<PAGE> 1
As filed with the Securities and Exchange Commission on September 16, 1997
Registration No. 333-_______
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------------
HUNTINGTON BANCSHARES INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Maryland 6711 31-0724920
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------------
Huntington Center
41 South High Street
Columbus, Ohio 43287
(614) 480-8300
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
------------------------------------
Ralph K. Frasier, Esq.
General Counsel and Secretary
Huntington Bancshares Incorporated
Huntington Center
41 South High Street
Columbus, Ohio 43287
(614) 480-4647
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------------
Copies of Correspondence to:
Mary Beth M. Clary, Esq. Rod Jones, Esq.
Porter, Wright, Morris & Arthur Shutts & Bowen
4501 Tamiami Trail, Suite 400 20 North Orange Avenue, Suite 1000
Naples, Florida 34103-3013 Orlando, Florida 32801
------------------------------------
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after this
Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered* Per Share* Price* Fee*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, without par value..... 550,000 $13.72 $6,729,600 $2,040
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purpose of calculating the registration fee based on
the book value on June 30,1997, of the 490,598 shares of common stock of The
Bank of Winter Park (which includes 76,589 shares which may be issued upon
exercise of stock options prior to the Merger) to be canceled in the Merger,
in accordance with Rule 457(f)(2).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
<PAGE> 2
THE BANK OF WINTER PARK
2006 ALOMA AVENUE
WINTER PARK, FLORIDA 32792
______________, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of The Bank of Winter Park ("Winter Park"), which will be held on _________,
______________1997, at 7:00 p.m. local time. The Special Meeting will be held at
the main office of Winter Park, which is located at 2006 Aloma Avenue, Winter
Park, Florida.
At this Special Meeting, shareholders of Winter Park will be asked to
consider and vote on the approval of a certain Agreement and Plan of Merger,
dated May 22, 1997, between Winter Park and The Huntington National Bank
("Huntington Bank"), which is a wholly owned subsidiary of Huntington Bancshares
Incorporated ("Huntington"), and the related Supplemental Agreement, dated May
22, 1997, between Huntington, Huntington Bank, and Winter Park (collectively,
the "Merger Documents"), pursuant to which Winter Park would be merged into
Huntington Bank (the "Merger"). The Merger Documents provide that Winter Park
shareholders will receive whole shares of Huntington Common Stock in exchange
for their shares of Winter Park Common Stock. Subject to certain adjustments,
the number of whole shares of Huntington Common Stock to be received for each
share of Winter Park Common Stock will be determined by dividing $30.00 by the
average of the closing sale prices for a share of Huntington Common Stock as
reported on the Nasdaq Stock Market on the five trading days immediately
preceding the two business days before the effective time of the Merger. Cash
will be paid for any fractional shares.
Huntington, headquartered in Columbus, Ohio, is the fourth largest bank
holding company in Ohio in terms of total assets at June 30, 1997. Huntington,
through its affiliates, conducts a full-service commercial and consumer banking
business, provides a variety of trust and fiduciary services, engages in
mortgage banking, lease financing, discount brokerage activities, underwriting
credit life and disability insurance, and issuing commercial paper guaranteed by
Huntington, and provides other financial products and services. As of June 30,
1997, Huntington affiliates operated 355 banking offices in Ohio, Florida,
Indiana, Kentucky, Michigan, and West Virginia, including 43 offices in Florida.
Huntington Common Stock is actively traded in the over-the-counter market under
the symbol "HBAN".
Additional information regarding the proposed Merger and the parties
involved is set forth in the attached Proxy Statement, which also serves as the
Prospectus regarding the Huntington Common Stock to be issued in connection with
the Merger. Please carefully read these materials and consider the information
contained in them.
THE BOARD OF DIRECTORS OF WINTER PARK HAS UNANIMOUSLY APPROVED THE
PROPOSED MERGER AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE
MERGER DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED BY SUCH DOCUMENTS.
The affirmative vote of the holders of two-thirds of the outstanding
shares of Winter Park Common Stock is required to approve the Merger Documents.
Accordingly, your vote is important no matter how large or how small your
holdings may be. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TO ASSURE
THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL MEETING. If you attend the Special
Meeting, you may vote in person if you wish and your proxy will not be used.
Very truly yours,
Bruce A. Naylor
President and Chief Executive Officer
<PAGE> 3
THE BANK OF WINTER PARK
2006 ALOMA AVENUE
WINTER PARK, FLORIDA 32792
------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
______________, 1997
------------------------------------
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of The Bank of Winter Park ("Winter Park") has been called by
the Board of Directors and will be held at the main office of Winter Park, which
is located at 2006 Aloma Avenue, Winter Park, Florida, on _____________,
_____________, 1997, at 7:00 p.m., local time, for the following purposes:
1. To consider and vote upon the approval of the Agreement and Plan
of Merger, dated May 22, 1997, between Winter Park and The
Huntington National Bank ("Huntington Bank"), which is a wholly
owned subsidiary of Huntington Bancshares Incorporated
("Huntington"), and the related Supplemental Agreement, dated May
22, 1997, between Huntington, Huntington Bank, and Winter Park,
pursuant to which Winter Park would be merged into Huntington Bank
and the shareholders of Winter Park would receive shares of the
common stock of Huntington, as more fully described in the
accompanying Proxy Statement/Prospectus; and
2. To transact any other business which may properly come before the
meeting or any adjournments or postponements thereof. (The Board
of Directors is not currently aware of any other business to come
before the Special Meeting.)
Only shareholders of record at the close of business on ____________,
1997, the record date for the Special Meeting, are entitled to notice of and to
vote at the Special Meeting and any adjournments or postponements thereof.
We urge you to execute and return the enclosed proxy as soon as
possible in order to ensure that your shares will be represented at the Special
Meeting. Your proxy may be revoked in the manner described in the accompanying
Proxy Statement/Prospectus at any time before it has been voted at the Special
Meeting. If you attend the Special Meeting, you may vote in person, and your
proxy will not be used.
Dated: __________, 1997 By Order of the Board of Directors
Bruce A. Naylor
President and Chief Executive Officer
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 4
PROSPECTUS
HUNTINGTON BANCSHARES INCORPORATED
COMMON STOCK
(without par value)
and associated rights
Huntington Bancshares Incorporated ("Huntington") proposes to issue up
to__________ shares of common stock, without par value ("Huntington Common
Stock"), in connection with the merger (the "Merger") of The Bank of Winter
Park ("Winter Park") into The Huntington National Bank ("Huntington Bank"), a
wholly owned subsidiary of Huntington. This document serves as both the
Prospectus relating to the issuance of Huntington Common Stock in the Merger
and the Proxy Statement for the special meeting of shareholders of Winter Park,
to be held on ________________, 1997 (the "Special Meeting"). At the Special
Meeting, the shareholders of Winter Park will be asked to approve the Merger by
approving the Agreement and Plan of Merger, dated May 22, 1997, between
Huntington Bank and Winter Park (the "Merger Agreement"), and the related
Supplemental Agreement among Huntington, Huntington Bank, and Winter Park,
dated May 22, 1997 (the "Supplemental Agreement"). The Merger Agreement and the
Supplemental Agreement are sometimes referred to in this document as the
"Merger Documents." The Merger is described in more detail on page __ and
copies of the Merger Documents are attached as Exhibits A and B.
At the effective time of the Merger (the "Effective Time"), each
issued and outstanding share of Winter Park common stock, $5.00 par value (the
"Winter Park Common Stock"), will be converted into the right to receive whole
shares of Huntington Common Stock. Cash will be paid for any fractional shares.
Subject to certain adjustments, the number of whole shares of Huntington Common
Stock to be received for each share of Winter Park Common Stock will be
determined by dividing $30.00 by the "Price Per Share of Huntington Common
Stock" (the "Exchange Ratio"). The Price Per Share of Huntington Common Stock
is the average of the closing sale prices for a share of Huntington Common
Stock as reported on the Nasdaq National Market on the five trading days
immediately preceding the two business days before the Effective Time.
Huntington Common Stock is traded on the Nasdaq National Market under the
symbol "HBAN." See "THE MERGER - TERMS OF THE MERGER."
------------------------------------
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.
------------------------------------
THE SHARES OF HUNTINGTON COMMON STOCK TO BE ISSUED IN THE MERGER ARE
NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND, THE BANK INSURANCE
FUND, OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH THIS OFFERING AND
SOLICITATION OF PROXIES TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN AS CONTAINED IN THIS DOCUMENT AND ANY INFORMATION OR REPRESENTATION
NOT CONTAINED IN THIS DOCUMENT MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY HUNTINGTON OR WINTER PARK. THIS DOCUMENT DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED BY THIS DOCUMENT IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT WOULD
BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS
DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IN IT IS CORRECT AS OF
ANY TIME AFTER THE DATE INDICATED BELOW.
------------------------------------
___________, 1997
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION.............................. 3
INFORMATION INCORPORATED BY
REFERENCE....................................... 3
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS.............................. 4
PROXY STATEMENT.................................... 5
INTRODUCTION....................................... 5
SUMMARY INFORMATION................................ 5
Huntington.................................... 5
Winter Park................................... 6
The Special Meeting........................... 6
The Merger.................................... 7
Recommendation of the Board of Directors...... 8
Rights of Dissenting Shareholders............. 8
Interests of Management....................... 8
Federal Income Tax Consequences............... 9
Accounting Treatment.......................... 9
Regulatory Approvals.......................... 9
Comparative Per Share Information............. 9
SELECTED FINANCIAL DATA............................ 11
Selected Financial Data of Huntington......... 11
Selected Financial Data of Winter Park........ 12
Unaudited Pro Forma
Selected Financial Data..................... 13
THE SPECIAL MEETING................................ 14
General....................................... 14
Record Date; Voting Rights.................... 14
Proxies....................................... 14
THE MERGER......................................... 15
General....................................... 15
Background of the Merger...................... 15
Reasons for the Merger........................ 16
Opinion of Carson Medlin...................... 17
Effective Time of the Merger.................. 22
Terms of the Merger........................... 23
Exchange of Certificates...................... 24
Fractional Shares............................. 25
Terms of the Warrant.......................... 25
Shareholder Agreements........................ 26
Covenants of the Parties...................... 27
Conditions to Consummation of the Merger...... 28
Amendment..................................... 29
Termination and Termination Fee............... 30
Rights of Dissenting Shareholders............. 31
Interests of Management....................... 32
Federal Income Tax Consequences............... 33
Accounting Treatment.......................... 34
Regulatory Approvals.......................... 34
Resales of Huntington Common Stock............ 35
EFFECT OF THE MERGER ON
SHAREHOLDERS' RIGHTS............................ 35
Capital Stock................................. 35
Nomination, Election, and Removal of Directors 36
Shareholder Proposals......................... 37
Special Voting Requirements for Certain
Transactions............................... 37
Evaluation of Mergers and Consolidations...... 38
Special Meetings.............................. 39
Directors' and Shareholders' Right to Adopt,
Alter, or Repeal the Bylaws................. 39
Personal Liability of Officers and Directors
to Shareholders............................. 39
Rights Plan................................... 40
HUNTINGTON BANCSHARES INCORPORATED................. 41
General....................................... 41
The Huntington National Bank.................. 42
Dividends and Price Range of Huntington
Common Stock ............................... 42
Other Information............................. 43
THE BANK OF WINTER PARK............................ 43
General....................................... 43
Primary Service Area.......................... 44
Competition................................... 44
Description of Properties..................... 44
Employees..................................... 45
Legal Proceedings............................. 45
Principal and Management Shareholders......... 45
Market for Winter Park Common Stock
and Related Shareholder Matters............. 47
GOVERNMENT REGULATION ............................. 47
General ...................................... 48
Holding Company Structure .................... 48
Dividend Restrictions ........................ 49
FDIC Insurance ............................... 50
Capital Requirements ......................... 50
Federal Deposit Insurance Corporation
Improvement Act of 1991 .................... 52
Interstate Branching and Consolidations ...... 53
Other Applicable Regulations ................. 53
EXPERTS ........................................... 54
LEGAL OPINIONS .................................... 54
OTHER MATTERS ..................................... 54
INDEX TO FINANCIAL INFORMATION..................... 55
EXHIBITS
Exhibit A - Agreement and Plan of Merger........A-1
Exhibit B - Supplemental Agreement..............B-1
Exhibit C - Opinion of Carson Medlin............C-1
Exhibit D - Shareholder Appraisal Rights........D-1
</TABLE>
THIS DOCUMENT INCORPORATES OTHER DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED IN OR DELIVERED WITH THIS DOCUMENT. COPIES OF THESE OTHER DOCUMENTS
RELATING TO HUNTINGTON ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM CHERI
GRAY, INVESTOR RELATIONS ANALYST, HUNTINGTON BANCSHARES INCORPORATED,
HUNTINGTON CENTER, 41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287, (614) 480-3803.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS RELATING TO HUNTINGTON, ANY
REQUEST SHOULD BE MADE BY _____________, 1997.
- 2 -
<PAGE> 6
AVAILABLE INFORMATION
Huntington is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and files reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC"). Copies of such reports, proxy statements, and other information
filed by Huntington can be inspected and copied at the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the public
reference facilities of the regional offices of the SEC at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material also can be obtained by mail from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the rules and regulations of the SEC. In addition, the SEC
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and information statements, and other information regarding
Huntington and other registrants that file electronically with the SEC.
Huntington has filed with the SEC a registration statement in
connection with the proposed issuance of Huntington Common Stock in the Merger
(the "Registration Statement"). This document does not contain all of the
information contained in the Registration Statement and its exhibits.
Statements contained in this document concerning the provisions of the Merger
Documents and other documents filed as exhibits to the Registration Statement
are necessarily brief descriptions and are not necessarily complete. Each such
statement is qualified in its entirety by reference to the full text of the
applicable documents.
All information contained in this document with respect to Huntington
was supplied by Huntington and all information contained in this document with
respect to Winter Park and The Carson Medlin Company, Winter Park's financial
advisor, was supplied by Winter Park. Although neither Huntington nor Winter
Park has any knowledge that would indicate that any statements or information
relating to the other party contained herein is inaccurate or incomplete,
neither Huntington nor Winter Park can warrant the accuracy or completeness of
such statements or information as they relate to the other party.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Huntington
pursuant to Section 13(a), 14, or 15(d) of the Securities Exchange Act of 1934,
as amended, are incorporated in this document by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1996;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, and
June 30, 1997;
3. Current Reports on Form 8-K dated January 15, April 9, May 5, June 19, and
July 14, 1997, to report annual and/or quarterly earnings and certain
developments;
4. Proxy Statement for the Annual Meeting of Shareholders held on April 24,
1997; except that the information referred to in Item 402(a)(8) of
Regulation S-K promulgated by the SEC shall not be deemed to be
specifically incorporated by reference in this document; and
5. The historical financial information of First Michigan Bank Corporation
included or incorporated by reference in Huntington's Joint Proxy
Statement/Prospectus, dated July 11, 1997.
In addition, the description of the rights issued under a certain
Rights Agreement, dated February 22, 1990, as amended August 16, 1995, between
Huntington and Huntington Bank, which rights are attached to all shares of
Huntington Common Stock, that is contained in Huntington's Forms 8-A filed with
the SEC pursuant to Section 12 of the Securities Exchange Act of 1934, and
Huntington's Current Report on Form 8-K, dated August 16, 1995, and as the
- 3 -
<PAGE> 7
same may be updated in any amendment or report filed for the purpose of
updating such description, is hereby incorporated by reference.
All other documents filed by Huntington pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, after
the date of this document and prior to the Special Meeting will be deemed to be
incorporated by reference in this document from the date such other documents
are filed. Any statement incorporated by reference in this document will be
deemed to be modified or superseded for purposes of this document to the extent
that a statement contained in this document or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
document modifies or supersedes such statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this document.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained under the captions "THE MERGER -
REASONS FOR THE MERGER" and "- OPINION OF CARSON MEDLIN" and elsewhere in this
Prospectus that are not historical facts, including without limitation,
statements of future expectations, projections of results of operations and
financial condition, statements of future economic performance and other
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, are subject to certain assumptions,
uncertainties, risks, and other factors which may cause the actual results,
performance, or achievements of Huntington and Winter Park to differ materially
from those contemplated in such forward-looking statements. In addition to the
specific matters referred to in this document, important factors which may
cause actual results to differ from those contemplated in such forward-looking
statements include:
o changes in economic conditions;
o movement in interest rates;
o the cost of Huntington's and Winter Park's capital, which may depend
in part on Huntington's and Winter Park's portfolio quality,
ratings, prospects, and outlook;
o the results of Huntington's and Winter Park's efforts to implement
their respective business strategies;
o actions of Huntington's and Winter Park's competitors and
Huntington's and Winter Park's ability to respond to such actions;
o the performance of borrowers from Huntington and Winter Park;
o changes in laws, governmental regulation, tax rates, and similar
matters; and
o other risks detailed in Huntington's other filings with the SEC.
- 4 -
<PAGE> 8
THE BANK OF WINTER PARK
-----------------------
PROXY STATEMENT
-----------------------
INTRODUCTION
This document and the accompanying proxy are being furnished to the
shareholders of Winter Park in connection with the solicitation of proxies by
the Board of Directors of Winter Park for the Special Meeting to be held at
7:00 p.m., local time, on _________, __________, 1997, at the main office of
Winter Park, which is located at 2006 Aloma Avenue, Winter Park, Florida, and
any adjournments or postponements thereof, for the purpose of considering and
voting upon the approval of the Merger Documents.
This document and accompanying proxy will be first sent or given to
the shareholders of Winter Park on or about ______________, 1997.
SUMMARY INFORMATION
The following is a brief summary of certain information with respect
to the Merger and the Merger Documents. This summary is not intended to be
complete and is qualified in its entirety by reference to, and should be read
in conjunction with, the detailed information and financial statements
contained or incorporated by reference in this document and its exhibits.
HUNTINGTON
Huntington, a multi-state bank holding company incorporated under the
laws of the State of Maryland in 1966, is headquartered in Columbus, Ohio. At
June 30, 1997, Huntington had total assets of approximately $21.6 billion and
total deposits of approximately $14.6 billion. Huntington, through its
affiliates, conducts a full service commercial and consumer banking business,
engages in mortgage banking, lease financing, trust services, discount
brokerage services, underwriting credit life and disability insurance, and
issuing commercial paper guaranteed by Huntington, and provides other financial
products and services. At June 30, 1997, Huntington's affiliates had 202
banking offices in Ohio and Northern Kentucky, 43 banking offices in West
Virginia, 43 banking offices in Michigan, 43 banking offices in Florida, 24
banking offices in Indiana, and 1 foreign office in the Cayman Islands. In
addition, Huntington's mortgage company affiliate has loan origination offices
throughout the Midwest and East Coast. The principal executive offices of
Huntington are located at Huntington Center, 41 South High Street, Columbus,
Ohio 43287 (telephone number 614- 480-8300). See "HUNTINGTON BANCSHARES
INCORPORATED."
In February 1997, Huntington completed the acquisition of
Citi-Bancshares, Inc., a $548 million bank holding company headquartered in
Leesburg, Florida ("Citi-Bancshares"). On May 5, 1997, Huntington entered into
an agreement to acquire First Michigan Bank Corporation, a bank holding company
located in Holland, Michigan ("First Michigan"), with assets and deposits of
$3.7 billion and $3.0 billion, respectively, as of June 30, 1997. Under the
terms of the merger with First Michigan (the "First Michigan Acquisition"),
First Michigan shareholders will receive 1.155
- 5 -
<PAGE> 9
shares of Huntington Common Stock for every share of First Michigan stock
(approximately 33,183,500 shares in the aggregate, representing approximately
16.8% of Huntington Common Stock on a post-merger basis) in a transaction that
will be accounted for as a pooling-of-interests. The First Michigan Acquisition
is expected to be completed on or about September 30, 1997.
Effective as of June 30, 1997, all but one of Huntington's banking
subsidiaries were merged into Huntington Bank, which is headquartered in
Columbus, Ohio (the "Huntington Reorganization"). The principal executive
offices of Huntington Bank are located at Huntington Center, 41 South High
Street, Columbus, Ohio 43287 (telephone number 614-480-8300). See "HUNTINGTON
BANCSHARES INCORPORATED - THE HUNTINGTON NATIONAL BANK."
WINTER PARK
Winter Park is a banking corporation organized under the laws of the
State of Florida in 1988 and, upon receipt of approval from the Comptroller of
Florida, commenced operations in 1989. Winter Park is headquartered in Winter
Park, Florida. At June 30, 1997, Winter Park had total assets of $88.4 million
and total deposits of $81.0 million. Winter Park has one subsidiary, The Bank
of Winter Park Mortgage Company, a Florida corporation. Winter Park provides a
full range of banking services to individuals and corporate customers through
its four banking offices in the Orlando area. The principal executive offices
of Winter Park are located at 2006 Aloma Avenue, Winter Park, Florida 32792
(telephone number 407-629-1888). See "THE BANK OF WINTER PARK."
THE SPECIAL MEETING
The Winter Park Special Meeting will be held at 7:00 p.m., local time,
on __________, _____________, 1997, at the main office of Winter Park, which is
located at 2006 Aloma Avenue, Winter Park, Florida. The close of business on
__________, 1997 (the "Record Date"), has been set as the record date for
determining the shareholders of record of Winter Park entitled to notice of and
to vote at the Special Meeting and any adjournments or postponements of that
Special Meeting. Winter Park shareholders of record at the close of business on
the Record Date will be entitled to vote at the Special Meeting.
A majority of the outstanding shares of Winter Park Common Stock,
represented in person or by proxy, will constitute a quorum at the Special
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum at the meeting. The affirmative
vote of the holders of two-thirds of the outstanding shares of Winter Park
Common Stock is required to approve the Merger Documents. Because the approval
of the Merger Documents requires the affirmative vote of a particular
percentage of the outstanding shares of Winter Park Common Stock, an abstention
or a broker non-vote with respect to such matter will have the same effect as a
vote against the matter.
As of the Record Date, there were 414,009 shares of Winter Park Common
Stock outstanding and entitled to vote on all matters requiring a vote of the
shareholders of Winter Park. The shares of Winter Park Common Stock outstanding
on the Record Date were held by approximately _______ holders of record. Each
share of Winter Park Common Stock entitles the holder to one vote, exercisable
in person or by properly executed proxy, on each matter that comes before the
shareholders at the Special Meeting. As of the Record Date, the directors and
executive officers of Winter Park and their affiliates beneficially owned
191,655 shares of Winter Park Common Stock (excluding shares subject to stock
options), which represent 46.3% of the total issued and outstanding shares of
such stock entitled to vote at the Special Meeting.
