of this Agreement or the
relationship of the parties hereto shall have as its venue Pinellas County,
Florida.
8.10 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which when taken together shall constitute but one
and the same instrument.
8.11 Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
8.12 Lawful Interest. No provision of this Agreement or of the Note
shall be deemed to require the payment, or permit the collection, of the
interest in excess of that permitted by applicable law is collected by the
Lender, such collection shall be deemed inadvertent and the excess interest
promptly refunded.
8.13 Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose. Except as other specified, references in this
Agreement to "Section" or "section" are references to sections of this
Agreement.
ALL PARTIES OF THIS TRANSACTION AGREE THAT EACH PARTY WAIVES TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST
THE OTHER PARTY ARISING OUT OF ANY MATTER CONNECTED WITH THIS LOAN AGREEMENT.
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<PAGE> 16
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
Signed sealed and delivered
UNITED FINANCIAL HOLDINGS, INC.
- ------------------------------- By:
-----------------------------
Neil W. Savage, President
- -------------------------------
AMSOUTH BANK
- ------------------------------- By:
-----------------------------
- ------------------------------- -----------------------------
Name (Printed or Type)
United Bank and Trust Company hereby acknowledges, accepts and approves this
Agreement on the date first written above.
UNITED BANK AND TRUST COMPANY
By:
-----------------------------
Neil W. Savage, Chairman
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<PAGE> 1
EXHIBIT 21
List of Subsidiaries of
United Financial Holdings, Inc.
<TABLE>
<S> <C>
1. Eickhoff, Pieper & Willoughby, Inc.
2. United Bank & Trust Company
3. United Trust Company
4. Giants Property, Inc.
5. Imaginative Investments, Inc.
</TABLE>
<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
October 6, 1998