The shares of Winter Park Common Stock represented by the accompanying
proxy with respect to the Special Meeting will be voted as directed if the
proxy is properly signed and received by Winter Park prior to the Special
Meeting. The proxy will be voted FOR the approval of the Merger Documents if no
direction is made to the contrary on a duly executed and returned proxy. The
proxy may also be used to grant discretionary authority to vote on other
matters which may arise at the Special Meeting; however, no proxy that is voted
against the approval of the Merger Documents will be voted in favor of any
adjournment or postponement of the Special Meeting for the purpose of
- 6 -
<PAGE> 10
soliciting additional proxies. A person giving the enclosed proxy has the power
to revoke it at any time prior to the Special Meeting by filing with the
Secretary of Winter Park written notice of revocation or a subsequent proxy
relating to the same shares, or by attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy). See "THE SPECIAL MEETING."
THE MERGER
The Merger Documents set forth the terms of the Merger, as well as
certain representations, warranties, conditions, and covenants made by
Huntington, Huntington Bank, and Winter Park as an inducement to the other
party to execute and deliver the Merger Documents and to consummate the Merger.
The consummation of the Merger is conditioned on the satisfaction of certain
conditions, including obtaining the approval of the shareholders of Winter Park
and obtaining various regulatory approvals. Upon the effectiveness of the
Merger, Winter Park will be merged into Huntington Bank and the separate
existence of Winter Park will cease.
At the Effective Time, the shares of Winter Park Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares held
by Winter Park, Huntington, Huntington Bank, or any subsidiary of any of them,
in each case other than in a fiduciary capacity or as a result of debts
previously contracted ("Canceled Shares"), which shares will be canceled and
retired at the Effective Time, and other than shares of Winter Park Common
Stock held by shareholders who have perfected their dissenters' rights in
accordance with applicable law ("Dissenting Shares")) will be converted into
the right to receive whole shares of Huntington Common Stock. Cash will be paid
for any fractional shares. Except under the circumstances described below, the
number of whole shares of Huntington Common Stock to be received for each share
of Winter Park Common Stock will be determined by dividing $30.00 by the Price
Per Share of Huntington Common Stock. The Price Per Share of Huntington Common
Stock is the average of the closing sale prices for a share of Huntington
Common Stock as reported on the Nasdaq National Market on the five trading days
immediately preceding the two business days before the Effective Time (the
"Pricing Formula"). See "THE MERGER - TERMS OF THE MERGER."
As used in this document, the "Total Outstanding Winter Park
Securities" means the sum of (a) the number of shares of Winter Park Common
Stock outstanding at the Effective Time (excluding Canceled Shares, but
including Dissenting Shares) plus (b) the number of shares of Winter Park
Common Stock that are subject to outstanding Winter Park Stock Options as of
the Effective Time. If the Total Outstanding Winter Park Securities differs
from 491,259 shares, the Exchange Ratio will be automatically adjusted by
multiplying the original Exchange Ratio (prior to this adjustment) by the
quotient obtained by dividing 491,259 by the Total Outstanding Winter Park
Securities.
At the Effective Time, each outstanding Winter Park Stock Option will
be converted into an option to acquire the same number of shares of Huntington
Common Stock as the holder would have been entitled to receive pursuant to the
Merger in exchange for such shareholder's shares of Winter Park Common Stock if
such holder had exercised such option in full prior to the Effective Time,
except that all fractional shares will be rounded to the nearest whole share.
The per share exercise price for each such option will be adjusted
appropriately.
The average of the closing sale prices for a share of Huntington
Common Stock as reported on the Nasdaq National Market on the five trading days
immediately preceding the Record Date was $_____. Assuming no adjustments due
to the number of Total Outstanding Winter Park Securities, if the Price Per
Share of Huntington Common Stock calculated on the basis of the Pricing Formula
prior to the Effective Time is $_____, each share of Winter Park Common Stock
will be converted into _____ shares of Huntington Common Stock (the "Estimated
Exchange Ratio"). Shareholders are advised to obtain current market quotations
for Huntington Common Stock. The market price of Huntington Common Stock at the
Effective Time, or on the date on which certificates representing such shares
are received, may be higher or lower than the market price of Huntington Common
Stock as of the Record Date or the time of the Special Meeting.
Winter Park has received an opinion of The Carson Medlin Company
("Carson Medlin"), Winter Park's financial advisor, that the terms provided for
in the Merger Agreement are fair to the unaffiliated shareholders of Winter Park
from a financial point of view. See "THE MERGER - BACKGROUND OF THE MERGER," "-
OPINION OF CARSON MEDLIN," and "- CONDITIONS TO CONSUMMATION OF THE MERGER" and
the opinion of Carson Medlin, which is attached to this document as Exhibit C.
- 7 -
<PAGE> 11
It is contemplated that the Merger will be consummated as soon as
practicable after the satisfaction of various conditions, including the receipt
of required regulatory approvals. See "THE MERGER - EFFECTIVE DATE OF THE
MERGER," and "- CONDITIONS TO CONSUMMATION OF THE MERGER."
The Supplemental Agreement provides that Winter Park will pay to
Huntington a termination fee in the amount of $442,000, if any of the specified
events occur. See "THE MERGER - TERMINATION AND TERMINATION FEE."
As an inducement to Huntington to enter into the Merger Documents,
Winter Park has issued to Huntington a Warrant, dated May 22, 1997 (the
"Warrant"), to purchase up to 102,856 shares of Winter Park Common Stock under
certain specified circumstances, at an exercise price of $30.00 per share,
pursuant to the terms of the Warrant and a certain Warrant Purchase Agreement,
dated May 22, 1997, between Huntington and Winter Park (the "Warrant Purchase
Agreement"). See "THE MERGER - TERMS OF THE WARRANT."
As a further inducement for Huntington and Huntington Bank to enter
into the Merger Documents, ten of the officers and directors of Winter Park,
holding in the aggregate 191,305 shares of Winter Park Common Stock as of the
Record Date, or approximately 46.2% of the outstanding shares of Winter Park
Common Stock entitled to vote at the Special Meeting, executed certain
Shareholder Agreements (the "Shareholder Agreements"). Under the terms of the
Shareholder Agreements, these officers and directors agreed to vote their
shares in favor of the approval of the Merger Documents and against the
approval of any competing acquisition offer or any other transaction which is
inconsistent with the obligation of Winter Park to consummate the Merger. See
"THE MERGER - SHAREHOLDER AGREEMENTS."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Winter Park unanimously recommends that the
shareholders of Winter Park vote in favor of the approval of the Merger
Documents. See "THE MERGER - BACKGROUND OF THE MERGER" and "REASONS FOR THE
MERGER."
RIGHTS OF DISSENTING SHAREHOLDERS
If the Merger is consummated, the holders of Winter Park Common Stock
who voted against the Merger or who gave the required notice at or prior to the
Special Meeting and, in either case, who comply with all notice requirements
and other procedures specified under applicable law will have the right to
receive payment in cash of the value of their Dissenting Shares in exchange for
their shares of Winter Park Common Stock. See "THE MERGER - APPRAISAL RIGHTS OF
DISSENTING SHAREHOLDERS."
INTERESTS OF MANAGEMENT
Certain of the directors and executive officers of Winter Park hold
Winter Park Stock Options which entitle them to purchase, in the aggregate, up
to 55,764 shares of Winter Park Common Stock. See "BUSINESS OF WINTER PARK --
PRINCIPAL AND MANAGEMENT SHAREHOLDERS." Under the terms of the Merger
Documents, any Winter Park Stock Options which are not exercised prior to the
Effective Date will be converted into options to acquire shares of Huntington
Common Stock. See "THE MERGER -- TERMS OF THE MERGER."
On the Effective Date, each employee of Winter Park (including each
executive officer) will, at Huntington's option, either (a) become an employee
of Huntington or its subsidiaries and be entitled to participate in certain
employee benefit plans of Huntington or (b) be entitled to benefits to the
extent provided by, and in accordance with, Huntington's transition pay plan as
of the date of such employee's termination. Three of Winter Park's officers,
including two of its executive officers, are entitled under separate employment
agreements with Winter Park to receive severance payments in amounts equal to
their respective annual salaries in the event their employment is terminated
within a specified period of time after any change in control of Winter Park.
Huntington has not indicated whether it intends to retain the executive
officers of Winter Park following the consummation of the Merger and it has
no obligation to do so.
- 8 -
<PAGE> 12
Under the Merger Documents, for a period of four years after the
Effective Time, Huntington has agreed, to the extent permitted by law, to
indemnify the directors, officers, employees, and agents of Winter Park against
certain liabilities arising out of such persons' service as a director,
officer, employee, or agent of Winter Park occurring at or prior to the
Effective Time, to the full extent that Winter Park would have been permitted
under federal or Florida law, or by its Articles of Incorporation or Bylaws
(and also to advance expenses as incurred to the full extent permitted under
applicable law). See "THE MERGER - INTERESTS OF MANAGEMENT."
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the Merger will be a tax-free reorganization
for federal income tax purposes and that no gain or loss will be recognized for
federal income tax purposes by the shareholders of Winter Park, except to the
extent that cash is received in lieu of the issuance of fractional shares or in
connection with the exercise of dissenting shareholder rights under applicable
law. See "THE MERGER - FEDERAL INCOME TAX CONSEQUENCES." All shareholders
should consult with their own tax advisors as to the particular tax
consequences of the Merger, including the applicability and effect of state,
local, and foreign tax laws and possible changes in the tax laws.
ACCOUNTING TREATMENT
Huntington intends to treat the Merger as a purchase for accounting
purposes. See "THE MERGER - ACCOUNTING TREATMENT."
REGULATORY APPROVALS
In order to consummate the Merger, the approval of the Office of the
Comptroller of the Currency (the "OCC") is required. Huntington filed an
application with the OCC on August 19, 1997. Action by the OCC under its
streamlined procedures may be expected within 45 days of filing. See "THE
MERGER - REGULATORY APPROVALS."
COMPARATIVE PER SHARE INFORMATION
In May 1997, Huntington entered into an agreement to acquire First
Michigan, a bank holding company located in Holland, Michigan, in a transaction
to be accounted for as a pooling of interests. It is expected that the First
Michigan Acquisition will be consummated on or about September 30, 1997. The
following summary presents unaudited selected comparative per share information
for (a) Huntington and Winter Park on an historical basis; (b) Huntington,
First Michigan, and Winter Park on a pro forma combined basis; and (c) Winter
Park on an equivalent pro forma basis.
The data presented below are based upon and should be read in
conjunction with the historical financial statements and related notes thereto
of Huntington and Winter Park incorporated by reference or included in this
document (adjusted for stock splits and stock dividends, as appropriate).
Winter Park equivalent pro forma amounts were computed by multiplying
Huntington's pro forma amounts by the Estimated Exchange Ratio of _____ shares
of Huntington Common Stock for each share of Winter Park Common Stock. See "THE
MERGER - TERMS OF THE MERGER." Results for the six months ended June 30, 1997,
are not necessarily indicative of results expected for the entire year, nor are
pro forma amounts necessarily indicative of results that would have been or
will be obtained on a combined basis.
- 9 -
<PAGE> 13
<TABLE>
<CAPTION>
HUNTINGTON WINTER PARK
------------------------------- -------------------------------
PRO EQUIVALENT
HISTORICAL FORMA(1) HISTORICAL PRO FORMA
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
Book Value Per Common Share:
As of June 30, 1997........................ $10.30 $9.89 $14.26
As of December 31, 1996.................... 9.64 9.27 $13.66
Cash Dividends Declared Per
Common Share(2):
For the six months ended June 30, 1997..... $0.36 $0.36 $0.00
For the year ended December 31, 1996....... 0.68 0.68 0.00
Net Income Per Common Share:
For the six months ended June 30, 1997..... $0.88 $0.84 $0.50
For the year ended December 31, 1996....... 1.63 1.58 1.66
</TABLE>
- --------------------
(1) The pro forma per share data, except for information regarding book value,
do not reflect anticipated expenses and nonrecurring charges attributable
to the Merger or the First Michigan Acquisition. The pro forma data also
do not reflect estimated expense reductions and revenue enhancements
expected to result from the Merger or the First Michigan Acquisition.
(2) Pro forma cash dividends represent historical cash dividends per share
declared by Huntington, adjusted for stock dividends and stock splits, as
appropriate.
Huntington Common Stock is traded on the Nasdaq National Market. The
last sale price per share of Huntington Common Stock on the Nasdaq National
Market as of May 21, 1997, the last trading day prior to the public
announcement of the proposed Merger (see "THE MERGER - BACKGROUND OF THE
MERGER") (as adjusted for the 10% stock dividend paid to Huntington
shareholders on July 31, 1997), and as of ______________, 1997, were $26.136
and $__________, respectively. There is no active trading market for Winter
Park Common Stock, although isolated transactions do occur from time to time.
To the knowledge of Winter Park, all transactions in Winter Park Common Stock
are negotiated on a private basis and quotations for Winter Park Common Stock
are not published.
- 10 -
<PAGE> 14
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA OF HUNTINGTON
The following selected financial data of Huntington for the five years
ended December 31, 1996, have been derived from Huntington's audited
consolidated financial statements. The selected financial data of Huntington
for the six months ended June 30, 1997 and 1996, have been derived from
unaudited consolidated financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, that, in the opinion of
management, are necessary for a fair and consistent presentation of such data.
Operating results for the six months ended June 30, 1997, are not necessarily
indicative of results expected for the entire year. This data should be read in
conjunction with the consolidated financial statements, related notes, and
other financial information of Huntington incorporated in this document by
reference. All per share data have been adjusted for stock dividends and stock
splits, as appropriate.
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income....... $834,336 $749,375 $1,510,464 $1,461,896 $1,219,721 $1,236,311 $1,202,286
Total interest expense...... 397,640 375,364 751,640 737,333 463,671 440,111 504,846
Net interest income......... 436,696 374,011 758,824 724,563 756,050 796,200 697,440
Securities gains............ 5,581 7,290 17,703 9,056 2,594 27,189 36,332
Provision for loan losses... 45,274 23,666 65,050 28,721 15,284 79,294 81,562
Net income.................. 138,996 127,913 262,101 244,489 242,593 236,912 161,046
Per common share:
Net income............... $0.88 $0.79 $1.63 $1.47 $1.47 $1.45 $1.00
Cash dividends declared.. $0.36 $0.32 $0.68 $0.62 $0.56 $0.46 $0.40
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual balances at period end:
Total assets............. $21,584 $20,321 $20,852 $20,255 $17,771 $17,619 $16,247
Long-term debt........... 1,927 1,897 1,556 2,103 1,214 762 479
Shareholders' equity..... 1,640 1,475 1,512 1,519 1,412 1,325 1,130
Shareholders' equity
per common share....... 10.30 9.18 9.64 9.44 8.53 8.04 6.98
Average balances during the period:
Total assets............. $21,344 $19,914 $20,049 $19,048 $16,750 $16,851 $15,165
Long-term debt........... 1,872 1,972 1,819 1,424 928 641 300
Shareholders' equity..... 1,545 1,534 1,513 1,503 1,403 1,216 1,074
</TABLE>
- 11 -
<PAGE> 15
SELECTED FINANCIAL DATA OF WINTER PARK
The following selected financial data of Winter Park for the five
years ended December 31, 1996, have been derived from Winter Park's audited
consolidated financial statements. The selected financial data of Winter Park
for the six months ended June 30, 1997 and 1996, have been derived from
unaudited consolidated financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, that, in the opinion of
management, are necessary for a fair and consistent presentation of such data.
Operating results for the six months ended June 30, 1997, are not necessarily
indicative of results expected for the entire year. This data should be read in
conjunction with the consolidated financial statements, related notes, and
other financial information of Winter Park included elsewhere in this document.
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ---------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income........ $3,493 $3,660 $6,844 $5,577 $3,928 $3,654 $2,927
Total interest expense....... 1,535 1,247 2,821 2,172 1,271 1,355 1,266
Net interest income.......... 1,958 2,413 4,023 3,405 2,657 2,299 1,661
Securities gains............. 0 0 0 0 0 220 143
Provision for loan losses.... 40 130 280 253 204 310 399
Net income (loss)............ 244 337 785 335 454 244 (72)
Per common share:
Net income (loss)......... $0.50 $0.71 $1.66 $0.71 $0.96 $0.59 ($0.18)
Cash dividends declared... $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ---------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual balances at period end:
Total assets.............. $88,350 $87,421 $92,511 $76,701 $51,129 $48,310 $58,889
Long-term debt............ 712 733 723 742 0 0 0
Shareholders' equity...... 5,902 5,130 5,654 4,888 4,173 4,069 3,824
Shareholders' equity
per common share........ 14.26 12.43 13.66 11.85 10.14 9.89 9.30
Average balances during the period:
Total assets.............. $89,301 $77,813 $84,726 $62,973 $49,903 $50,581 $35,884
Long-term debt............ 717 738 733 354 0 0 0
Shareholders' equity...... 5,852 5,218 5,354 4,682 4,125 3,946 3,860
</TABLE>
- 12 -
<PAGE> 16
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
The following unaudited pro forma selected financial data combine
historical results for Huntington, Winter Park, and First Michigan for the year
ended December 31, 1996, and for the six months ended June 30, 1997 and 1996,
each having been adjusted for stock dividends and stock splits, as appropriate,
giving effect to the Merger and the First Michigan Acquisition as if each had
occurred at the beginning of the periods presented. This data should be read in
conjunction with the pro forma consolidated financial statements included
elsewhere in this document.
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1996
--------------------------------------- ------------------
1997 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Total interest income............................ $983,567 $883,078 $1,785,969
Total interest expense........................... 469,918 439,080 883,552
Net interest income.............................. 513,649 443,998 902,417
Securities gains (losses)........................ 5,702 7,206 17,619
Provision for loan losses........................ 53,251 28,485 76,651
Net income....................................... 160,586 147,590 304,174
Per common share:
Net income.................................... $0.84 $0.76 $1.58
Cash dividends declared....................... $0.36 $0.32 $0.68
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------------------------------------- ------------------
1997 1996 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Actual balances at period end:
Total assets.................................. $25,349 $23,715 $24,468
Long-term debt................................ 1,957 1,903 1,587
Shareholders' equity.......................... 1,894 1,697 1,750
Shareholders' equity per common share......... 9.89 8.81 9.27
Average balances during the period:
Total assets.................................. $25,009 $23,241 $23,463
Long-term debt................................ 1,903 1,978 1,833
Shareholders' equity.......................... 1,792 1,756 1,740
</TABLE>
- 13 -
<PAGE> 17
THE SPECIAL MEETING
GENERAL
The Winter Park Special Meeting will be held at 7:00 p.m., local time,
on __________, ____________, 1997, at the main office of Winter Park, which is
located at 2006 Aloma Avenue, Winter Park, Florida. At the Special Meeting, the
shareholders of Winter Park will be asked to consider and vote upon the
approval of the Merger Documents.
RECORD DATE; VOTING RIGHTS
Winter Park shareholders of record at the close of business on
____________, 1997, will be entitled to vote at the Special Meeting. Each share
of Winter Park Common Stock entitles the holder to one vote, exercisable in
person or by properly executed proxy, on each matter that comes before the
shareholders at the Special Meeting. A majority of the outstanding shares of
Winter Park Common Stock, represented in person or by proxy, will constitute a
quorum at the Special Meeting. Abstentions and broker non-votes will be counted
for purposes of determining the presence or absence of a quorum at the Special
Meeting. The affirmative vote of the holders of two-thirds of the outstanding
shares of Winter Park Common Stock is required to approve the Merger Documents.
Because the approval of the Merger Documents requires the affirmative vote of a
particular percentage of the outstanding shares of Winter Park Common Stock, an
abstention or a broker non-vote with respect to such matter will have the same
effect as a vote against the matter.
As of the Record Date, Winter Park had 414,009 shares of Winter Park
Common Stock outstanding and entitled to vote on all matters requiring a vote
of the Winter Park shareholders. The shares of Winter Park Common Stock
outstanding on the Record Date were held by approximately _________ holders of
record. As of the Record Date, the directors and executive officers of Winter
Park and their affiliates owned 191,655 shares of Winter Park Common Stock
(excluding shares subject to stock options), which represent 46.3% of the total
issued and outstanding shares of such stock entitled to vote at the Special
Meeting.
PROXIES
The shares of Winter Park Common Stock represented by the accompanying
proxy with respect to the Special Meeting will be voted as directed if the
proxy is properly signed and received by Winter Park prior to the Special
Meeting. The proxy will be voted FOR the approval of the Merger Documents if no
direction is made to the contrary on a duly executed and returned proxy. The
proxy may also be used to grant discretionary authority to vote on other
matters which may arise at the Special Meeting. While management of Winter Park
is presently unaware of any such matters, the person or persons designated to
vote the shares will cast votes according to their best judgment if any such
matters properly come before the Special Meeting, however, no proxy that is
voted against the approval of the Merger Documents will be voted in favor of
any adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies. A person giving the enclosed proxy has the power
to revoke it at any time prior to the Special Meeting by filing with the
Secretary of Winter Park written notice of revocation or a subsequent proxy
relating to the same shares, or by attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy).
Winter Park will bear the cost of the solicitation of proxies from its
shareholders, including the charges and expenses of brokerage firms and others,
if any, for forwarding solicitation material to beneficial owners of stock.
Representatives of Winter Park or Huntington may solicit proxies by mail,
telegram, telephone, meetings, or personal interview.
- 14 -
<PAGE> 18
THE MERGER
The following information concerning the Merger, to the extent it is
contained in the Merger Documents, is qualified in its entirety by reference to
the Merger Agreement, which is attached to this document as Exhibit A, and the
Supplemental Agreement, which is attached to this document as Exhibit B.
GENERAL
The Merger Documents set forth the terms of the Merger, as well as
certain representations, warranties, conditions, and covenants made by
Huntington and Winter Park as an inducement to the other party to execute and
deliver the Merger Documents and to consummate the Merger. The consummation of
the Merger is conditioned on the satisfaction of certain conditions, including
obtaining the approval of the shareholders of Winter Park and obtaining various
regulatory approvals. Upon the effectiveness of the Merger, Winter Park will be
merged into Huntington Bank and each outstanding share of Winter Park Common
Stock will be converted into the right to receive whole shares of Huntington
Common Stock, subject to certain limitations. See "-- TERMS OF THE MERGER".
BACKGROUND OF THE MERGER
Winter Park was organized to fulfill the need for a locally owned and
managed banking institution in the City of Winter Park in Orange County,
Florida. From the commencement of its business in 1989, the Board of Directors
of Winter Park has sought to maximize shareholder value through steady asset
growth.
In order to achieve its growth objectives, the Board of Directors of
Winter Park initiated an expansion program in 1992 that provided for the
gradual establishment of additional branch offices throughout the East-Central
Orlando area. Pursuant to this plan, in December 1992, Winter Park acquired a
larger office on Aloma Avenue which then became the bank's main office. In
January 1995, Winter Park opened its third office in the Pinecastle area south
of Orlando, and in February 1996, Winter Park opened its fourth office in
Longwood, Seminole County. In May 1997, Winter Park received regulatory
approval to open its fifth banking office in the Conway area of Orlando. Winter
Park has also acquired a site for its sixth banking office which would be
located in Casselberry in South Seminole County. The Casselberry office is
expected to open in 1998, subject to regulatory approval.
The expansion of Winter Park's branch network is reflected in the
growth of its total deposits from $46.6 million at December 31, 1994, to $81.0
million at June 30, 1997, and the growth of its total assets from $51.1 million
at December 31, 1994, to $88.4 million at June 30, 1997. In the opinion of the
Winter Park directors, this growth in the size and branch network of Winter
Park has greatly enhanced its attractiveness as an acquisition candidate for
larger regional banks.
In July 1995, pursuant to its strategic plan to establish new lines of
business, Winter Park acquired all of the shares of TransLand Financial
Services, Inc. ("TransLand"), a mortgage banking firm, in order to facilitate
the development of its mortgage lending business, particularly the financing of
construction of single-family residences. TransLand's business grew rapidly and
contributed to the overall growth of Winter Park. However, TransLand's growth
began to strain Winter Park's capital, liquidity, and management resources.
Accordingly, in August 1996, Winter Park sold the assets of TransLand. In
September 1996, Winter Park's former president resigned to take a position with
another bank. Shortly thereafter, the senior vice presidents for lending and
operations also resigned to take other positions.
Winter Park has occasionally received expressions of interest in a
possible acquisition of Winter Park from various other banks. The Board of
Directors believed, however, that in view of the effects of the business
restructuring associated with the sale of TransLand and the changes in
management, higher offers could be obtained after Winter Park completed the
development of its branch network, established more consistent profitability,
and re-established a stable management team. Accordingly, these expressions of
interest were not pursued at that time.
- 15 -
<PAGE> 19
In February 1997, however, Winter Park received an unsolicited offer
from Regions Financial Corporation ("Regions") to exchange shares of Regions'
common stock for all of the Winter Park Common Stock in a tax-free
reorganization. The Regions offer was substantially more attractive than any of
the previous indications of interest in Winter Park. Accordingly, the Board of
Directors began serious negotiations with Regions and allowed Regions to
conduct a due diligence investigation of Winter Park. At this time, Winter Park
also engaged the services of its special counsel, Shutts & Bowen, L.L.P.
("Shutts & Bowen"), to advise the Board with respect to legal matters related
to a possible sale of the bank and Carson Medlin to advise it with respect to
the financial terms of the prospective transaction.
While it was evaluating the adequacy of the Regions offer, Carson
Medlin received several unsolicited indications of interest in acquiring Winter
Park. Subsequently, Carson Medlin contacted several other banks to determine
whether there was any additional interest in acquiring Winter Park. In
response, Winter Park received offers from two larger Florida banking
organizations and two regional banking organizations headquartered outside of
Florida, including Huntington, which offered to acquire Winter Park in a
taxable cash transaction.
After further consideration, Winter Park's Executive Committee
authorized Carson Medlin to pursue further negotiations with the other four
banking organizations to explore their interest in increasing their respective
offers. In this connection, Carson Medlin was asked to explore the willingness
of Huntington to change the consideration it offered from cash to stock. During
the course of these negotiations in early April 1997, the Regions offer, which
provided no limits to protect against declines in the value of the Regions'
stock, had become less attractive, while Huntington agreed both to make a stock
offer and to increase the amount of its offer. At that point, the Huntington
offer, which was subject to completion of its due diligence investigation of
Winter Park, appeared to be the highest of the five offers received.
After Huntington completed its due diligence investigation, Winter
Park's Executive Committee directed Carson Medlin and Shutts & Bowen to proceed
with the negotiation of a definitive merger agreement with Huntington. On April
29, 1997, Huntington provided Winter Park an initial draft of the Merger
Documents and proceeded to conduct additional due diligence procedures. After
further negotiations between the management of Huntington and Winter Park and
discussions between their respective counsel, on May 9, 1997, Huntington
provided Winter Park a revised draft of the Merger Documents incorporating a
number of changes requested by Winter Park.
On May 12, 1997, the Board of Directors of Winter Park met with
representatives of Shutts & Bowen and Carson Medlin to review the principal
terms of the Merger Documents. At this meeting, Shutts & Bowen described the
principal terms of the Merger Documents and Carson Medlin described the
methodology of its financial analysis concerning the terms of the Merger
Agreement and discussed the fairness from a financial point of view of the
consideration to be received by Winter Park's shareholders. After further
discussion, the Board of Directors of Winter Park decided to request further
changes in the Merger Documents.
Huntington and Winter Park continued their negotiations and, on May 20,
1997, Huntington delivered the Merger Documents to Winter Park with final
revisions incorporated. That same day, the Board of Directors of Winter Park met
again with representatives of Shutts & Bowen and Carson Medlin to consider the
terms of the revised Merger Documents. Shutts & Bowen described the changes in
the Merger Documents, and Carson Medlin delivered to the Board of Directors its
opinion that the terms of the Merger Agreement were fair to Winter Park's
shareholders from a financial point of view. See "- OPINION OF CARSON MEDLIN"
below. After further discussion, the Board of Directors of Winter Park
unanimously approved the Agreement and authorized its chairman to sign the
Merger Documents and deliver them to Huntington.
REASONS FOR THE MERGER
In its deliberations with regard to the Merger, the Board of Directors
of Winter Park considered the following:
o the consideration to be received by the shareholders of Winter Park
upon the consummation of the Merger;
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o the federal income tax consequences of the Merger;
o the transferability of the Huntington Common Stock to be received in
connection with the Merger;
o the financial condition, earnings record, and business prospects of
Winter Park and of Huntington;
o the current and historical market prices of Huntington Common Stock;
o the amounts paid in recent acquisitions of other community banks
based in Florida;
o the opinion of Carson Medlin that the consideration to be received
by the shareholders of Winter Park is fair from a financial point of
view; and
o the impact of the Merger on Winter Park's customers, employees, and
local community.
The Winter Park Board of Directors also considered Huntington's
ability to offer a broader range of products and services to the customers of
Winter Park. No relative or specific weight or value was assigned to any of the
foregoing factors by the Board of Directors, and individual directors may have
given differing weights or values to various considerations.
THE BOARD OF DIRECTORS OF WINTER PARK BELIEVES THAT THE MERGER IS IN
THE BEST INTEREST OF WINTER PARK'S SHAREHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER DOCUMENTS
AND THE MERGER.
OPINION OF CARSON MEDLIN
Pursuant to an engagement letter, dated February 24, 1997, the Board
of Directors of Winter Park engaged Carson Medlin to provide the Board of
Directors of Winter Park with a written opinion regarding the fairness of the
Merger from a financial point of view. Winter Park selected Carson Medlin as
its financial advisor on the basis of Carson Medlin's experience and expertise
in representing community banks in acquisition transactions. Carson Medlin is
an investment banking firm which specializes in the securities of financial
institutions located in the southeastern United States. As part of its
investment banking activities, Carson Medlin is regularly engaged in the
valuation of financial institutions and transactions relating to their
securities.
As part of its engagement, representatives of Carson Medlin attended
the meeting of Winter Park's Board held on May 20, 1997, at which meeting the
terms of the Merger Documents were discussed and considered. Carson Medlin
delivered its written opinion (dated as of that date) to the Board of Directors
of Winter Park stating that the aggregate consideration to be received in the
Merger by the unaffiliated shareholders of Winter Park for their shares of the
Winter Park Common Stock is fair, from a financial point of view. Carson Medlin
subsequently confirmed such opinion in writing as of the date of this document.
The full text of Carson Medlin's written opinion is attached as
Exhibit C to this document and should be read in its entirety with respect to
the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by Carson Medlin in
connection with its opinion. Carson Medlin's opinion is addressed to Winter
Park's Board of Directors and is substantially identical to the written opinion
delivered to Winter Park's Board on May 20, 1997. The summary of the opinion of
Carson Medlin set forth in this document is qualified in its entirety by
reference to the full text of such opinion attached as Exhibit C.
Carson Medlin has relied, without independent verification, upon the
accuracy and completeness of the information it reviewed for the purpose of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of Huntington or Winter
Park, and it was not furnished with any such appraisals. Carson Medlin is not
an expert in the evaluation of loan portfolios, including under-performing or
non-performing assets, charge-offs, or the allowance for loan losses. It has
not reviewed any individual credit files of
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Huntington or Winter Park. Instead, it has assumed that the loan loss
allowances for each of Huntington and Winter Park are in the aggregate adequate
to cover such losses. Carson Medlin's opinion is necessarily based on economic,
market, and other conditions existing on the date of its opinion, and on
information as of various earlier dates made available to it. Carson Medlin
reviewed certain financial projections prepared by Huntington and Winter Park.
Carson Medlin assumed that these projections were prepared on a reasonable
basis using the best and most current information available to the managements
of Huntington and Winter Park, and that such projections will be realized in
the amounts and at the times contemplated by such projections. Neither
Huntington nor Winter Park publicly discloses internal management projections
of the type provided to Carson Medlin. Such projections were not prepared for,
or with a view toward, public disclosure. Carson Medlin assumed that the Merger
will be recorded as a purchase under generally accepted accounting principles.
The preparation of a fairness opinion involves various determinations
as to the most appropriate methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not readily
susceptible to partial analysis or summary description. In connection with
rendering its opinion, Carson Medlin performed a variety of financial analyses.
Carson Medlin believes that its analyses must be considered together as a whole
and that selecting portions of such analyses and the facts considered therein,
without considering all other factors and analyses, could create an incomplete
or inaccurate view of the analyses and the process underlying Carson Medlin's
opinion. Carson Medlin made numerous assumptions with respect to industry
performance, business, and economic conditions, and other matters, many of
which are beyond the control of Huntington and Winter Park and which may not be
realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals and do not necessarily reflect the prices at which
such companies or their securities may actually be sold. Except as described
below, none of the analyses performed by Carson Medlin were assigned a greater
significance by Carson Medlin than any other.
In connection with its opinion, dated as of the date of this document,
Carson Medlin reviewed:
o the Merger Documents;
o the annual reports to shareholders of Huntington, including the
audited financial statements for the five years ended December 31,
1996, and the audited financial statements of Winter Park for the
five years ended December 31, 1996;
o the unaudited interim financial statements of Huntington for the six
months ended June 30, 1997, and the unaudited interim financial
statements of Winter Park for the six months ended June 30, 1997;
o certain financial and operating information with respect to the
business, operations, and prospects of Huntington and Winter Park;
and
o this document.
In addition, Carson Medlin:
o held discussions with members of the senior management of Huntington
and Winter Park regarding the historical and current business
operations, financial condition, and future prospects of their
respective companies;
o reviewed the historical market prices and trading activity for the
common stock of Huntington and Winter Park and compared them with
those of certain publicly traded companies which it deemed to be
relevant;
o compared the results of operations of Huntington and Winter Park
with those of certain financial institutions which it deemed to be
relevant;
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<PAGE> 22
o compared the financial terms of the Merger with the financial terms,
to the extent publicly available, of certain other recent business
combinations of financial institutions;
o analyzed the pro forma financial impact of the Merger on Huntington;
and
o conducted such other studies, analyses, inquiries and examinations
as Carson Medlin deemed appropriate.
VALUATION METHODOLOGIES
The following is a summary of the principal analyses performed by
Carson Medlin and presented to the Winter Park Board of Directors on May 20,
1997, in connection with Carson Medlin's opinion of that date.
SUMMARY OF PROPOSAL. Carson Medlin reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
Carson Medlin reviewed the implied value of the consideration offered which
showed that each of the outstanding shares of Winter Park Common Stock shall be
converted into the right to receive shares of Huntington Common Stock having a
value of $30.00 as of the Effective Date of the Merger. The implied value thus
represented a total transaction value of approximately $12.4 million on a
primary share basis and $14.7 million on a fully diluted basis. Carson Medlin
calculated that the aggregate transaction value on a fully diluted basis
represented 223% of Winter Park's book value at March 31, 1997, 18.5 times its
annualized first quarter 1997 earnings, an 11.6% core deposit premium (defined
as the aggregate transaction value minus fully diluted book value divided by
core deposits), and 16.5% of Winter Park's total assets at March 31, 1997.
INDUSTRY COMPARATIVE ANALYSIS. In connection with rendering its
opinion, Carson Medlin compared selected operating results of Winter Park to
those of 50 publicly-traded community commercial banks in Alabama, Florida,
Georgia, North Carolina, South Carolina, Virginia, and West Virginia (the "SIBR
Banks") as contained in the Southeastern Independent Bank Review(TM), a
proprietary research publication prepared by Carson Medlin quarterly since
1991. The SIBR Banks range in asset size from approximately $97 million to
$2.3 billion and in shareholders' equity from approximately $9.1 million to
$230.7 million. Carson Medlin considers this group of financial institutions
more comparable to Winter Park than larger, more widely traded regional
financial institutions. Carson Medlin compared, among other factors, the
profitability, capitalization, and asset quality of Winter Park to the SIBR
Banks. Carson Medlin noted that based on results through the year ended
December 31, 1996:
o Winter Park had a return on average assets ("ROA") of 1.06%,
compared to mean ROA of 1.23% for the SIBR Banks;
o Winter Park had a return on average equity ("ROE") of 16.7%,
compared to mean ROE of 12.6% for the SIBR Banks;
o Winter Park had a ratio of common equity to total assets at December
31, 1996, of 6.2%, compared to a mean common equity to total assets
ratio of 9.6% for the SIBR Banks; and
o Winter Park had a ratio of nonperforming assets (defined as loans 90
days past due, nonaccrual loans, and other real estate) to total
loans net of unearned income and other real estate at December 31,
1996, of 0.90%, compared to mean nonperforming assets to total loans
net of unearned income and other real estate ratio of 1.02% for the
SIBR Banks.
This comparison indicated that Winter Park's financial performance equaled or
exceeded the average performance of the SIBR Banks for most of the factors
considered.
Carson Medlin also compared selected operating results of Huntington
to those of six other publicly-traded mid-size regional bank holding companies
defined as those with assets between $10 and $50 billion (the "Peer Banks")
located in the Midwest. The Peer Banks include: Comerica, Inc., Fifth Third
Bancorp, First of America Bank Corp., National City Corp., Old Kent Financial
Corp., and Star Banc Corp. Carson Medlin considers this group of midwestern
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<PAGE> 23
financial institutions comparable to Huntington as to financial
characteristics, stock price performance, and trading volume. Carson Medlin
compared selected balance sheet data, asset quality, capitalization,
profitability ratios, and market statistics using financial data at or for the
three months ended March 31, 1997, and market data as of April 30, 1997. This
comparison showed, among other things, that:
o for the three months ended March 31, 1997, Huntington's net interest
margin was 4.35% compared to a mean of 4.49% and a median of 4.52%
for the Peer Banks;
o for the three months ended March 31, 1997, Huntington's efficiency
ratio (defined as noninterest expense divided by the sum of
noninterest income and taxable equivalent net interest income before
provision for loan losses) was 56.3% compared to a mean of 53.4% and
a median of 54.9% for the Peer Banks;
o for the three months ended March 31, 1997, Huntington's ROA was
1.28% compared to a mean of 1.59% and a median of 1.56% for the Peer
Banks;
o for the three months ended March 31, 1997, Huntington's ROE was
17.75% compared to a mean of 18.78% and a median of 18.37% for the
Peer Banks;
o at March 31, 1997, Huntington's stockholders' equity to total assets
ratio was 7.26% compared to a mean of 8.22% and a median of 8.11%
for the Peer Banks;
o at March 31, 1997, Huntington's ratio of nonperforming assets to
total assets was 0.54% compared to a mean of 0.52% and a median of
0.51% for the Peer Banks;
o at March 31, 1997, the ratio of Huntington's loan loss reserves to
nonperforming assets (including loans 90 days or more past due) was
257% compared to a mean of 232% and a median of 243% for the Peer
Banks; and
o at April 30, 1997, Huntington's market capitalization was $4.2
billion, while the Peer Banks ranged from a low of $2.3 billion to a
high of $10.7 billion.
This comparison indicated that Huntington's financial performance is slightly
below average in comparison to the Peer Banks. Carson Medlin noted, however,
that it considers Huntington's overall financial performance to be strong and
that the Peer Banks included some of the highest performing companies in the
banking industry.
COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain
information relating to 19 selected Central Florida bank mergers announced or
completed since January 1994 (the "Comparable Transactions"). The Comparable
Transactions were (acquiree/acquiror): Tampa Banking Company/AmSouth Bancorp;
Osceola National Bank/Southern Banking Corp.; United Citizens Bank/Southeast
Banking Corp.; Security National Corp./Huntington Bancshares Incorporated;
Peoples State Bank/SunTrust Banks, Inc.; Reliance Bank of Florida/Huntington
Bancshares Incorporated; Plant State Bank/SouthTrust Corp.; First Seminole
Bank/Huntington Bancshares Incorporated; First Commercial Financial/SouthTrust
Corp.; Citizens First Bancshares/Citi-Bancshares, Inc.; University State Bank
Corp./Terrace Bank of Florida; Southern Banking Corp./The Colonial BancGroup,
Inc.; First State Bank of Florida/SouthTrust Corp.; Lake State Bank/SouthTrust
Corp.; Tomoka Bancorp/The Colonial BancGroup, Inc.; Fort Brooke
Bancorporation/The Colonial BancGroup, Inc.; South Hillsborough Community
Bank/Provident Bancorp; First Mercantile National Bank/Regions Financial Corp.;
and First Commerce Banks of Florida/The Colonial BancGroup, Inc. Carson Medlin
considered, among other factors, the earnings, capital level, asset size, and
quality of assets of the acquired financial institutions. Carson Medlin
compared the transaction prices to trailing four quarters' earnings, stated
book values, total assets, and core deposit premiums.
On the basis of the Comparable Transactions, Carson Medlin calculated
the range of purchase prices as a percentage of book value for the Comparable
Transactions from a low of 139% to a high of 349%, with a mean of 206%. These
transactions indicated a range of values for Winter Park from $18.70 per share
to $46.91 per share, with a mean of $27.71 per share (based on Winter Park's
fully diluted book value of $13.45 per share at March 31, 1997).
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<PAGE> 24
The aggregate consideration implied by the terms of the Merger Agreement is
$30.00 per share or a price to book value multiple of 223% which is above the
average of the range for the Comparable Transactions.
Carson Medlin calculated the range of purchase prices as a multiple of
earnings for the Comparable Transactions, from a low of 7.0 times to a high of
23.9 times, with a mean of 16.3 times. These transactions indicated a range of
values for Winter Park from $11.34 to $38.72 per share, with a mean of $26.41
per share (based on Winter Park's annualized first quarter fully diluted
earnings of $1.62 per share). The aggregate consideration implied by the terms
of the Merger Agreement is $30.00 per share or a price to earnings multiple of
18.5 times which is above the average of the range for the Comparable
Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 3.7% to a high of 25.3%,
with a mean of 11.4%. The premium on Winter Park's core deposits implied by the
terms of the Merger Agreement is 11.6%, near the average of the range for the
Comparable Transactions.
Finally, Carson Medlin calculated the range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 10.7%
to a high of 26.5%, with a mean of 18.3%. As a percentage of total assets, the
purchase price implied by the terms of the Merger Agreement is approximately
16.5%, slightly below the average of the range for the Comparable Transactions.
No company used in Carson Medlin's analyses is identical to Huntington
or to Winter Park. Nor is any transaction identical to the Merger. Accordingly,
the results of these analyses necessarily involve complex considerations and
judgments concerning differences in financial and operating characteristics of
Huntington and Winter Park and other factors that could affect the value of the
companies to which they have been compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable industry or transaction data.
PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value of
Winter Park assuming that Winter Park remained an independent bank. For
purposes of this analysis, Carson Medlin utilized certain projections of Winter
Park's future earnings. It assumed that all of these earnings would be retained
and that the Winter Park Common Stock would be sold at the end of 5 years at
200% of projected book value. This value was then discounted to present value
utilizing discount rates of 14% through 16%. These rates were selected because,
in Carson Medlin's experience, they represent the rates that investors in
securities such as the Winter Park Common Stock demand in light of the
potential appreciation and risks. On the basis of these assumptions, Carson
Medlin calculated that the present value of Winter Park as an independent bank
ranged from $26.95 per share to $29.40 per share. The aggregate consideration
implied by the terms of the Merger Agreement is $30.00 per share which falls
above the high end of the range under the present value analysis. Carson Medlin
noted that the present value analysis was included because it is a widely used
valuation methodology, but noted that the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend payout rates, terminal values, and discount
rates.
STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the
historical trading prices and volumes for the Huntington Common Stock on a
monthly basis from December 1992 to April 1997 and analyzed the total return of
Huntington Common Stock for the five years ended December 31, 1996. Carson
Medlin also compared the price performance of the Huntington Common Stock
during this period to the six Peer Banks.
During the four quarters ending March 31, 1997, the ratio of stock
price to trailing 12 months' earnings per share for the Peer Banks was: a low
of 13.6 times, a high of 17.6 times, and a mean of 15.7 times. Huntington's
price to earnings ratio ranged from a low of 12.8 times to a high of 14.7 times
with a mean of 13.8 times. Huntington Common Stock has traded on average at a
lower price to earnings ratio than the Peer Banks.
During the four quarters ending March 31, 1997, the stock price as a
percentage of book value for Peer Banks was: a low of 212%, a high of 282%, and
a mean of 248%. Huntington's price to book ratio ranged from a low of 211% to a
high of 254% with a mean of 235%. Huntington Common Stock has traded near or
slightly below average on a price to book value basis compared to the Peer
Banks.
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<PAGE> 25
Carson Medlin also examined the trading volume in Huntington Common
Stock in comparison with that of the Peer Banks. During the four quarters
ending March 31, 1997, the quarter end monthly trading volume of outstanding
shares of the Peer Banks ranged from a low of 3.3% to a high of 4.9% with a
mean of 4.0%. Huntington's quarter end monthly trading volume to outstanding
shares ranged from a low of 1.3% to a high of 3.6% with a mean of 2.0%. Carson
Medlin considers Huntington Common Stock to be liquid and marketable in
comparison with these Peer Banks and other bank holding companies.
Carson Medlin also examined the trading prices and volumes of Winter
Park Common Stock. Winter Park Common Stock has not traded in volumes
sufficient to be meaningful. Therefore, Carson Medlin did not place any weight
on the market price of the Winter Park Common Stock.
CONTRIBUTION ANALYSIS. Carson Medlin reviewed the relative
contributions in terms of various balance sheet and income statement components
to be made by Winter Park and Huntington to the combined institution based on
(a) balance sheet data at March 31, 1997, and (b) three month earnings as of
March 31, 1997. The income statement and balance sheet components analyzed
included total assets, net loans, total deposits, shareholders' equity, and net
income. This analysis showed that, while Winter Park shareholders would own
approximately 0.3% of the aggregate outstanding shares of the combined
institution based on the Exchange Ratio, Winter Park was contributing 0.4% of
total assets, 0.4% of net loans, 0.6% of total deposits, 0.4% of shareholders'
equity, and 0.3% of first quarter 1997 net income.
OTHER ANALYSIS. Carson Medlin also reviewed selected investment
research reports on and earnings estimates for Huntington. In addition, Carson
Medlin prepared an overview of historical financial performance of Huntington
and a shareholder claims analysis.
The opinion expressed by Carson Medlin was based upon market,
economic, and other relevant considerations as they existed and have been
evaluated as of the date of the opinion. Events occurring after the date of
issuance of the opinion, including but not limited to, changes affecting the
securities markets, the results of operations, or material changes in the
assets or liabilities of Winter Park could materially affect the assumptions
used in preparing the opinion.
In connection with its opinion dated as of the date of this document,
Carson Medlin confirmed the appropriateness of its reliance on the analyses
used to render its May 20, 1997, opinion by performing procedures to update
certain of such analyses and reviewing the assumptions on which its analyses
were based and the factors considered in connection therewith.
COMPENSATION OF CARSON MEDLIN
Pursuant to an engagement letter, dated February 24, 1997, Winter Park
engaged Carson Medlin to assist in effecting a transaction similar to the
Merger and to act as its financial advisor in connection with such proposed
transaction. Winter Park has paid Carson Medlin $22,500 for its services
pursuant to the terms of the engagement letter. In addition, if a sale of
Winter Park to Huntington is accomplished, pursuant to the engagement letter
Winter Park will pay Carson Medlin an investment banking fee in an amount equal
to 1.25 percent of the aggregate consideration paid in such transaction, less
the $22,500 previously paid to Carson Medlin, or approximately $162,000. Winter
Park has agreed to reimburse Carson Medlin for its reasonable out-of-pocket
expenses and to indemnify Carson Medlin against certain liabilities, including
certain liabilities under the federal securities laws.
EFFECTIVE TIME OF THE MERGER
The Merger will be effective at 11:59 p.m., local Florida time (the
"Effective Time"), on the "Effective Date," which will be the date of
consummation of the Merger as certified by the Comptroller of the Currency. The
Effective Date cannot be earlier than the date of expiration of any required
waiting period following receipt of the regulatory approval required in order
to consummate the Merger. Unless Huntington and Winter Park otherwise agree,
the Effective Date will be the last day of the month in which all conditions
specified in the Supplemental Agreement have been satisfied or waived. It is
anticipated that, if the shareholders of Winter Park approve the Merger
Documents, and
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if the necessary regulatory approval is received, and if the other conditions
to the consummation of the Merger are satisfied, the Effective Date will occur
in the fourth quarter of 1997.
TERMS OF THE MERGER
The Merger Documents provide for the merger of Winter Park into
Huntington Bank pursuant to the applicable provisions of the laws of the United
States and the State of Florida. Upon the effectiveness of the Merger,
Huntington Bank will be the surviving entity and the separate existence of
Winter Park will cease. The articles of association and bylaws of the surviving
entity will be those of Huntington Bank as in effect immediately prior to the
Effective Time until otherwise amended in accordance with law.
At the Effective Time, by virtue of the Merger, the shares of Winter
Park Common Stock issued and outstanding immediately prior to the Effective
Time (other than Canceled Shares and Dissenting Shares) will cease to be
outstanding and will be converted into the right to receive whole shares of
Huntington Common Stock. Except under the circumstances described below, the
number of whole shares of Huntington Common Stock to be received for each share
of Winter Park Common Stock will be determined by dividing $30 by the Price Per
Share of Huntington Common Stock. The Price Per Share of Huntington Common
Stock is the average of the closing sale prices for a share of Huntington
Common Stock as reported on the Nasdaq National Market on the five trading days
immediately preceding the two business days before the Effective Time. Cash
will be paid for any fractional shares in an amount equal to the product of the
Price Per Share of Huntington Common Stock multiplied by such fraction. No
interest will be payable with respect to such cash payment.
As used in this document, the "Total Outstanding Winter Park
Securities" means the sum of (a) the number of shares of Winter Park Common
Stock outstanding at the Effective Time (excluding Canceled Shares, but
including Dissenting Shares) plus (b) the number of shares of Winter Park
Common Stock that are subject to outstanding Winter Park Stock Options as of
the Effective Time. If the Total Outstanding Winter Park Securities differs
from 491,259 shares, the Exchange Ratio will be automatically adjusted by
multiplying the original Exchange Ratio (prior to this adjustment) by the
quotient obtained by dividing 491,259 by the Total Outstanding Winter Park
Securities.
At the Effective Time, each outstanding Winter Park Stock Option will
be converted into an option to acquire the same number of shares of Huntington
Common Stock as the holder would have been entitled to receive pursuant to the
Merger in exchange for such shareholder's shares of Winter Park Common Stock if
such holder had exercised such option in full prior to the Effective Time,
except that all fractional shares will be rounded to the nearest whole share.
The per share exercise price for each such Winter Park Stock Option will be
equal to the exercise price for a share of Winter Park Common Stock purchasable
pursuant to such option immediately prior to the Effective Time divided by the
Exchange Ratio. All incentive stock options will be converted in such a manner
that their status as incentive stock options for federal income tax purposes
will be maintained. Upon such substitution, all rights under the Winter Park
stock option plans will terminate. As of the Record Date, Winter Park Stock
Options to purchase 76,589 shares of Winter Park Common Stock were outstanding.
The average of the closing sale prices for a share of Huntington Common
Stock as reported on the Nasdaq National Market on the five trading days
immediately preceding the Record Date was $_____. If the Price Per Share of
Huntington Common Stock calculated on the basis of the Pricing Formula prior to
the Effective Time is $_____ and the Total Outstanding Winter Park Securities
equal 491,259, each share of Winter Park Common Stock will be converted into
_____ shares of Huntington Common Stock (the "Estimated Exchange Ratio").
Shareholders are advised to obtain current market quotations for Huntington
Common Stock. The market price of Huntington Common Stock at the Effective Time,
or on the date on which certificates representing such shares are received, may
be higher or lower than the market price of Huntington Common Stock as of the
Record Date or the time of the Special Meeting.
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EXCHANGE OF CERTIFICATES
Huntington Bank, or its nominee, has been designated by Huntington to
act as the exchange agent (the "Exchange Agent") in connection with the Merger.
Huntington Bank intends to enter into an agreement with Harris Trust and
Savings Bank ("Harris Trust"), the transfer agent for Huntington Common Stock,
to act as its agent and assume the responsibilities of the Exchange Agent for
the Merger. Approval of the Merger Documents by the shareholders of Winter
Park will constitute ratification of the appointment of Huntington Bank and its
agent, Harris Trust, as the Exchange Agent.
As promptly as practicable after the Effective Date, Huntington Bank
will cause the Exchange Agent to prepare and mail to each holder of record at
the Effective Time of any shares of Winter Park Common Stock (other than
Canceled Shares or Dissenting Shares) a letter of transmittal containing
instructions for the surrender of all certificates for shares of Winter Park
Common Stock. Upon the surrender by such holder of a certificate or
certificates for shares of Winter Park Common Stock standing in such holder's
name to the Exchange Agent in accordance with the instructions set forth in the
letter of transmittal, such holder will be entitled to receive in exchange a
certificate representing the number of whole shares of Huntington Common Stock
into which the shares represented by the certificate or certificates so
surrendered shall have been converted and, if applicable, a check payable to
such holder in the amount necessary to pay for any fractional shares of
Huntington Common Stock which such holder would otherwise have been entitled to
receive. Huntington will deliver to the Exchange Agent such share certificates
for whole shares of Huntington Common Stock and the amount of cash necessary to
pay for all fractional shares of Huntington Common Stock in order to permit the
Exchange Agent to promptly deliver such certificates and cash to the holders of
shares of Winter Park Common Stock upon its receipt of certificates
representing shares of Winter Park Common Stock. No interest will be payable
with respect to either the whole shares of Huntington Common Stock or the cash
payable in lieu of fractional shares.
None of Huntington, Huntington Bank, nor the Exchange Agent will be
obligated to deliver a certificate for Huntington Common Stock or a check for
cash in lieu of fractional shares to a former shareholder of Winter Park until
such former shareholder surrenders the certificate or certificates representing
shares of Winter Park Common Stock standing in such former shareholder's name
or, if such former shareholder is unable to locate such certificate or
certificates, an appropriate affidavit of loss and indemnity agreement and bond
as may be required by Huntington. Until so surrendered, each outstanding
certificate for shares of Winter Park Common Stock will be deemed for all
corporate purposes (except the payment of dividends) to evidence ownership of
the number of whole shares of Huntington Common Stock into which the shares of
Winter Park Common Stock represented by such certificate shall have been
converted.
After the Effective Date, no dividends or distributions payable to
holders of record of Huntington Common Stock will be paid to any holder of an
outstanding certificate or certificates formerly representing shares of Winter
Park Common Stock until such certificate(s) are surrendered by such holder in
accordance with the terms of the Merger Agreement. Promptly upon surrender of
such outstanding certificate(s), there will be paid to such holder of the
certificate or certificates for Huntington Common Stock issued in exchange the
amount of dividends and other distributions, if any, which had became payable
with respect to such full shares of Huntington Common Stock, but which had not
yet been paid on such stock. No interest will be payable with respect to the
payment of any dividends or other distributions. All such dividends or other
distributions unclaimed at the end of one year from the Effective Date will, to
the extent such dividends have been previously paid to the Exchange Agent, be
repaid by the Exchange Agent to Huntington. After that time, the holders of
such outstanding certificates for Winter Park Common Stock must look, subject
to applicable escheat, unclaimed funds, and other laws, as general creditors
only to Huntington for payment thereof.
The stock transfer books of Winter Park will be closed as of the close
of business on the day that is two business days prior to the Effective Date.
After such date, there will be no further registration on the records of Winter
Park of transfers of outstanding certificates formerly representing shares of
Winter Park Common Stock.
Huntington is empowered to adopt additional reasonable rules and
regulations with respect to the matters described above not inconsistent with
the provisions of the Merger Agreement.
- 24 -
<PAGE> 28
FRACTIONAL SHARES
No fractional shares of Huntington Common Stock will be issued. Each
former shareholder of Winter Park who would otherwise be entitled to receive a
fractional share of Huntington Common Stock upon surrender of his certificate
or certificates for shares of Winter Park Common Stock will receive from the
Exchange Agent cash in an amount equal to the fractional share interest
multiplied by the Price Per Share of Huntington Common Stock. No interest will
be payable with respect to such cash payment.
Immediately after the third anniversary of the Effective Date, the
Exchange Agent will deliver to Huntington Bank any unclaimed balance of cash
owing with respect to fractional shares and such cash will be retained by, and
become the property of Huntington Bank, free and clear of any claims
whatsoever.
TERMS OF THE WARRANT
On May 22, 1997, pursuant to the terms of the Warrant Purchase
Agreement, Winter Park issued the Warrant to Huntington. The Warrant gives
Huntington or a subsequent holder of the Warrant (collectively, the "Holder")
the right to purchase, under certain specified circumstances, a total of up to
102,856 shares of Winter Park Common Stock (the "Warrant Stock"), representing
19.9% of the outstanding shares of Winter Park Common Stock (after giving
effect to the issuance of the Warrant Stock), at a price of $30.00 per share,
subject to certain anti-dilution adjustments (the "Warrant Price").
The Holder may not exercise the Warrant unless it has obtained all
required approvals, if any, of appropriate regulatory authorities having
jurisdiction pursuant to all applicable laws and regulations. Further, subject
to the terms and conditions set forth in the Warrant and in the Warrant
Purchase Agreement and the provisions of applicable law, the Holder may not
exercise the Warrant without the written consent of Winter Park except upon the
occurrence of any of the following events (each, a "Triggering Event"):
o any material breach of the Merger Documents by Winter Park which
would permit Huntington to terminate the Merger Documents;
o prior to the Special Meeting, any person or group of persons submits
a proposal to Winter Park relating to:
o the possible sale or other disposition of more than 25% of the
Winter Park Common Stock or any other class of voting
securities of Winter Park;
o the possible sale or other disposition of 15% or more of
Winter Park's assets; or
o a merger or consolidation involving Winter Park other than a
transaction in which Winter Park would be the surviving
corporation and the current shareholders of Winter Park would
own the majority of the stock of the surviving corporation (an
"Acquisition Proposal") and, on or before November 22, 1998,
Winter Park enters into an agreement relating to such
Acquisition Proposal and consummates such Acquisition
Proposal;
o prior to the Special Meeting, a person or group of persons commences
a tender or exchange offer to acquire equity securities of Winter
Park if, after giving effect to such offer, such person or group
would own or have the right to acquire a majority equity interest in
Winter Park (a "Tender Offer") and such equity interest is acquired
pursuant to such Tender Offer on or before November 22, 1998; or
o Winter Park enters into an agreement with respect to an Acquisition
Proposal and such transaction is consummated on or before November
22, 1998.
- 25 -
<PAGE> 29
The Warrant terminates on the earliest of: (a) six months after the
occurrence of a Triggering Event; (b) the Effective Date; or (c) upon
termination of the Merger Documents pursuant to the terms thereof, unless such
termination is the result of any material breach of the Merger Documents by
Winter Park which would permit Huntington to terminate the Merger Documents.
The Warrant and Warrant Purchase Agreement contain anti-dilution
provisions and provisions granting the Holder certain registration and
repurchase rights. In addition, Winter Park is required to repurchase the
Warrant from the Holder, at the Holder's option, any time after the Warrant
becomes exercisable and prior to the expiration thereof. The repurchase price
is equal to the difference between the "Market/Offer Price" (defined below) and
the Warrant Price, multiplied by the number of shares for which the Warrant
being surrendered by the Holder may then be exercised, but only if the
Market/Offer Price is greater than the Warrant Price. In addition, at the
request of the owner of Warrant Stock, Winter Park must repurchase all of the
shares of the Warrant Stock at a price equal to the greater of the Warrant
Price and the Market/Offer Price, multiplied by the number of shares so
purchased and being surrendered by the owner. The Market/Offer Price means the
highest of:
o the price per share of Winter Park Common Stock at which a tender or
exchange offer has been made;
o the price per share of Winter Park Common Stock to be paid by any
third party pursuant to an agreement with Winter Park; and
o the highest closing price per share of Winter Park Common Stock
within the four-month period immediately preceding the date the
Holder gives notice of the required repurchase of the Warrant or the
owner of Warrant Stock gives notice of the required repurchase of
such Warrant Stock.
SHAREHOLDER AGREEMENTS
As an inducement for Huntington and Huntington Bank to enter into the
Merger Documents, Huntington received Shareholder Agreements from ten persons
selected by Huntington from among Winter Park's directors and officers (the
"Obligated Shareholders"). Under the terms of the Shareholder Agreements, these
Obligated Shareholders agreed to vote all of the shares of the Winter Park
Common Stock owned by them, or over which they have the power to vote, in favor
of the approval of the Merger Documents and against the approval of any
competing acquisition proposal, and against any other transaction which would
be inconsistent with the obligation of Winter Park to consummate the Merger.
Each of the Shareholder Agreements will remain in effect for one year
or until the consummation of the Merger, the termination of the Merger
Documents, or the death of the Obligated Shareholder, whichever occurs first.
Each of the Obligated Shareholders must also agree not to sell or otherwise
voluntarily dispose of any of the shares subject to the Shareholder Agreement
or take any other voluntary action which would terminate the Obligated
Shareholder's power to vote the shares or otherwise be inconsistent with the
Shareholder Agreement.
The ten persons named below, holding in the aggregate 191,305 shares
of Winter Park Common Stock as of the Record Date, or approximately 46.21% of
the outstanding shares of Winter Park Common Stock entitled to vote
- 26 -
<PAGE> 30
at the Special Meeting, executed Shareholder Agreements. As a result, Winter
Park anticipates that these Obligated Shareholders will vote the number of
shares indicated in favor of the approval of the Merger Documents:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
OF WINTER PARK WINTER PARK
COMMON STOCK COMMON
NAME OF DIRECTOR/OFFICER OWNED(1) STOCK
--------------- ------------
<S> <C> <C>
Percy B. Bell..................................... 27,316 6.60%
Robert S. Harrell................................. 38,467 9.29%
Gerald Hardage.................................... 10,000 2.42%
Benjamin F. LePore................................ 20,000 4.83%
Gregory J. Mainguth............................... 850 0.21%
George J. Norman.................................. 23,918 5.78%
James G. Norman................................... 12,362 2.99%
Eugene A. Polino.................................. 11,242 2.72%
Ralph Singleton................................... 46,050 11.12%
Arnold Wurst...................................... 1,100 0.27%
------------- ------------
191,305 46.21%
</TABLE>
(1) The shares of Winter Park Common Stock indicated in the table do not
include shares subject to outstanding stock options.
COVENANTS OF THE PARTIES
The Merger Documents provide, among other things, that from May 22,
1997, until the Effective Time, Winter Park will conduct its operations only in
the ordinary and usual course of business and will use its best efforts to
preserve intact its business organization, assets, prospects, and business
relationships, to keep available the services of its officers and employees,
and to maintain existing relationships with other entities.
In addition, Winter Park cannot, directly or indirectly, solicit,
encourage, initiate, or, except to the extent necessary to comply with the
fiduciary duty of its Board of Directors as advised by counsel, entertain,
consider, or participate in any negotiations or discussions with respect to any
"Acquisition Proposal" (as defined below) nor, except to the extent necessary
to comply with the fiduciary duty of its Board of Directors as advised by
counsel, can Winter Park disclose any information not customarily disclosed to,
or provide access to its properties, books, or records to, or otherwise assist
or encourage, any person or entity in connection with any Acquisition Proposal.
Acquisition Proposal is defined to include any inquiries, offers, or proposals
by any other corporation, firm, association, person, or entity relating to:
o the possible sale or other disposition of more than 25% of the
shares of Winter Park Common Stock, including a disposition of
shares in an exchange or tender offer;
o the possible sale or other disposition of a majority of the assets
of Winter Park;
o a merger or consolidation involving Winter Park, other than a
transaction in which Winter Park will be the owner of all of the
stock of the surviving corporation following the transaction; or
o a merger or consolidation involving Winter Park, other than a
transaction in which Winter Park will be the surviving corporation
and the current shareholder of Winter Park will be the owners of a
majority of the stock of the surviving corporation following the
transaction.
- 27 -
<PAGE> 31
Huntington and Huntington Bank have agreed, to the extent permitted by
law, to assume certain obligations of Winter Park to indemnify and defend the
present and former directors, officers, employees, and agents of Winter Park
against liabilities in connection with such persons' status or services as
directors, officers, employees, and agents of Winter Park. See " - INTERESTS OF
MANAGEMENT."
The Merger Documents also provide that Huntington and Huntington Bank
will:
o provide to employees of Winter Park who become employees of
Huntington or an affiliate of Huntington after the Effective Time
employee benefits under Huntington employee benefit plans, on terms
and conditions which, when taken as a whole, are substantially
similar to those currently provided generally by Huntington Bank to
its similarly situated employees;
o provide to any person who is employed by Winter Park at the
Effective Time and who is subsequently terminated with benefits
pursuant to, but only to the extent provided by, Huntington's
Transition Pay Plan as in effect on the date of their termination;
and
o give credit for purposes of eligibility, vesting, and such other
purposes (other than for the purpose of benefit accrual under any
plans maintained by Huntington) for which such service is taken into
account or recognized, to the extent feasible and permissible under
all applicable laws, rules, and regulations and the applicable terms
of Huntington's employee benefit plans for all service with Winter
Park prior to the Effective Time.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Documents are approved by the
affirmative vote of the holders of two-thirds of the outstanding shares of
Winter Park Common Stock. Consummation of the Merger is subject to the
satisfaction of certain other conditions, including:
o the receipt of approvals of the Merger by the OCC and any other
governmental authority having jurisdiction, and the expiration of
any applicable waiting periods, with no such approval containing any
provision which would be materially adverse to the business of
Huntington or Huntington Bank;
o the absence of any lawsuit, governmental investigation, or
administrative proceeding, or threat of any such lawsuit,
investigation, or proceeding which materially questions the validity
or legality of the Merger;
o the receipt by Huntington, Huntington Bank, and Winter Park of
certain legal opinions from counsel, including an opinion regarding
certain tax aspects of the Merger;
o the receipt by Winter Park of an opinion from Carson Medlin, dated
as of the Effective Date, stating that, from a financial point of
view, the terms of the Merger are fair to the Winter Park
shareholders; and
o the listing of the shares of Huntington Common Stock to be issued in
the Merger on the Nasdaq National Market.
The obligation of Winter Park to consummate the Merger is further
conditioned on the representations and warranties of Huntington and Huntington
Bank contained in the Supplemental Agreement being true and correct in all
material respects on the Effective Date; the obligations of Huntington and
Huntington Bank to be performed pursuant to the Merger Documents on or before
the Effective Date having been performed in all material respects; and the
absence of any material adverse change in the consolidated results of
operations, financial condition, properties, or business of Huntington since
December 31, 1996.
- 28 -
<PAGE> 32
The obligations of Huntington and Huntington Bank to consummate the
Merger are subject to fulfillment on or before the Effective Date of the
following additional conditions precedent:
o the representations and warranties of Winter Park contained in the
Supplemental Agreement being true and correct in all material
respects on the Effective Date;
o the obligations of Winter Park to be performed pursuant to the
Merger Documents on or before the Effective Date having been
performed in all material respects;
o the receipt by Huntington of letters from Winter Park's independent
certified public accountants, dated as of the Effective Date, with
respect to certain financial information;
o the total number of Dissenting Shares not exceeding 5% of the
outstanding shares of Winter Park Common Stock;
o the absence of any material adverse change in the consolidated
results of operations, financial condition, properties, or business
of Winter Park since December 31, 1996;
o the receipt by Huntington of commitments for owners' and leasehold
title insurance policies insuring Winter Park's ownership and
leasehold interests in and to all real estate owned or leased by
Winter Park, together with such endorsements to such policies as
Huntington may reasonably request;
o the receipt by Huntington of surveys and environmental assessments
of certain parcels of real property owned by Winter Park;
o the receipt by Winter Park of all consents required for the
prevention of any default under any material contract, license, or
permit to which it is a party;
o the delivery to Huntington by each director, officer, and other
person who is deemed an "affiliate" of Winter Park and their
affiliates prior to the Effective Date of a written agreement
providing that such person will not sell, pledge, transfer, or
otherwise dispose of the shares of Huntington Common Stock to be
received by such person in connection with the Merger unless certain
conditions are met; and
o the total shareholders' equity of Winter Park as of the end of the
most recent calendar quarter preceding the Effective Date and as of
the Effective Date being not less than the total shareholders'
equity of Winter Park as of December 31, 1996.
Huntington, Huntington Bank, and Winter Park may waive any
inaccuracies in the representations and warranties of the other parties
contained in the Merger Documents or in any document in connection with the
Merger and may waive compliance by the other parties with any of the
conditions, covenants, and agreements contained in the Merger Documents.
AMENDMENT
The Merger Documents may be amended, to the extent permitted by law,
by a subsequent writing signed by Winter Park and Huntington, whether before or
after shareholder approval of the Merger Documents has been obtained, provided,
that, the Exchange Ratio may not be changed after the shareholders of Winter
Park have approved the Merger Documents without the approval of such
shareholders in the same manner as required for the adoption of the Merger
Documents.
- 29 -
<PAGE> 33
TERMINATION AND TERMINATION FEE
The Merger Documents may be terminated and the Merger abandoned at any
time prior to the Effective Time, whether before or after shareholder approval,
as follows:
o by mutual consent of Huntington, Huntington Bank, and Winter Park;
o by any party in the event of an inaccuracy of any representation or
warranty of the other party or the material breach of any covenant
or agreement, in any case which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
party of the breach and which, in the case of the inaccuracy of any
representation or warranty, would provide the other party the
ability to refuse to consummate the Merger (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant, or other agreement);
o by any party in the event any required consent of any regulatory
authority is denied or the shareholders of Winter Park fail to vote
their approval of the Merger Documents at the Special Meeting
(provided that the terminating party is not then in material breach
of any representation, warranty, covenant, or other agreement);
o by any party in the event the Merger is not consummated by February
15, 1998, if such failure is not caused by any breach of the Merger
Documents by the party electing to terminate; and
o by any party in the event that any of the conditions precedent to
the obligations of such party cannot be fulfilled or satisfied by
February 15, 1998 (provided that the terminating party is not then
in material breach of any representation, warranty, covenant or
other agreement).
The Supplemental Agreement provides that Winter Park will pay to
Huntington a termination fee in the amount of $442,000 as liquidated damages
if:
o prior to the termination of the Merger Documents, an Acquisition
Proposal is submitted to the shareholders of Winter Park and, prior
to May 31, 1999, such Acquisition Proposal is approved by the
shareholders of Winter Park; or
o an Acquisition Proposal is received by Winter Park or is made
directly to the shareholders of Winter Park at any time prior to the
Special Meeting, the Board of Directors of Winter Park either fails
to recommend or withdraws its recommendation to the shareholders of
Winter Park to vote in favor of the approval of the Merger Documents
or fails to solicit proxies for the approval of the Merger
Documents, and the Merger is not consummated by May 31, 1999.
In the event of the termination and abandonment of the Merger
Documents, the Merger Documents will become void and there will be no further
obligation or liability on the part of any party except with respect to:
o any liability of any party then in breach of the Merger Documents
with respect to such breach unless it involves a breach of a
representation and the breach was not intentional;
o the obligations of each party to keep certain information
confidential and to pay all Merger expenses incurred by such party;
and
o the obligation of Winter Park to pay the termination fee, if
applicable by the terms of the Supplemental Agreement.
The obligations of Winter Park under the terms of the Warrant may
survive the termination of the Merger Documents under certain circumstances.
See "--TERMS OF THE WARRANT."
- 30 -
<PAGE> 34
RIGHTS OF DISSENTING SHAREHOLDERS
Florida law specifies that when a Florida state bank merges into a
national bank, as is the case with the Merger, the action to be taken by the
Florida state bank and the rights and liabilities of the Florida state bank and
its shareholders are the same as those applicable to national banks and its
shareholders under federal law. Accordingly, the rights of dissenting
shareholders of Winter Park in connection with the Merger are governed by the
provisions of Title 12, Section 215a of the United States Code ("Section 215a")
because Huntington Bank, which is the surviving entity in the Merger, is a
national bank governed by federal banking laws. The following description of
the statutory rights of dissenting shareholders and the procedures required for
perfecting those rights is qualified in its entirety by reference to the terms
of Section 215a, a copy of which is attached as Exhibit D. EACH STEP MUST BE
TAKEN IN STRICT COMPLIANCE WITH THE APPLICABLE PROVISIONS OF SECTION 215A IN
ORDER TO ENSURE THAT A SHAREHOLDER WILL HAVE PROPERLY PERFECTED HIS OR HER
APPRAISAL RIGHTS.
Under Section 215a, any holder of Winter Park Common Stock who has
either (a) voted against the Merger or (b) given written notice to the
presiding officer of the Special Meeting, at or prior to the Special Meeting,
that such shareholder dissents from the Merger Documents, will be entitled to
receive the cash value of the shares held by him or her, provided that a
written request for payment of the value of the shares is made to Huntington
Bank at any time within 30 days after the Effective Date. Such written request
for payment must be accompanied by the surrender of stock certificates
representing such shares.
Under Section 215a, the value of any Dissenting Shares will be
ascertained as of the Effective Date by an appraisal made by a committee of
three persons composed of one selected by the vote of the holders of a majority
of the Dissenting Shares, one selected by the directors of Huntington Bank, and
the third to be selected by the two so chosen. The valuation of the Dissenting
Shares agreed upon by any two of these three appraisers will govern. If the
value fixed by these appraisers is not satisfactory to any holder of Dissenting
Shares, that holder may, within five days after being notified of the appraised
value of his or her Dissenting Shares, appeal to the OCC who will cause a
reappraisal to be made. Such reappraisal will be final and binding as to the
value of the Dissenting Shares of the appealing holder.
If, within 90 days from the Effective Date, for any reason one or more
of the appraisers is not so selected, or the appraisers fail to determine the
value of the Appraised Shares, the OCC will, upon written request of any
interested party, cause an appraisal of the Dissenting Shares to be made which
will be final and binding on all parties. The value of such Dissenting Shares
must be promptly paid to the holders by Huntington Bank. The shares of
Huntington Common Stock that would have been delivered to the holders of such
Dissenting Shares, if any, will be sold by Huntington Bank at an advertised
public auction, and the holders of such Dissenting Shares will be entitled to
any amount by which the auction proceeds exceed the amounts paid to the holders
of such Dissenting Shares. The expenses of appraisal will be paid by Huntington
Bank.
IN ORDER TO ENSURE PERFECTION OF THEIR APPRAISAL RIGHTS, SHAREHOLDERS
OF WINTER PARK WHO WISH TO DISSENT FROM THE MERGER DOCUMENTS MUST COMPLY WITH
SECTION 215A. ACCORDINGLY, EACH WINTER PARK SHAREHOLDER ELECTING TO RECEIVE
DISSENTERS' RIGHTS MUST:
(1) EITHER VOTE AGAINST THE MERGER DOCUMENTS OR DELIVER TO THE
PRESIDING OFFICER OF THE SPECIAL MEETING, AT OR PRIOR TO THE
SPECIAL MEETING, A WRITTEN NOTICE TO THE EFFECT THAT HE OR SHE
DISSENTS FROM THE MERGER DOCUMENTS, AND
(2) PROVIDE A SEPARATE WRITTEN REQUEST FOR PAYMENT OF THE APPRAISED
VALUE OF HIS OR HER SHARES TO HUNTINGTON BANK AT ANY TIME WITHIN
30 DAYS AFTER THE EFFECTIVE DATE, WHICH REQUEST MUST BE
ACCOMPANIED BY THE SURRENDER OF THE STOCK CERTIFICATE OR
CERTIFICATES REPRESENTING SUCH SHARES.
THE NOTICE SPECIFIED IN ITEM (1) ABOVE WILL BE DEEMED TO BE SUFFICIENT IF IT
IDENTIFIES THE SHAREHOLDER, INDICATES THAT THE SHAREHOLDER DISSENTS FROM THE
MERGER DOCUMENTS, AND SPECIFIES THE NUMBER OF SHARES AS TO WHICH DISSENTERS'
RIGHTS ARE BEING REQUESTED. THE REQUEST SPECIFIED IN ITEM (2) ABOVE WILL BE
DEEMED TO BE SUFFICIENT IF IT IDENTIFIES THE SHAREHOLDER, INDICATES THAT THE
SHAREHOLDER DEMANDS PAYMENT OF THE CASH VALUE OF HIS OR HER SHARES, AND
- 31 -
<PAGE> 35
SPECIFIES THE NUMBER OF SHARES AS TO PAYMENT OF THE CASH VALUE IS BEING
REQUESTED. PLEASE NOTE THAT A MERE FAILURE TO VOTE, WITHOUT PROVIDING THE
WRITTEN NOTICE OF DISSENT SPECIFIED IN ITEM (1) ABOVE AND THE WRITTEN DEMAND
FOR PAYMENT SPECIFIED IN ITEM (2) ABOVE, WILL NOT CONSTITUTE A DEMAND FOR THE
CASH VALUE OF A SHAREHOLDER'S SHARES.
Upon and after the Effective Date, all shares of Winter Park Common
Stock, including Dissenting Shares whether or not surrendered by the holders
thereof, will be void and deemed to be canceled, and no voting or other rights
of any kind will pertain to such shares or to the holders of such shares except
only such rights as may be expressly provided in the Merger Documents or
expressly provided by law.
Winter Park shareholders who choose to perfect their dissenters'
rights and receive cash rather than shares of Huntington Common Stock in the
Merger will recognize gain or loss for federal income tax purposes. See "THE
MERGER -- FEDERAL INCOME TAX CONSEQUENCES".
INTERESTS OF MANAGEMENT
Certain of the directors and executive officers of Winter Park hold
Winter Park Options (the "Winter Park Options") which entitle them to purchase,
in the aggregate, up to 55,764 shares of Winter Park Common Stock. See
"BUSINESS OF WINTER PARK -- PRINCIPAL AND MANAGEMENT SHAREHOLDERS." Under the
terms of the Merger Documents, any Winter Park Options which are not exercised
prior to the Effective Date will be converted into options to acquire shares of
Huntington Common Stock. The treatment of the Winter Park Options under the
Merger Documents was based upon the Exchange Ratio, so that the consideration
to be received by the holders of the Winter Park Options is equivalent to the
consideration to be received by the current shareholders of Winter Park. See
"THE MERGER -- TERMS OF THE MERGER."
On the Effective Date, each employee of Winter Park (including each
executive officer) will, at Huntington's option, either become an employee of
Huntington or its subsidiaries or be entitled to benefits to the extent provided
by, and in accordance with, Huntington's transition pay plan as of the date of
such employee's termination. All employees of Winter Park who become employees
of Huntington or its subsidiaries after the Effective Date will be entitled, to
the extent permitted by applicable law, to participate in the employee benefit
plans of Huntington on terms and conditions which, when taken as a whole, are
substantially similar to those currently provided generally by Huntington Bank
to its similarly situated employees. Such employees will be given credit for
purposes of eligibility, vesting, and such other purposes (other than for the
purpose of benefit accrual under any plans maintained by Huntington) for which
such service is taken into account or recognized, to the extent feasible and
permissible under all applicable laws and the terms of such plans, for all
service with Winter Park prior to the Effective Time. Three of Winter Park's
officers, including two of its executive officers, are entitled under separate
employment agreements with Winter Park to receive severance payments in amounts
equal to their respective annual salaries in the event their employment is
terminated within a specified period of time after any change in control of
Winter Park. Huntington has not indicated whether it intends to retain the
executive officers of Winter Park following the consummation of the Merger (and
it has no obligation to do so).
Under the Merger Documents, for a period of four years after the
Effective Time, Huntington has agreed, to the extent permitted by law, to
indemnify the directors, officers, employees, and agents of Winter Park against
certain liabilities arising out of such persons' service as a director,
officer, employee, or agent of Winter Park occurring at or prior to the
Effective Time, to the full extent that Winter Park would have been permitted
under federal or Florida law, or by its Articles of Incorporation or Bylaws
(and also to advance expenses as incurred to the full extent permitted under
applicable law).
Except as described above, none of the directors or executive officers
of Winter Park, and no associate of any such person, has any substantial direct
or indirect interest in the Merger, other than an interest arising from the
ownership of Winter Park Common Stock.
- 32 -
<PAGE> 36
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal
income tax consequences of the Merger, including certain consequences to
holders of Winter Park Common Stock who are citizens of the United States and
who hold their shares as capital assets. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and is for general information
only. The tax treatment of a particular shareholder will depend upon such
shareholder's particular situation. Special tax considerations not discussed in
this document may be applicable to particular classes of taxpayers, such as
broker-dealers, certain retirement plans, financial institutions, or insurance
companies, or to any shareholder who acquired Winter Park Common Stock through
the exercise of an employee stock option or otherwise as compensation. All
shareholders should consult with their own tax advisors as to particular tax
consequences of the Merger to them, including the applicability and effect of
state, local, and foreign tax laws and possible changes in the tax law.
Consummation of the Merger is dependent upon receipt by Huntington,
Huntington Bank, and Winter Park of an opinion of Porter, Wright, Morris &
Arthur, counsel to Huntington and Huntington Bank, substantially to the effect
that, for federal income tax purposes, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and will result
in the tax consequences described below. In rendering such opinion, Porter,
Wright, Morris & Arthur is entitled to rely upon certain assumptions and
representations of the parties and their respective officers, directors, and
shareholders.
Assuming that the Merger constitutes a reorganization within the
meaning of Section 368(a) and that Winter Park, Huntington, and Huntington Bank
will each be a party to the reorganization within the meaning of Section 368(b)
of the Code, the following is a summary of the tax consequences which will
result:
(a) No gain or loss will be recognized by a Winter Park shareholder
who receives shares of Huntington Common Stock in exchange for
such shareholder's shares of Winter Park Common Stock, except to
the extent that such shareholder receives any cash in lieu of the
issuance of fractional shares.
(b) Where solely cash is to be received by a Winter Park shareholder
in exchange for such shareholder's shares of Winter Park Common
Stock pursuant to the exercise of appraisal rights, the cash will
be treated as having been received by such shareholder as a
distribution in redemption of his or her Winter Park Common
Stock, subject to the provisions and limitations of Section 302
of the Code.
(c) The payment of cash in lieu of fractional share interests of
Huntington Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of
the exchange and then were redeemed by Huntington. These cash
payments will be treated as having been received as distributions
in full payment in exchange for the Huntington Common Stock
redeemed subject to the conditions and limitations of Section 302
of the Code.
(d) The tax basis of the shares of Huntington Common Stock to be
received by a Winter Park shareholder will be the same as the
basis of the Winter Park Common Stock surrendered in exchange for
such Huntington Common Stock, reduced by any amount allocated to
a fractional share of Huntington Common Stock with respect to
which cash is received.
(e) The holding period of the shares of Huntington Common Stock to be
received by a particular Winter Park shareholder will include the
holding period of the shares of Winter Park Common Stock
surrendered in exchange, provided that such shares of Winter Park
Common Stock were held as a capital asset in the hands of the
Winter Park shareholder on the Effective Date.
(f) No gain or loss will be recognized by Huntington or Huntington
Bank (except for the inclusion in income of amounts resulting
from any required changes in accounting methods or similar items)
upon the consummation of the Merger.
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(g) No gain or loss will be recognized by Winter Park (except for the
inclusion in income of amounts resulting from any required
changes in accounting methods or similar items) upon the
consummation of the Merger.
Cash payments to holders of Winter Park Common Stock (other than
certain exempt entities and persons) paid in the Merger will be subject to a
31% backup withholding tax under federal income tax law unless certain
requirements are met. Backup withholding will not apply, however, to a payment
to a Winter Park shareholder or other payee if such shareholder or payee
completes and signs the substitute Form W-9 that will be included as part of
the letter of transmittal sent to former Winter Park shareholders after
consummation of the Merger (see "- EXCHANGE OF CERTIFICATES") or otherwise
proves to Huntington and the Exchange Agent that such shareholder or payee is
exempt from backup withholding.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for by Huntington
as a purchase. Thus, the results of Winter Park will be included in
Huntington's consolidated financial statements from the Effective Date.
REGULATORY APPROVALS
The Merger is subject to the Bank Merger Act and must be approved by
the OCC. It is anticipated that the Merger will qualify for action by the OCC
under its recently adopted streamlined procedures which provide for a response
in 45 days. An application to the OCC was filed on August 19, 1997.
Approval by the OCC requires that the criteria of the Bank Merger Act
be met. In conducting its review of any application under the Bank Merger Act,
the OCC is required to take into consideration:
o the financial and managerial resources (including the competence,
experience, and integrity of the officers, directors, and principal
shareholders);
o the future prospects of the existing and proposed institutions; and
o the convenience and needs of the communities to be served.
In considering financial resources and future prospects, the OCC will,
among other things, evaluate the adequacy of the capital levels of the parties
to a proposed transaction.
The Bank Merger Act also prohibits the OCC from approving a merger if:
o it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize
the business of banking in any part of the United States, or
o its effect in any section of the country would be substantially to
lessen competition or tend to create a monopoly, or
o it would in any other manner result in a restraint of trade,
unless the OCC finds that the anti-competitive effects of a merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended, the OCC must take
into account the record of performance of the existing depository institutions
in meeting the credit needs of the entire community, including lowand
moderate-income neighborhoods, served by such institutions.
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The Bank Merger Act provides for the publication of notice of, and the
opportunity for administrative hearings relating to, the application for
approval noted and described above. Interested parties may intervene in the
approval proceedings. If an interested party intervenes, such intervention
could substantially delay the regulatory approvals required for consummation of
the Merger. Any merger approved by the OCC is subject to a statutory waiting
period of 15 to 30 days, during which time the United States Department of
Justice may challenge a merger on antitrust grounds. The commencement of an
antitrust action would stay the effectiveness of the regulatory agency's
approval unless a court specifically ordered otherwise.
The Merger does not require the approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") because no bank
holding company merger is involved and the Merger will receive the prior
approval of a federal supervisory agency (the OCC) under the Bank Merger Act.
Because Huntington Bank is located in Florida as well as in Ohio by virtue of
Huntington Bank's prior merger with The Huntington National Bank of Florida,
the Merger is not considered by the OCC to be an interstate merger subject to
the state notification and other requirements of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994.
Huntington's management believes that the OCC will approve the
application filed with it, and that the Merger will not be subject to challenge
by the Department of Justice under the antitrust laws. However, no assurance
can be provided that such approval will be obtained, that the Department of
Justice will not challenge the Merger under the antitrust laws, or that the
approval by the OCC will not contain conditions unacceptable to either
Huntington or Winter Park. See "THE MERGER - CONDITIONS TO CONSUMMATION OF THE
MERGER."
RESALES OF HUNTINGTON COMMON STOCK
Although the Huntington Common Stock to be issued upon consummation of
the Merger has been registered under the Securities Act of 1933, as amended,
certain directors and executive officers of Winter Park and other persons
deemed to be affiliates of Winter Park and their affiliates may not resell or
otherwise dispose of the shares of Huntington Common Stock received by them in
connection with the Merger unless such sales are made pursuant to an effective
registration under the Securities Act of 1933, as amended, or pursuant to Rule
145 promulgated by the SEC or another exemption from registration under such
Act. Huntington has obtained from each of such persons a written undertaking
to the effect that no sale, transfer, or other disposition will be made of any
Huntington Common Stock received in the Merger except in accordance with the
above restrictions.
EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS
At the Effective Time, the Winter Park shareholders will automatically
become Huntington shareholders, and their rights as shareholders will be
determined by Maryland General Corporation Law and by Huntington's Charter and
Bylaws. The rights of Winter Park shareholders differ in some respects from the
rights they would have as shareholders of Huntington. The following is a brief
summary of the material differences in the rights of Winter Park shareholders
from the rights of shareholders of Huntington; however, this summary does not
purport to be a complete description of such differences.
CAPITAL STOCK
Winter Park's Articles of Incorporation authorize the issuance of up
to 600,000 shares of Winter Park common stock of a single class having a par
value of $5.00 per share.
Huntington's Charter authorizes the issuance of 306,617,808 shares of
capital stock, of which 300,000,000 shares are Huntington Common Stock and
6,617,808 shares are serial preferred stock, without par value ("Huntington
Preferred Stock"). Huntington's Board of Directors has the authority to
classify and reclassify any unissued shares of
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Huntington Preferred Stock in one or more series with such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms or conditions of redemption, or other rights
as may be authorized by the Board of Directors of Huntington and stated in
articles supplementary or other charter documents providing for the issuance of
such Huntington Preferred Stock. Huntington Common Stock is subject to all of
the terms and provisions of the Huntington Preferred Stock as fixed by the
Board of Directors. There are currently no shares of Huntington Preferred Stock
designated or outstanding.
Neither Winter Park shareholders nor Huntington shareholders have any
preemptive rights to purchase additional shares of stock upon an offering or
sale for cash or otherwise of such stock.
NOMINATION, ELECTION, AND REMOVAL OF DIRECTORS
Neither Florida law nor Winter Park's Bylaws or Articles of
Incorporation set forth specific procedures for the nomination of persons for
election to the Board of Directors of Winter Park. Winter Park's Bylaws provide
that, in order for a person to be eligible for election as a director of Winter
Park, such person must be a shareholder of at least 100 shares of common stock.
Florida law requires, and Winter Park's Bylaws provide, that a majority of the
directors must be citizens of the United States, and at least three-fifths of
the directors must have resided in Florida for at least one year preceding
their election and must be residents of Florida during their continuance in
office. Florida law also requires a bank, such as Winter Park, with total
assets of less than $150 million to have at least one director who is not also
an officer of the bank who has at least one year of direct experience as an
executive officer, regulator, or director of a financial institution within the
last three years.
Florida law requires that the board of directors of a state banking
corporation must consist of at least five directors. Winter Park's Bylaws
provide that the number of directors may be increased or decreased by the Board
of Directors to not more than fifteen and not fewer than five directors. Winter
Park's Board of Directors currently has ten directors. Florida law authorizes,
and Winter Park's Articles of Incorporation provide, that a majority of the
full Board of Directors may, at any time during the year following the annual
meeting of shareholders, increase the number of directors by not more than two
and appoint persons to fill the vacancies so created.
Winter Park's Bylaws provide that a director holds office until the
annual meeting for the year in which his term expires and until his successor
is elected and qualified, or until his earlier resignation, removal from
office, or death. Under Winter Park's Bylaws, the shareholders of Winter Park
may remove a director with or without cause at a meeting called for that
purpose by a vote of a majority of all shareholders entitled to vote at the
election of directors. Under Florida law, shareholders do not have a right to
cumulate their votes for the election of directors unless such right is
provided for in the articles of incorporation. Winter Park's Articles of
Incorporation do not provide for cumulative voting.
Huntington's Bylaws provide that, in order for a person to be eligible
for election as a director of Huntington, such person must be nominated by or
at the direction of Huntington's Board of Directors or by a shareholder
entitled to vote for the election of directors in accordance with certain
specified procedures. Shareholder nominations must be made pursuant to timely
written notice to the Secretary of Huntington. In most cases, a shareholder's
notice, to be timely, must be received at the principal executive offices of
Huntington not less than 30 days nor more than 60 days prior to the date of a
shareholders' meeting. The notice must set forth certain specified information
about the shareholder giving the notice and the shareholder's proposed nominee.
Huntington's Bylaws provide that the number of directors may be fixed
or changed by resolution of a majority of the entire Board of Directors to not
more than 25 nor fewer than three directors. The Board of Directors has
currently set the number of directors at 11. There are no residency or other
eligibility requirements for Huntington's Directors.
Huntington's Charter provides for the division of the Board of
Directors into three classes. Each class must consist, as nearly as possible,
of one-third of the total number of directors. At each annual meeting of
shareholders, successors to the class of directors whose term expires at the
annual meeting are elected for a three-year term. If the
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number of directors is changed, any increase or decrease must be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible. A director holds office until the annual meeting for
the year in which his term expires and until his successor is elected and
qualified.
Under Huntington's Charter, the shareholders of Huntington may remove
a director with cause by the affirmative vote of two-thirds of all shareholders
entitled to vote at the election of directors. No director may be removed by
the shareholders of Huntington without cause. Neither Huntington's Charter nor
its Bylaws provide for cumulative voting.
SHAREHOLDER PROPOSALS
In general, at any meeting of the shareholders of Huntington or Winter
Park, only business that has been properly brought before such meeting may be
acted upon at such meeting. Huntington's Bylaws provide further that, in order
to be properly brought before a meeting of shareholders of Huntington, business
must be brought by or at the direction of the Board of Directors or otherwise
by a shareholder in accordance with certain specified procedures. A shareholder
proposing business must give timely written notice thereof to the Secretary of
Huntington. In most cases, a shareholder's notice, to be timely, must be
received at the principal executive offices of Huntington not less than 30 days
nor more than 60 days prior to the date of a shareholders' meeting. The notice
must set forth certain specified information about the shareholder proposing
such business and the shareholder's proposal.
Neither the Articles of Incorporation nor the Bylaws of Winter Park
contain comparable provisions.
SPECIAL VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS
In general, Florida law requires the affirmative vote of the holders
of the majority of the shares present in person or represented by proxy and
entitled to vote to effect amendments to the articles of incorporation that
would create dissenters' rights, a merger, sale of assets other than in the
ordinary course of business, or dissolution of the corporation. (Note, however,
that the vote required to approve the Merger is governed by federal law, rather
than Florida state law, because Huntington Bank is a national bank governed by
federal law and will be the surviving entity. Federal law requires the
affirmative vote of two-thirds of the outstanding shares of Winter Park Common
Stock to approve and adopt the Merger Documents.)
Maryland law requires the affirmative vote of the holders of
two-thirds of the outstanding shares of Huntington stock entitled to vote to
effect material amendments to the charter, a merger, consolidation, sale of
assets other than in the ordinary course of business, or dissolution of the
corporation. Maryland law also requires a "super majority" vote, in addition to
any vote otherwise required by law or Huntington's Charter, for certain
business combinations. Unless certain value and other standards are met or an
exemption is available, any business combination between Huntington and any
interested person (defined generally as a 10% shareholder or an affiliate of
such shareholder) must be recommended by the Board of Directors and approved by
the affirmative vote of at least 80% of the votes entitled to be cast by
holders of Huntington voting stock, voting together as a single class, and
two-thirds of the votes entitled to be cast by holders of voting stock other
than voting stock beneficially owned by an interested shareholder who is a
party to the business combination, voting together as a single class.
Both Maryland and Florida law provide certain limitations with respect
to "control shares." "Control shares" are generally defined under Maryland and
Florida law as shares of a corporation which would, if aggregated with all
other shares of that corporation owned by a person, entitle that person,
directly or indirectly, to exercise or direct the exercise of voting power
within specified ranges. "Control-share acquisition" is generally defined by
Maryland and Florida law as an acquisition (other than an acquisition
specifically exempted from the definition of control share acquisition, such as
an acquisition pursuant to certain mergers), directly or indirectly, by any
person of ownership of, or the power to direct the exercise of voting power
with respect to, issued and outstanding control shares. Under both Maryland and
Florida law, control shares acquired in a control share acquisition have no
voting rights except to the extent such rights are approved by the
shareholders. For such approval, Maryland law requires the affirmative vote
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of two-thirds of all votes entitled to be cast on the matter, excluding all
interested shares, and Florida law requires the approval of a resolution by a
majority of all votes entitled to be cast, excluding all interested shares.
Additionally, both Maryland and Florida law have certain "fair price"
provisions which impose additional voting requirements for business
combinations with "interested shareholders" (generally, persons holding more
than 10% of the corporation's voting stock). Under these provisions, except in
cases in which certain minimum price, form of consideration, and procedural
requirements are satisfied or for certain transactions that may be approved in
advance by the board of directors, higher than normal voting requirements are
imposed. Under Maryland law, transactions to which the higher voting
requirements apply require the recommendation of the board of directors of the
corporation and must be approved by at least 80% of the votes entitled to be
cast, voting together as a single group, and by at least two-thirds of the
votes, other than the votes of the interested shareholder (and affiliates of
such interested shareholder), voting together as a single group. Under Florida
law, an affiliated transaction between a corporation and an interested
shareholder not satisfying the fair price provisions must be approved by an
affirmative vote of holders of two-thirds of the voting shares other than the
shares beneficially owned by the interested shareholder, except in instances
where:
o the affiliated transaction has been approved by the majority of the
disinterested directors,
o the corporation has not had more than 300 shareholders of record at
any time during the three years preceding the announcement date,
o the interested shareholder has been the beneficial owner of at least
80% of the corporation's outstanding voting shares for at least five
years preceding the announcement date, or
o the interested shareholder is the beneficial owner of at least 90%
of the outstanding voting shares of the corporation, excluding those
shares acquired in a transaction not approved by a majority of the
disinterested directors.
The super majority vote, control share, and fair price provisions of
Maryland and Florida law may deter or render more difficult attempts by third
parties to obtain control of a corporation incorporated in those states if such
attempts are not supported by the corporation's board of directors. In addition
to these statutory provisions, Huntington has adopted a shareholder rights
plans that gives the Huntington shareholders certain rights to purchase
additional shares in the event that a person or group of persons acquires a
specified percentage of the outstanding Huntington shares. This plan has
certain anti-takeover effects. See "- - RIGHTS PLAN."
EVALUATION OF MERGERS AND CONSOLIDATIONS
Under Florida law, in discharging any of his duties, a director of
Winter Park may consider such factors as the director deems relevant, including
the long-term prospects and interests of Winter Park and its shareholders and
the social, economic, legal, or other effects of any action on the employees,
suppliers, and customers of Winter Park, the communities in which Winter Park
operates, and the economy of the state and the nation.
Article Ninth of Huntington's Charter provides that, in connection
with the exercise of its judgment in determining what is in the best interest
of Huntington when evaluating a merger or consolidation of Huntington (among
other things), the Board of Directors must, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant:
o the interests of the shareholders, including the relation of the
consideration offered in the then proposed transaction to the then
current market price of Huntington's stock and also the current
value of Huntington in a freely negotiated transaction and in
relation to the Board of Directors' estimate of the future value of
Huntington as an independent entity or as the subject of a future
merger or consolidation,
o the interests of depositors of banks affiliated with Huntington and
of other creditors of Huntington, and
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o any other factors that the Board of Directors determines to be
relevant, including, among other factors, the social, legal, and
economic effects upon employees, suppliers, customers, and the
business of Huntington and on the communities in which Huntington
operates.
SPECIAL MEETINGS
Pursuant to Winter Park's Bylaws, a special meeting of the
shareholders may be called for any purpose and at any time by the Board of
Directors or by shareholders holding in the aggregate at least 10% of Winter
Park's stock. Pursuant to Florida law, shareholders demanding a special
meeting must deliver to the Secretary of Winter Park a written demand for the
meeting, which must describe the purposes of the meeting. Winter Park's Bylaws
further provide that any action required or allowed to be taken at any annual
or special meeting of the shareholders may be taken without a meeting, without
prior notice, and without a vote, if a written consent to the action is signed
by the holders of outstanding stock having at least the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all the shares entitled to vote were present and voted.
Pursuant to Maryland law and Huntington's Bylaws, a special meeting of
shareholders may be called by the Board of Directors, the Chairman, or the
President of Huntington and must be called by the Secretary upon written
request of the holders of not less than 25% of the outstanding shares entitled
to vote at the meeting. Any shareholder request must state the purpose or
purposes of such meeting and the matters proposed to be acted on at such
meeting. The Secretary must inform such shareholders of the reasonably
estimated cost of preparing and mailing the notice of the meeting, and upon
payment to Huntington of such costs, the Secretary must give notice of such
meeting, except that no special meeting need be called upon the request of the
holders of less than a majority of all votes entitled to be cast at such
meeting to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the shareholders held during the preceding
twelve months.
DIRECTORS' AND SHAREHOLDERS' RIGHT TO ADOPT, ALTER, OR REPEAL THE BYLAWS
Winter Park's Bylaws provide that the Bylaws may be altered, amended,
or repealed, and that new Bylaws may be adopted at any regular meeting of the
Board of Directors by a majority of the directors then in office. Under Florida
law, Winter Park's shareholders are also entitled to amend or repeal the
bylaws.
Under Maryland law, the power to adopt, alter, and repeal the bylaws
of a corporation is vested in the shareholders, except to the extent that the
charter or bylaws vest it in the board of directors. Huntington's Charter and
Bylaws provide that Huntington's Bylaws may be adopted, amended, or repealed by
the affirmative vote of two-thirds of the votes entitled to be cast by the
outstanding shares of Huntington's voting stock or by the Board of Directors at
any regular or special meeting.
PERSONAL LIABILITY OF OFFICERS AND DIRECTORS TO SHAREHOLDERS
Under Florida law, a director is generally not personally liable to
the corporation or any other person unless the director breached or failed to
perform his duties as a director and such breach or failure constitutes:
o a violation of criminal law, unless the director had reasonable
cause to believe that his conduct was lawful or no reasonable cause
to believe that his conduct was unlawful,
o a transaction from which the director received an improper benefit,
o an unlawful distribution,
o a conscious disregard for the best interest of the corporation or
willful misconduct, or
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o recklessness or an act or omission which was committed in bad faith
or with malicious purpose or in a manner exhibiting wanton and
willful disregard of human rights, safety, or property.
Winter Park's Bylaws provide that any director or officer may be
indemnified or reimbursed for reasonable expenses actually incurred by him in
connection with any action, suit, or proceeding to which he is made a party by
reason of being or having been a director or officer; provided, however, that
no person will be indemnified or reimbursed in relation to any action, suit, or
proceeding in which he shall be finally adjudged to have been negligent in the
performance of his duties, or to have committed any act or failed to perform
any duties for which there is a common law or statutory liability. Further, no
person will be indemnified or reimbursed in relations to any action, suit, or
proceeding which has been made the subject of a compromise settlement except
with the approval of a majority of the Board of Directors. This right of
indemnification or reimbursement is not exclusive of any other rights to which
a director or officer may be entitled.
Huntington's Charter provides that no director or officer will be
personally liable to the corporation or its shareholders for money damages to
the fullest extent permitted by Maryland statutory or decisional law. The
effect of this provision under Maryland law is that neither Huntington nor its
shareholders will be able to recover money damages against a director or
officer of Huntington unless Huntington or its shareholders is able to prove
that:
o the director or officer actually received an improper benefit in
money, property, or services (in which case recovery is limited to
the actual amount of such improper benefit), or
o the action, or failure to act, by the director or officer was the
result of active and deliberate dishonesty which was material to the
cause of action adjudicated in the proceeding.
RIGHTS PLAN
In 1990, the Board of Directors of Huntington entered into the Rights
Agreement, which was amended on August 16, 1995 (the "Huntington Rights
Agreement"). Pursuant to the Huntington Rights Agreement, each Huntington
shareholder received one "Right" for each outstanding share of Huntington
Common Stock held by that shareholder. In addition, Huntington has and will
continue to issue one Right with each newly-issued share of Huntington Common
Stock so that each outstanding share of Huntington Common Stock (including the
shares of Huntington Common Stock to be issued to Winter Park shareholders in
connection with the Merger) will have a Right attached.
The Rights currently have no value, are represented by the
certificates evidencing shares of Huntington Common Stock, and until the
Distribution Date (as defined below), trade only with such stock. The Rights
will separate from the Huntington Common Stock and become exercisable only if a
person or group (an "Acquiror") acquires beneficial ownership of 10% or more of
the outstanding Huntington Common Stock or announces a tender offer that would
result in ownership of 10% or more of the outstanding Huntington Common Stock
(the "Distribution Date"). The Huntington Rights Agreement provides that, at
the Distribution Date, each Right will entitle the holder to purchase for
$66.12 (which price has been adjusted for stock dividends, as appropriate) (the
"Exercise Price"), subject to further adjustment from time to time for
additional stock dividends, stock splits, and other changes in capitalization,
one-hundredth of a share of Series A Junior Participating Stock of Huntington
(the "Series A Preferred Shares"). Each such fractional Series A Preferred
Share is intended to be the practical equivalent of one share of Huntington
Common Stock.
In the event an Acquiror acquires 10% or more of the then outstanding
shares of Huntington Common Stock (a "Triggering Event"), each Right held by
the Acquiror (or any affiliate or associate thereof) will become null and void
and each Right held by all other Huntington shareholders will entitle its
holder to purchase for the Exercise Price that number of Huntington Series A
Preferred Shares having a value (based upon the market value of Huntington
Common Stock at the time of the Triggering Event) equal to twice the Exercise
Price. In the event Huntington is acquired in a merger or other business
combination or a significant portion of its assets are sold, leased, exchanged,
or otherwise transferred to:
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o a publicly traded Acquiror, each Right will entitle its holder to
purchase, for the Exercise Price, that number of shares of the
Acquiror which at the time of the transaction would have a market
value of twice the Exercise Price, or alternatively,
o an Acquiror that is not a publicly traded corporation, each Right
will entitle its holder to purchase, for the Exercise Price, at such
holder's option, (a) that number of shares of the Acquiror (or, at
such holder's option, of the surviving corporation in such
acquisition, which could be Huntington) which at the time of the
transaction would have a book value of twice the Exercise Price, or
(b) if such Acquiror has an affiliate that has publicly traded
common shares, that number of common shares of such affiliate which
at the time of the transaction would have market value of twice the
Exercise Price.
The number of Series A Preferred Shares or other securities or
property issuable upon exercise of a Right, and the Exercise Price are subject
to adjustment upon the occurrence of certain events including, for example, a
stock dividend or split payable in Huntington Common Stock or Series A
Preferred Shares. The number of Rights may also be adjusted upon the occurrence
of certain events including, for example, a reverse stock split. The Rights are
not exercisable until the Distribution Date and will expire on August 16, 2005,
unless earlier redeemed by Huntington. Huntington may redeem the Rights for
$.01 per Right under certain circumstances.
As with the super majority vote and control share provisions of
Maryland law, the Rights have certain anti-takeover effects. See "-- SPECIAL
VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS." The Rights may cause substantial
dilution to a person or group that attempts to acquire Huntington, except
pursuant to an offer conditioned on the Rights being redeemed or a substantial
number of Rights being acquired. The Rights, however, should not interfere with
any merger or other business combination approved by the Huntington Board of
Directors due to the Board's ability to redeem the Rights. Huntington's Board
recognizes that a takeover might in some circumstances be beneficial to
Huntington's shareholders. Neither the Rights Plan nor the Maryland law
provisions described in this document are designed to preclude an acquisition
of Huntington, but rather will give the Huntington Board of Directors adequate
opportunity to evaluate whether an acquisition offer is in the best interest of
Huntington and to protect its shareholders from coercive acquisition methods.
The description and terms of the Rights are set forth in the
Huntington Rights Agreement, a copy of which is attached as Exhibit 1 to
Huntington's registration statement on Form 8-A, filed with the SEC on February
20, 1990, as amended by an Amendment to Huntington Rights Agreement, a copy of
which was filed with the SEC on a Form 8-K, dated August 16, 1995, both of
which are incorporated by reference. See, "INFORMATION INCORPORATED BY
REFERENCE." This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Huntington Rights
Agreement.
HUNTINGTON BANCSHARES INCORPORATED
GENERAL
Huntington, incorporated in Maryland in 1966, is a multi-state bank
holding company headquartered in Columbus, Ohio. At June 30, 1997, Huntington
had total assets of approximately $21.6 billion and total deposits of
approximately $14.6 billion.
Huntington's affiliates conduct a full service commercial and consumer
banking business, engage in mortgage banking, lease financing, trust services,
discount brokerage services, underwriting credit life and disability insurance,
and issuing commercial paper guaranteed by Huntington, and provide other
financial products and services. At June 30, 1997, Huntington's affiliates
operated 202 banking offices in Ohio and Northern Kentucky, 43 banking offices
in West Virginia, 43 banking offices in Michigan, 43 banking offices in
Florida, 24 banking offices in Indiana, and one foreign office in the Cayman
Islands. In addition, Huntington's mortgage company affiliate has loan
origination
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offices throughout the Midwest and East Coast. Foreign banking activities, in
total or with any individual country, are not significant to the operations of
Huntington. At June 30, 1997, Huntington and its subsidiaries had approximately
8,201 full-time equivalent employees.
Competition in the form of price and service from other banks and
financial companies, such as savings and loans, credit unions, finance
companies, and brokerage firms, is intense in most of the markets served by
Huntington and its subsidiaries. Mergers between and the expansion of financial
institutions both within and outside Ohio have provided significant competitive
pressure in major markets. Since September 1995, when federal interstate
banking legislation became effective that made it permissible for bank holding
companies in any state to acquire banks in any other state, actual or potential
competition in each of Huntington's markets has been intensified. The same
federal legislation permits further competition through interstate branching
beginning in mid-1997, subject to certain limitations by individual states.
In February 1997, Huntington completed the acquisition of
Citi-Bancshares, Inc., a $548 million bank holding company headquartered in
Leesburg, Florida. On May 5, 1997, Huntington entered into an agreement to
acquire First Michigan, a bank holding company located in Holland, Michigan,
with assets and deposits of $3.7 billion and $3.0 billion, respectively, as of
June 30, 1997. Under the terms of the merger with First Michigan, First
Michigan shareholders will receive 1.155 shares of Huntington Common Stock for
every share of First Michigan stock (approximately 33,183,500 shares in the
aggregate, representing approximately 16.8% of Huntington Common Stock on a
post-merger basis) in a transaction that will be accounted for as a
pooling-of-interests. The First Michigan Acquisition is expected to be
completed on or about September 30, 1997. Other than the First Michigan
Acquisition and the pending acquisition of Winter Park, as of the date of this
document, Huntington has no acquisitions pending; however, Huntington continues
to explore other opportunities to acquire banking and non-banking companies,
both interstate and intrastate.
THE HUNTINGTON NATIONAL BANK
Effective as of June 30, 1997, all but one of Huntington's banking
subsidiaries were merged into Huntington Bank. After consummation of the Merger
and the First Michigan Acquisition, Huntington Bank will have 452 banking
offices, with approximately $24.8 billion in assets.
As of June 30, 1997, after giving effect to the Huntington
Reorganization, Huntington Bank operated 43 banking offices in Florida with
total assets in Florida of $1.8 billion, and total deposits in its Florida
banking offices of $1.5 billion. After consummation of the Merger, Huntington
Bank will have 47 banking offices with approximately $1.9 billion in assets in
the Central and West Coast areas of Florida. The principal executive offices of
Huntington Bank are located at Huntington Center, 41 South High Street,
Columbus, Ohio 43287 (telephone number 614-480-8300).
DIVIDENDS AND PRICE RANGE OF HUNTINGTON COMMON STOCK
Huntington Common Stock is traded on the Nasdaq National Market under
the symbol "HBAN" and is listed as "HuntgBcshr" or "HuntBanc" in most
newspapers. The following table sets forth the cash dividends declared and the
high and low last sale prices for Huntington Common Stock on the Nasdaq
National Market during the periods indicated. The dividends and price ranges
have been adjusted to reflect stock dividends and stock splits, as appropriate.
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS --------------------------------------
PER SHARE HIGH LOW
------------------ ---------------- ----------------
<S> <C> <C> <C>
1995:
First Quarter................ $0.15 $14 15/16 $13 5/16
Second Quarter............... 0.15 16 5/8 14 3/16
</TABLE>
- 42 -
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
Third Quarter................ 0.16 19 9/16 16 5/16
Fourth Quarter............... 0.16 20 15/16 18 1/2
1996:
First Quarter ............... $0.16 $20 1/8 $18 5/8
Second Quarter .............. 0.16 20 7/8 19 9/16
Third Quarter ............... 0.18 21 3/8 19 5/16
Fourth Quarter .............. 0.18 26 1/4 20 13/16
1997:
First Quarter ............... $0.18 $28 7/8 $22 3/4
Second Quarter............... 0.18 27 1/4 23 5/8
Third Quarter (through
_______, 1997)..........
</TABLE>
On May 21, 1997, the last trading day prior to the public announcement
of the proposed Merger, the high and low sales prices per share of Huntington
Common Stock on the Nasdaq National Market (adjusted for the 10% stock dividend
paid to Huntington shareholders on July 31, 1997) were $26.136 and $_____,
respectively. On _______, 1997, such prices were $_____ and $_____,
respectively.
Huntington has declared regular cash dividends on Huntington Common
Stock in each quarter since Huntington was organized in 1966 and has increased
its cash dividend every year since that time. The Board of Directors of
Huntington presently intends to continue to consider the payment of regular
quarterly cash dividends on Huntington Common Stock. The amount and timing of
any future dividends will depend upon the earnings of Huntington and its
subsidiaries, their financial condition, need for funds, and other relevant
factors. Huntington has also issued either a stock dividend or stock split
every year for 24 consecutive years. See "GOVERNMENT REGULATION - DIVIDEND
RESTRICTIONS" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
OTHER INFORMATION
Huntington Common Stock is actively traded in the over-the-counter
market under the Nasdaq symbol "HBAN." Because information regarding Huntington
is readily available to investors, the law permits this document to be
abbreviated by incorporating certain information regarding Huntington by
reference to certain reports and other documents filed with the SEC. See
"INFORMATION INCORPORATED BY REFERENCE." Other than as described herein, there
have been no material changes in the affairs of Huntington since the filing of
its Annual Report on Form 10-K for the year ended December 31, 1996, that have
not been described in a subsequent report filed with the SEC pursuant to the
Securities and Exchange Act of 1934, as amended.
THE BANK OF WINTER PARK
GENERAL
Winter Park was organized as a Florida banking corporation in 1988 and
commenced operations in 1989 in order to provide banking services to the
residents of Winter Park, Florida, and the greater Orlando metropolitan area.
Its executive offices and main banking office are located at 2006 Aloma Avenue,
Winter Park, Florida 32792, and its telephone number at that address is
407-629-1888. Since its opening, Winter Park has attracted business from
customers who prefer to deal with a financial institution which provides a high
level of personal service and responsiveness and a commitment to the local
community.
- 43 -
<PAGE> 47
Winter Park offers a wide range of banking services to individuals and
businesses located in its primary service area. Winter Park is actively engaged
in the business of seeking deposits from the public and making real estate,
commercial, and consumer loans. Winter Park offers a variety of deposit
accounts to its individual and commercial customers, as well as related banking
services. These services include interest bearing checking accounts, savings
accounts, certificates of deposit, ATM cards, commercial checking accounts,
individual retirement accounts, safe deposit boxes, bank-by-mail service,
drive-up teller service, extended lobby and drive-in hours, an extended daily
cut-off time, letters of credit, draft collection, and direct deposit.
Winter Park's principal sources of income are interest on loans and
investments and service charges. Its principal expenses are interest paid on
deposits and general operating expenses. At June 30, 1997, Winter Park had
total assets of $88.4 million and total deposits of $81.0 million. Winter Park
has one subsidiary, The Bank of Winter Park Mortgage Company, a Florida
corporation licensed by the Florida Department of Banking and Finance as a
mortgage lender.
PRIMARY SERVICE AREA
Winter Park's primary service area is a corridor approximately four
miles wide by 18 miles long through the most densely developed portion of
Florida's Central Orange and Southern Seminole Counties bounded, generally, by
Interstate Highway 4 and South Orange Blossom Trail (U.S. Highway 17/92/441) on
the West, Sand Lake Road (State Road 482) on the South, Semoran Boulevard
(State Road 436) and U.S. Highway 17/92 on the East, and Longwood Hills Road on
the North. In addition, Winter Park services customers outside Winter Park's
primary service area, but within other parts of Orange and Seminole Counties.
COMPETITION
Competition among financial institutions in Winter Park's primary
service area and throughout the Orlando Metropolitan Statistical Area (the
"MSA") is intense. Ten large regional banks, 11 independent community banks,
eight thrift institutions, and 21 credit unions have branch offices in the MSA.
Winter Park is also in competition with a large number of non-depository
financial services firms, including insurance companies, consumer finance
companies, and securities brokerage firms that have offices in the MSA.
DESCRIPTION OF PROPERTIES
The main banking office of Winter Park is located in a two story
building located at 2006 Aloma Avenue, Winter Park, Florida. This facility is
owned by Winter Park. The banking office has a three-lane drive-in facility. In
addition to the main banking office, Winter Park operates full service banking
offices at the following locations:
o 1250 Lee Road, Winter Park, Florida
This single-story facility, opened in 1989 as Winter Park's
initial banking office, includes a three-lane drive-in and is
leased by Winter Park.
o 5645 Hansel Avenue, Edgewood, Florida
This single-story facility, opened in February 1995, includes a
three-lane drive-in and is leased by Winter Park.
o 1400 West State Road 434, Longwood, Florida
This single-story facility, opened in March 1996, includes a
three-lane drive-in and is leased by Winter Park.
In addition to the above banking offices, Winter Park established an
operations and data processing center in 1996. The operations and data
processing center is located at 4444 Curry Ford Road, Orlando, Florida. This
facility
- 44 -
<PAGE> 48
was formerly a branch office of Coral Gables Federal Savings and Loan
Association. Winter Park has received regulatory approval to establish banking
operations at this facility. This single-story facility includes a three-lane
drive-in and is leased by Winter Park.
In late 1995, Winter Park purchased a facility at 998 East Semoran
Boulevard, Casselberry, Florida. This site was also formerly a branch office of
Coral Gables Federal Savings and Loan Association. The facility consists of an
8,405 square foot two-story bank building with two drive-through lanes. The
building is currently being renovated. Winter Park has not yet received
regulatory approval to establish a branch office at this site.
EMPLOYEES
At June 30, 1997, Winter Park had a staff of 52 full-time employees.
LEGAL PROCEEDINGS
Winter Park is not a party to any material legal proceedings, other
than routine litigation incidental to its banking business.
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth (a) the name and address of the persons
known by Winter Park to beneficially own more than 5% of the outstanding shares
of Winter Park Common Stock and the name of each of Winter Park's directors;
(b) the number and percent of shares of Winter Park Common Stock owned by each
such person and by all directors and executive officers of Winter Park as a
group as of June 30, 1997; and (c) the estimated number of shares of Huntington
Common Stock each such person or group is expected to receive as a result of
the Merger (assuming that such persons do not exercise their appraisal rights),
calculated by multiplying the number of shares of Winter Park Common Stock
beneficially owned by such person or group by the Estimated Exchange Ratio of
______ shares of Huntington Common Stock for each share of Winter Park Common
Stock.
- 45 -
<PAGE> 49
<TABLE>
<CAPTION>
HUNTINGTON
WINTER PARK COMMON STOCK COMMON STOCK
----------------------------------------- EXPECTED TO BE
SHARES BENEFICIALLY PERCENT BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) OWNED OWNED
- -------------------------------------------- ---------------------- ------------- ----------------------
<S> <C> <C>
Ralph D. Singleton
Director
529 Versailles Drive, Suite 200
Maitland, FL 32751 56,190(2) 13.25%
Robert S. Harrell
Director and Chairman
5300 S. Orange Avenue
Orlando, FL 32809 48,915(3) 11.52%
Charles E. Harris
Ewing/Florida Bank Stock Fund,
Limited Partnership
1030 N. Orange Avenue, Suite 300
Orlando, FL 32801 40,500(4) 9.78%
Percy B. Bell
Director and Vice-Chairman
1600 Lee Road
Winter Park, FL 32789 34,134(5) 8.11%
George J. Norman
Director
306 Wild Olive Lane
Longwood, FL 32779 29,683(6) 7.07%
Gerald Hardage
Director 10,000(7) 2.42%
Benjamin F. LePore
Director 20,000(8) 4.83%
James G. Norman
Director 15,835(9) 3.79%
Eugene A. Polino
Director 13,902(10) 3.34%
Arnold Wurst
Director 2,560(11) 0.62%
All Directors and Executive Officers 247,419(12) 52.67%
as a group (12 in group)
</TABLE>
- -------------------
(1) Under applicable SEC regulations, shares are considered to be beneficially
owned by a person as of a particular date if such person either (a)
directly or indirectly has or shares the power to vote or dispose of the
shares, whether or not such person has any economic interest in the
shares, or (b) has the right to acquire such shares within 60 days of the
particular date. All of the stock options held by the Winter Park
directors are currently exercisable. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to the
shares reported.
(2) This amount consists of 28,550 shares which Mr. Singleton owns
individually, 17,500 shares which he owns as trustee of the Central
Meridian Corporation Pension and Profit Sharing Plan, and 10,140 shares
which he may purchase under outstanding stock options.
- 46 -
<PAGE> 50
(3) This amount consists of 38,467 shares which Mr. Harrell owns individually
and 10,448 shares which he may purchase under outstanding stock options.
(4) Ewing/Florida Bank Stock Fund, Limited Partnership, is an investment fund
organized by certain officers and directors of Allen C. Ewing & Co. (an
investment banking firm) in which Charles E. Harris serves as an officer
and director. Mr. Harris has voting and investment power over these
shares.
(5) This amount consists of 23,016 shares which Mr. Bell owns individually,
4,300 shares which he owns jointly with his wife, and 6,818 shares which
he may purchase under outstanding stock options.
(6) This amount consists of 15,194 shares which Mr. George Norman owns
individually, 3,500 shares owned by his wife, 5,224 shares which he owns
through various retirement plans, and 5,765 shares which he may purchase
under outstanding stock options.
(7) This amount consists of 10,000 shares which Mr. Hardage owns as trustee of
the Gerald Hardage Family Trust.
(8) This amount consists of 20,000 shares which Mr. LePore owns individually.
(9) This amount consists of 5,017 shares which Mr. James G. Norman owns
individually, 3,500 shares owned by his wife, 3,845 shares which he owns
through various retirement plans, and 3,473 shares which he may purchase
under outstanding stock options.
(10) This amount consists of 1,142 shares which Mr. Polino owns individually,
500 shares which he owns jointly with his wife, 4,600 shares which he owns
through his individual retirement account, 5,000 shares which he owns
jointly with Gilbert DeHamer, and 2,660 shares which he may purchase under
outstanding stock options.
(11) This amount consists of 1,100 shares which Mr. Wurst owns jointly with his
wife and 1,460 shares which he may purchase under outstanding stock
options.
(12) This amount includes 55,764 shares which directors and executive officers
have the right to purchase under outstanding stock options exercisable
within 60 days of June 30, 1997.
MARKET FOR WINTER PARK COMMON STOCK AND RELATED SHAREHOLDER MATTERS
There is no active trading market for Winter Park Common Stock,
although isolated transactions do occur from time to time. To the knowledge of
Winter Park, all transactions in Winter Park Common Stock are negotiated on a
private basis and quotations for Winter Park Common Stock are not published.
No cash dividends have been declared or paid on shares of Winter Park
Common Stock. The holders of Winter Park Common Stock are entitled to dividends
when, as, and if declared by the Board of Directors of Winter Park out of funds
legally available for such purpose. Winter Park's ability to pay dividends is
subject to, among other things, Florida law and Winter Park's income. The
payment of dividends by Winter Park is subject to various regulatory
restrictions. See "GOVERNMENT REGULATION - DIVIDEND RESTRICTIONS".
GOVERNMENT REGULATION
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
- 47 -
<PAGE> 51
GENERAL
As a registered bank holding company, Huntington is subject to the
supervision of the Federal Reserve Board and is required to file with the
Federal Reserve Board reports and other information regarding its business
operations and the business operations of its subsidiaries. Huntington is also
subject to examination by the Federal Reserve Board and required (subject to
the availability of the expedited notice procedure) to obtain Federal Reserve
Board approval prior to acquiring, directly or indirectly, ownership or control
of voting shares of any bank, if, after such acquisition, it would own or
control more than 5% of any class of voting stock of such bank. As is the case
with the Merger, the Federal Reserve Board does not require prior approval when
the transaction involves a merger with a target bank, no holding company is
involved as a merger party, and a federal supervisory agency, such as the OCC,
approves such merger (see "THE MERGER - REGULATORY APPROVALS"). In addition,
pursuant to federal law and regulations promulgated by the Federal Reserve
Board, Huntington may only engage in, or own or control companies that engage
in, activities deemed by the Federal Reserve Board to be so closely related to
banking as to be a proper incident thereto. Under additional Federal Reserve
regulations, Huntington may, in most cases, commence permissible new
non-banking business activities de novo with only subsequent notice to the
Federal Reserve Board and may acquire smaller companies that engage in
permissible non-banking activities under an expedited procedure requiring only
12 business days notice to the Federal Reserve Board.
The two bank subsidiaries of Huntington have deposits insured by the
Bank Insurance Fund ("BIF") of the FDIC. Huntington's national bank subsidiary
is subject to supervision, examination, and regulation by the OCC. Huntington's
state bank subsidiary is subject to supervision, examination, and regulation by
the Ohio state banking authorities and the FDIC. Certain deposits of
Huntington's national bank subsidiary were acquired from savings associations
and are insured by the Savings Association Insurance Fund ("SAIF") of the FDIC.
The nonbank subsidiaries of Huntington are also subject to supervision,
examination, and regulation by the Federal Reserve Board and examination by
applicable federal and state banking agencies. In addition to the impact of
federal and state supervision and regulation, the subsidiaries of Huntington
are affected significantly by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit availability in order to
influence the economy.
Winter Park has deposits insured by the BIF. Winter Park and its
subsidiary are subject to supervision, examination, and regulation by the
Florida state banking authorities and the FDIC. Pursuant to federal law and
regulations promulgated by the FDIC, Winter Park may only engage as principal
in activities that are permissible for national banks, or in activities that
the FDIC has determined would pose no significant risk to the BIF, provided
that Winter Park is and continues to be in compliance with applicable capital
standards prescribed by the FDIC. See " - CAPITAL REQUIREMENTS".
HOLDING COMPANY STRUCTURE
The depository institution subsidiaries of Huntington are subject to
affiliate transaction restrictions under federal law which limit the transfer
of funds by the subsidiary banks to their parent and any nonbank subsidiaries
of the parent, whether in the form of loans, extensions of credit, investments,
or asset purchases. Such transfers by any subsidiary bank to its parent
corporation or to any nonbank subsidiary of the parent are limited in amount to
10% of the institution's capital and surplus and, with respect to such parent
and all such nonbank subsidiaries of the parent, to an aggregate of 20% of any
such institution's capital and surplus. Furthermore, such loans and extensions
of credit are required to be secured in specified amounts. In addition, all
affiliate transactions must be conducted on terms and under circumstances that
are substantially the same as such transactions with unaffiliated entities.
Under applicable regulations, at June 30, 1997, approximately $204.0 million
was available for loans to Huntington from its subsidiary banks.
The Federal Reserve Board has a policy to the effect that a bank
holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and to commit resources to support
each such subsidiary bank. Under the source of strength doctrine, the Federal
Reserve Board may require a bank holding company to make capital injections
into a troubled subsidiary bank and may charge the bank holding company with
engaging in unsafe and unsound practices for failure to commit resources to
such a subsidiary bank. This capital
- 48 -
<PAGE> 52
injection may be required at times when Huntington may not have the resources
to provide it. Any loans by a holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. Moreover, in the event of a bank holding
company's bankruptcy, any commitment by such 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 of payment.
Comprehensive financial institutions legislation known as the
Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA") was
adopted in 1989. Among other things, FIRREA established a new principle of
liability on the part of depository institutions insured by the FDIC for any
losses incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989, in connection with (a) the default of a commonly controlled
FDIC-insured depository institution, or (b) any assistance provided by the FDIC
to a commonly controlled FDIC-insured depository institution in danger of
default. "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the
absence of regulatory assistance. Accordingly, in the event that any insured
bank subsidiary of Huntington causes a loss to the FDIC, the other bank
subsidiary of Huntington could be required to compensate the FDIC by
reimbursing to it the amount of such loss, and such reimbursement could cause a
loss of Huntington's investments in such other subsidiary.
Federal law permits the OCC to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states, including Ohio, provide for such assessment and sale with
respect to the subsidiary banks chartered by such states. Moreover, under
legislation that became effective August 10, 1993, the claims of a receiver of
an insured depository institution for administrative expenses and the claims of
holders of deposit liabilities of such an institution are accorded priority
over the claims of general unsecured creditors of such an institution,
including the holders of the institution's note obligations, in the event of
liquidation or other resolution of such institution. As a result of such
legislation, claims of a receiver for administrative expenses and claims of
holders of deposit liabilities of Huntington's depository subsidiaries
(including the FDIC, as subrogee of such holders) would receive priority over
the holders of notes and other senior debt of such subsidiaries in the event of
liquidation or other resolution and over the interests of Huntington as sole
shareholders.
DIVIDEND RESTRICTIONS
Dividends from subsidiary banks are a significant source of funds for
payment of dividends to the shareholders of bank holding companies. There are,
however, statutory limits on the amount of dividends a depository institution
subsidiary can pay to its parent without regulatory approval.
Federal and state banking laws and regulations place certain
restrictions on the amount of dividends that a bank may pay or loans that it
may make to its parent company or companies. A subsidiary bank of Huntington
may not, without prior regulatory approval, pay a dividend in an amount greater
than such bank's undivided profits. In addition, the prior approval of the OCC
is required for the payment of a dividend by a national bank if the total of
all dividends declared by the bank in a calendar year would exceed the total of
its net income for the year combined with its retained net income for the two
preceding years. Under these provisions and in accordance with the
above-described formula, as of June 30, 1997, Huntington's subsidiary banks
have declared dividends to Huntington in 1997 of approximately $105.2 million
and, without regulatory approval, could declare additional dividends of
approximately $44.6 million during the balance of 1997, plus an additional
amount equal to their aggregate net income through the date of declaration.
If, in the opinion of the applicable regulatory authority, a bank
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 bank,
could include the payment of dividends), such authority may require, after
notice and hearing, that such bank cease and desist from such practice. The
Federal Reserve Board, the OCC, and the FDIC have issued policy statements
which provide that
- 49 -
<PAGE> 53
insured banks and bank holding companies should generally only pay dividends
out of current operating earnings. Winter Park has retained its operating
earnings to increase its equity capital and has never paid a dividend on the
Winter Park Common Stock.
FDIC INSURANCE
The FDIC is mandated by law to assess deposit insurance premiums on
depository institutions sufficient, but no more than sufficient, to achieve and
maintain a target reserve level (also referred to as a designated reserve ratio
or DRR) for both the BIF and the SAIF of 1.25% of insured deposits. The BIF
achieved its target reserve level in mid-1995, and the SAIF did so in late 1996
by means of a special assessment on savings associations and banks that
acquired SAIF-insured deposits on or prior to June 30, 1995.
The FDIC has employed a risk-based insurance assessment system for
both insurance funds since 1994, under which it places each insured depository
institution in one of nine risk categories based on its level of capital and
other relevant information (such as supervisory evaluations). Winter Park and
the insured depository subsidiaries of Huntington are all BIF members and are
subject to this risk-based system.
In the light of the current financial situation of the funds and the
current low level of depository institution failure, the FDIC has established
adjusted schedules of BIF and SAIF assessments with annual premium rates
ranging from 0% to 0.27% of insured deposits, depending on the assessment risk
classification of the assessed institution. The 0% rate is available to
well-capitalized institutions having one of the two best supervisory ratings.
Both of Huntington's depository subsidiaries are currently eligible for the 0%
rate. Unless the loss experience of the BIF in the future requires the FDIC to
make an upward adjustment of the assessment schedules, or a Huntington
depository subsidiary ceases to be well capitalized or fails to obtain one of
the two best supervisory ratings, Huntington's depository subsidiaries will
continue to be able to obtain deposit insurance without payment of premium.
Winter Park's current annual assessment rate is .10% of insured deposits.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and
leverage guidelines for bank holding companies such as Huntington. The
risk-based capital ratio guidelines establish a systematic analytical framework
that makes regulatory capital requirements more sensitive to differences in
risk profiles among financial institutions, takes off-balance sheet exposures
into explicit account in assessing capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets.
Under the guidelines and related policies, bank holding companies must
maintain capital sufficient to meet both a risk-based asset ratio test and
leverage ratio test on a consolidated basis. The risk-based ratio is determined
by allocating assets and specified off-balance sheet commitments into four
weighted categories, with higher weighting being assigned to categories
perceived as representing greater risk. A bank holding company's capital (as
described below) is then divided by total risk-weighted assets to yield the
risk-based ratio. The leverage ratio is determined by relating core capital (as
described below) to total assets adjusted as specified in the guidelines. Both
of Huntington's subsidiary banks and Winter Park are subject to substantially
similar capital requirements adopted by applicable regulatory agencies.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers:
o "Tier 1", or core capital, includes common equity, noncumulative
perpetual preferred stock (excluding auction rate issues), and
minority interests in equity accounts of consolidated
subsidiaries, less goodwill and, with certain limited exceptions,
all other intangible assets. Bank holding companies, however, may
include cumulative perpetual preferred stock in their Tier 1
capital, up to a limit of 25% of such Tier 1 capital.
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<PAGE> 54
o "Tier 2", or supplementary capital, includes, among other things,
cumulative perpetual and limited-life preferred stock, hybrid
capital instruments, mandatory convertible securities, qualifying
subordinated debt, and the allowance for loan losses, subject to
certain limitations.
"Total capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators
require that intangible assets, with certain exceptions, be deducted from Tier
1 capital. Under Federal Reserve Board interim rules adopted in August 1995,
the only types of intangible assets that may be included in (i.e., not deducted
from) a bank holding company's capital are mortgage servicing rights ("MSRs")
and purchased credit card relationships ("PCCRs"), provided that, in the
aggregate, the total amount of MSRs and PCCRs included in capital does not
exceed 50% of Tier 1 capital. PCCRs are subject to a separate sublimit of 25%
of Tier 1 capital. The amount of MSRs and PCCRs that a bank holding company may
include in its capital is limited to the lesser of
o 90% of such assets' fair market value (as determined under the
guidelines), or
o 100% of such assets' book value, each determined quarterly.
Identifiable intangible assets (i.e., intangible assets other than goodwill)
other than MSRs and PCCRs, including core deposit intangibles, acquired on or
before February 19, 1992 (the date the Federal Reserve Board issued its
original proposal for public comment), generally are not deducted from capital
for supervisory purposes, although they are deducted for purposes of evaluating
applications filed by bank holding companies.
On August 4, 1997, the Federal Reserve Board and the other federal
banking regulators proposed extensive changes in the capital treatment of
intangible assets in the light of FAS 125. Under the proposal, revenue flows
from mortgage servicing fees would be regarded as mortgage servicing assets
("MSAs"), 90% of the fair value of which could be included in capital, up to an
amount which, when combined with 90% of the fair value of PCCRs, will not
exceed 100% of Tier 1 capital. The separate sublimit for PCCRs of 25% of Tier 1
capital would continue, as would the requirement that non-mortgage servicing
assets and all other intangible assets be deducted from Tier 1 capital. Public
comment is being sought in the proposal on alternative treatments of interest
only ("I/O") strips receivable, i.e., rights to future interest income from
serviced assets in excess of contractual servicing fees.
Under the risk-based guidelines, financial institutions are required
to maintain a risk-based ratio (total capital to risk-weighted assets) of 8%,
of which 4% must be Tier 1 capital. The appropriate regulatory authority may
set higher capital requirements when an institution's circumstances warrant.
Under the leverage guidelines, financial institutions are required to
maintain a leverage ratio (Tier 1 capital to adjusted total assets, as
specified in the guidelines) of at least 3%. The 3% minimum ratio is applicable
only to financial institutions that meet certain specified criteria, including
excellent asset quality, high liquidity, low interest rate exposure, and the
highest regulatory rating. Financial institutions not meeting these criteria
are required to maintain a leverage ratio which exceeds 3% by a cushion of at
least 100 to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels.
Furthermore, the Federal Reserve Board's guidelines indicate that the Federal
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available to the
federal regulatory authorities, including limitations on the ability to pay
dividends, the issuance by the regulatory authority of a capital directive to
increase capital, and the termination of deposit insurance by the FDIC, as well
as to the measures described below under "FEDERAL DEPOSIT INSURANCE CORPORATION
IMPROVEMENT ACT OF 1991" as applicable to undercapitalized institutions.
- 51 -
<PAGE> 55
As of June 30, 1997, the Tier 1 risk-based capital ratios, total
risk-based capital ratios, and Tier 1 leverage ratios for Huntington and Winter
Park were as follows:
<TABLE>
<CAPTION>
HUNTINGTON
--------------------------------
PRO WINTER
REQUIREMENT HISTORICAL FORMA(1) PARK
------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Tier 1 Risk-Based Capital Ratio......... 4.00% 8.90% 8.75% 8.93%
Total Risk-Based Capital Ratio.......... 8.00% 12.26% 11.82% 10.18%
Tier 1 Leverage Ratio................... 3.00% 7.55% 7.38% 6.35%
</TABLE>
- --------------------
(1) Includes Huntington, First Michigan, and Winter Park on a pro forma
combined basis.
As of June 30, 1997, both of Huntington's bank subsidiaries and Winter
Park had capital in excess of the minimum requirements.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revised the bank regulatory and funding provisions of
the Federal Deposit Insurance Act and made revisions to several other federal
banking statutes.
Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these purposes,
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized."
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other
things, the regulations define the relevant capital measures for the five
capital categories:
o An institution is deemed to be "well capitalized" if it has a
total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6% or greater, and a leverage ratio
of 5% or greater and is not subject to a regulatory order,
agreement, or directive to meet and maintain a specific capital
level for any capital measure.
o An institution is deemed to be "adequately capitalized" if it has
a total risk-based capital ratio of 8% or greater, a Tier 1
risk-based capital ratio of 4% or greater, and, generally, a
leverage ratio of 4% or greater and the institution does not meet
the definition of a "well capitalized" institution.
o An institution that does not meet one or more of the "adequately
capitalized" tests is deemed to be "undercapitalized".
o An institution is deemed to be "significantly undercapitalized"
if the institution 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%.
o An institution is deemed to be "critically undercapitalized" if
it has a ratio of tangible equity (as defined in the regulations)
to total assets that is equal to or less than 2%.
- 52 -
<PAGE> 56
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If
any depository institution subsidiary is required to submit a capital
restoration plan, its parent company would be required to provide a limited
guarantee regarding compliance with the plan as a condition of approval of such
plan by the appropriate federal banking agency. If an undercapitalized
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized institutions may
be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days
after becoming critically undercapitalized, make any payment of principal or
interest on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, as of June 30, 1997,
Huntington's bank subsidiaries had an immaterial amount of brokered deposits.
As of the same date, Winter Park did not have brokered deposits.
FDICIA, as amended, directs that each federal banking regulatory
agency prescribe standards, by regulation or guideline, for depository
institutions relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, asset quality, earnings, and stock valuation. The Federal
Reserve Board has adopted a regulation in the form of guidelines covering most
of these items, and the other federal banking regulatory agencies are expected
to adopt identical regulations. Huntington believes that the regulations and
guidelines will not have a material effect on the operations of its depository
institution subsidiaries.
INTERSTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 provides for nationwide interstate banking and branching. Under the law,
interstate acquisitions of banks or bank holding companies in any state by bank
holding companies in any other state became permissible as of September 29,
1995. Interstate branching and consolidations of existing bank subsidiaries in
different states became permissible on June 1, 1997. On June 30, 1997,
Huntington availed itself of the interstate branching authority and merged all
of its subsidiary banks except The Huntington State Bank, into its principal
bank, Huntington Bank, and consolidated all of its subsidiary bank holding
companies, except Huntington Bancshares Florida, Inc. into Huntington.
Huntington Bancshares Florida, Inc. will not be merged or liquidated in the
foreseeable future into Huntington, pursuant to a private letter ruling
obtained from the Internal Revenue Service in connection with a prior merger.
OTHER APPLICABLE REGULATIONS
The Riegle Community Development and Regulatory Improvement Act of
1994 made several changes in existing law affecting bank holding companies,
including a reduction in the minimum post-approval antitrust review waiting
period for depository institution mergers and acquisitions and the substitution
of a notice for an application when a bank holding company proposes to engage
in, or acquire a company to engage in, nonbank activities.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996
provided, in addition to arrangements for the recapitalization of the SAIF,
regulatory relief for bank holding companies in several significant areas. Bank
holding companies that also owned savings associations and were therefore
subject to regulation by the Office of Thrift Supervision ("OTS") as savings
and loan holding companies were relieved of such duplicative
- 53 -
<PAGE> 57
regulation, and neither future acquisitions of savings associations by bank
holding companies nor mergers of savings associations into banks will any
longer require application to and approval by the OTS. Acquisitions by
well-capitalized and well-managed bank holding companies of companies engaging
in permissible nonbanking activities (other than savings associations) may now
be made with only 12 days prior notice to the Federal Reserve Board, and de
novo engagement in such activities by such bank holding companies may be
commenced without prior notice and with only subsequent notice to the Federal
Reserve Board. The same legislation gave regulatory relief to banks in regard
to corporate governance, branching, disclosure, and other operational areas.
EXPERTS
The consolidated financial statements of Huntington included in
Huntington's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference herein have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report included therein and
incorporated herein by reference. Such financial statements audited by Ernst &
Young LLP are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Winter Park as of December
31, 1996, and for the year then ended have been included in this document in
reliance upon the report of Rex Meighen & Company, independent public
accountants, whose report thereon appears elsewhere in this document, and upon
the authority of such firm as experts in accounting and auditing. The
consolidated financial statements of Winter Park as of December 31, 1995, and
December 31, 1994, and for each of the years then ended have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein and upon the authority
of said firm as experts in accounting and auditing.
LEGAL OPINIONS
The validity of the Huntington Common Stock to be issued to Winter
Park shareholders pursuant to the Merger and certain other legal matters in
connection with the Merger will be passed upon for Huntington by Porter,
Wright, Morris & Arthur, Columbus, Ohio. As of _____________, 1997, members of
such firm participating in the representation of Huntington on this matter
beneficially owned an aggregate of _________ shares of Huntington Common Stock.
Certain legal matters in connection with the Merger will be passed on for
Winter Park by Shutts & Bowen L.L.P., Orlando, Florida.
OTHER MATTERS
As of the date of this document, management of Winter Park knows of no
business other than that described in this document that will come before the
Special Meeting. Should any other matters properly come before the Special
Meeting, the enclosed proxy confers upon the person or persons designated to
vote the shares discretionary authority to vote the shares with respect to any
such other matter in accordance with their judgment, except that no proxy that
is voted against the approval of the Merger Documents will be voted in favor of
any adjournment or postponement of the meeting for the purpose of soliciting
additional proxies.
- 54 -
<PAGE> 58
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Introduction to Pro Forma Consolidated Financial Statements........................................... F-1
Pro Forma Consolidated Balance Sheet as of June 30, 1997 ............................................. F-2
Pro Forma Consolidated Statement of Income for the six months ended
June 30, 1997 .................................................................................... F-3
Pro Forma Consolidated Statement of Income for the year ended
December 31, 1996 ................................................................................ F-4
Pro Forma Consolidated Statement of Income for the year ended
December 31, 1995 ................................................................................ F-5
Pro Forma Consolidated Statement of Income for the year ended
December 31, 1994 ................................................................................ F-6
Notes to Pro Forma Consolidated Financial Statements.................................................. F-7
CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK OF WINTER PARK AND SUBSIDIARY
Condensed Consolidated Balance Sheets as of June 30, 1997 and 1996 and
December 31, 1996................................................................................. F-8
Condensed Consolidated Statement of Income for the periods ended
June 30, 1997 and 1996............................................................................ F-9
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the periods ended June 30, 1997 and 1996...................................................... F-10
Condensed Consolidated Statement of Cash Flows for the periods ended
June 30, 1997 and 1996............................................................................ F-11
Notes to Condensed Consolidated Financial Statements - June 30, 1997 and 1996......................... F-12
Independent Auditors' Report - Rex Meighen & Company.................................................. F-17
Consolidated Balance Sheet as of December 31, 1996.................................................... F-18
Consolidated Statement of Income for the year ended December 31, 1996................................. F-19
Consolidated Statement of Changes in Stockholders' Equity
for the year ended December 31, 1996.............................................................. F-20
Consolidated Statement of Cash Flows for the year ended December 31, 1996............................. F-21
Notes to Consolidated Financial Statements - December 31, 1996........................................ F-22
</TABLE>
- 55 -
<PAGE> 59
<TABLE>
<S> <C>
Independent Auditors' Report - KPMG Peat Marwick LLP.................................................. F-32
Consolidated Balance Sheets as of December 31, 1995 and 1994.......................................... F-33
Consolidated Statements of Income for the years ended
December 31, 1995 and 1994........................................................................ F-35
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1995 and 1994.................................................... F-36
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994........................................................................ F-37
Notes to Consolidated Financial Statements - December 31, 1995 and 1994............................... F-39
Managements' Discussion and Analysis of
Financial Condition and Results of Operations..................................................... F-56
</TABLE>
- 56 -
<PAGE> 60
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated financial statements give effect to the
Merger under the purchase method of accounting and the First Michigan
Acquisition as a pooling of interests. The consolidated financial statements on
the following pages present (i) the historical consolidated balance sheets of
Huntington, First Michigan, and Winter Park at June 30, 1997, and the pro forma
consolidated balance sheet as of June 30, 1997, giving effect to the Merger and
the First Michigan Acquisition as if each had occurred on that date; and (ii)
the historical consolidated statements of income of Huntington, First Michigan
and Winter Park for the six months ended June 30, 1997, and for each of the
three years in the period ended December 31, 1996, and the pro forma
consolidated statements of income for the six months ended June 30, 1997, and
for each of the three years in the period ended December 31, 1996, giving effect
to the Merger and the First Michigan Acquisition as if each had been effected
for all periods presented.
The pro forma balance sheet gives effect to nonrecurring charges related to the
First Michigan Acquisition. However, the pro forma consolidated financial
statements exclude the estimated effect of revenue enhancements and expense
savings associated with the consolidation of operations of Huntington, First
Michigan, and Winter Park.
The pro forma consolidated financial statements are intended for informational
purposes and may not be indicative of the combined financial position or results
of operations that actually would have occurred had the transaction been
consummated during the periods or as of the dates indicated, or which will be
attained in the future. The pro forma consolidated financial statements should
be read in conjunction with the 1996 Annual Report on Form 10-K and the
Quarterly Reports on Form 10-Q for the periods ended June 30, 1997, and March
31, 1997, of Huntington and First Michigan, as well as the consolidated
financial statements of Winter Park included in this document.
F - 1
<PAGE> 61
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Balance Sheet
At June 30, 1997 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
First The
Huntington Michigan Bank of
Bancshares Bank Winter Pro Forma
Incorporated Corporation Park Adjustments Pro Forma
------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks .......................... $ 952,160 $ 152,132 $ 7,618 $(14,740)(B) $ 1,097,170
Interest bearing deposits in banks ............... 1,234 2,163 3,397
Trading account securities ....................... 6,585 6,585
Federal funds sold and securities purchased
under resale agreements ........................ 18,726 200 1,810 20,736
Mortgages held for sale .......................... 144,931 84 145,015
Securities available for sale - at fair value .... 4,423,024 490,042 18,968 4,932,034
Investment securities ............................ 54,972 239,191 500 294,663
Total loans ...................................... 15,132,937 2,692,453 56,059 17,881,449
Less allowance for loan losses ................ 212,689 35,178 1,015 248,882
----------- ---------- ---------- -----------
Net loans ........................................ 14,920,248 2,657,275 55,044 17,632,567
----------- ---------- ---------- -----------
Premises and equipment ........................... 323,536 67,967 3,119 394,622
Customers' acceptance liability .................. 42,573 42,573
Accrued income and other assets .................. 696,253 64,185 1,207 9,000 (A) 779,483
8,838 (C)
----------- ---------- ---------- -------- -----------
Total assets .......................................... $21,584,242 $3,673,155 $ 88,350 $ 3,098 $25,348,845
=========== ========== ========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits ................................... $14,591,064 $3,044,368 $ 81,031 $17,716,463
Short-term borrowings ............................ 2,959,433 272,268 3,231,701
Bank acceptances outstanding ..................... 42,573 42,573
Long-term debt ................................... 1,926,643 29,537 712 1,956,892
Accrued expenses and other liabilities ........... 424,200 37,311 705 $ 45,000 (A) 507,216
----------- ---------- ---------- -------- -----------
Total liabilities .............................. 19,943,913 3,383,484 82,448 45,000 23,454,845
----------- ---------- ---------- -------- -----------
Shareholders' Equity
Common stock ................................... 1,264,664 27,813 2,070 (2,070)(D) 1,292,477
Treasury stock ................................. (160,557) (160,557)
Surplus ........................................ 251,968 203,673 2,277 (2,277)(D) 455,641
Retained earnings .............................. 309,847 57,672 1,566 (36,000)(A) 331,519
(1,566)(D)
Net unrealized gains/(losses) on securities
available for sale ........................... (25,593) 513 (11) 11 (D) (25,080)
----------- ---------- ---------- -------- -----------
Total Shareholders' Equity ....................... 1,640,329 289,671 5,902 (41,902) 1,894,000
----------- ---------- ---------- -------- -----------
Total Liabilities and Shareholders' Equity ............ $21,584,242 $3,673,155 $ 88,350 $ 3,098 $25,348,845
=========== ========== ========== ======== ===========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements.
F - 2
<PAGE> 62
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Six Months Ended June 30, 1997 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First The
Huntington Michigan Bank of
Bancshares Bank Winter Pro forma Pro Forma
Incorporated Corporation Park Adjustments (F)
------------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Interest income
Loans ............................. $ 673,139 $ 122,170 $ 2,762 $798,071
Securities ........................ 156,326 23,436 593 180,355
Other ............................. 4,871 537 138 $(405)(E)(i) 5,141
--------- --------- --------- ----- --------
Total interest income ........ 834,336 146,143 3,493 (405) 983,567
--------- --------- --------- ----- --------
Interest expense
Deposits .......................... 246,630 64,242 1,535 312,407
Short-term borrowings ............. 94,715 5,484 100,199
Long-term debt .................... 56,295 1,017 57,312
--------- --------- --------- --------
Total interest expense ....... 397,640 70,743 1,535 469,918
--------- --------- --------- --------
Net interest income .......... 436,696 75,400 1,958 (405) 513,649
Provision for loan losses ................ 45,274 7,937 40 53,251
--------- --------- --------- ----- --------
Net interest income after
provision for loan losses.. 391,422 67,463 1,918 (405) 460,398
--------- --------- --------- ----- --------
Total non-interest income ................ 135,351 21,676 465 157,492
Total non-interest expense ............... 311,441 58,606 1,979 177(E)(ii) 372,203
--------- --------- --------- ----- --------
Income before income taxes ... 215,332 30,533 404 (582) 245,687
Provision for income taxes ............... 76,336 8,747 160 (142)(E)(iii) 85,101
--------- --------- --------- ----- --------
Net income ................... $ 138,996 $ 21,786 $ 244 $(440) $160,586
========= ========= ========= ===== ========
Net income per Common Share (1) .......... $ 0.88 $ 0.77 $ 0.50 $ 0.84
Average Common Shares Outstanding (1) .... 158,180 28,270 487 190,832
</TABLE>
(1) Adjusted for stock splits and stock dividends, as applicable.
See Notes to Pro Forma Consolidated Financial Statements.
F - 3
<PAGE> 63
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1996 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First The
Huntington Michigan Bank of
Bancshares Bank Winter Pro forma Pro Forma
Incorporated Corporation Park Adjustments (F)
------------ ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest income
Loans ............................. $1,193,896 $221,856 $5,930 $1,421,682
Securities ........................ 304,794 45,143 735 350,672
Other ............................. 11,774 2,472 179 $ (810)(E)(i) 13,615
---------- -------- ------ ------- ----------
Total interest income ........ 1,510,464 269,471 6,844 (810) 1,785,969
---------- -------- ------ ------- ----------
Interest expense
Deposits .......................... 459,514 121,172 2,805 583,491
Short-term borrowings ............. 178,721 6,911 16 185,648
Long-term debt .................... 113,405 1,008 114,413
---------- -------- ------ ----------
Total interest expense ....... 751,640 129,091 2,821 883,552
---------- -------- ------ ----------
Net interest income .......... 758,824 140,380 4,023 (810) 902,417
Provision for loan losses ................ 65,050 11,321 280 76,651
---------- -------- ------ ------- ----------
Net interest income after
provision for loan losses.. 693,774 129,059 3,743 (810) 825,766
---------- -------- ------ ------- ----------
Total non-interest income ................ 272,993 37,737 2,454 313,184
Total non-interest expense ............... 567,946 108,349 4,991 354 (E)(ii) 681,640
---------- -------- ------ ------- ----------
Income before income taxes ... 398,821 58,447 1,206 (1,164) 457,310
Provision for income taxes ............... 136,720 16,279 421 (284)(E)(iii) 153,136
---------- -------- ------ ------- ----------
Net income ................... $ 262,101 $ 42,168 $ 785 $ (880) $ 304,174
========== ======== ====== ======= ==========
Net income per Common Share (1) .......... $ 1.63 $ 1.50 $ 1.66 $ 1.58
Average Common Shares Outstanding (1) .... 160,553 28,118 474 193,029
</TABLE>
(1) Adjusted for stock splits and stock dividends, as applicable.
See Notes to Pro Forma Consolidated Financial Statements.
F - 4
<PAGE> 64
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1995 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First The
Huntington Michigan Bank of
Bancshares Bank Winter Pro forma Pro Forma
Incorporated Corporation Park Adjustments (F)
------------ ----------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest income
Loans ............................. $1,156,446 $202,395 $4,581 $1,363,422
Securities ........................ 289,732 43,200 782 333,714
Other ............................. 15,718 3,002 214 $ (810)(E)(i) 18,124
---------- -------- ------ ------- ----------
Total interest income ........ 1,461,896 248,597 5,577 (810) 1,715,260
---------- -------- ------ ------- ----------
Interest expense
Deposits .......................... 425,631 113,037 2,167 540,835
Short-term borrowings ............. 212,110 5,793 5 217,908
Long-term debt .................... 99,592 697 100,289
---------- -------- ------ ----------
Total interest expense ....... 737,333 119,527 2,172 859,032
---------- -------- ------ ----------
Net interest income .......... 724,563 129,070 3,405 (810) 856,228
Provision for loan losses ................ 28,721 7,991 253 36,965
---------- -------- ------ ------- ----------
Net interest income after
provision for loan losses.. 695,842 121,079 3,152 (810) 819,263
---------- -------- ------ ------- ----------
Total non-interest income ................ 243,009 31,141 670 274,820
Total non-interest expense ............... 560,403 101,584 3,279 354 (E)(ii) 665,620
---------- -------- ------ ------- ----------
Income before income taxes ... 378,448 50,636 543 (1,164) 428,463
Provision for income taxes ............... 133,959 13,324 208 (284)(E)(iii) 147,207
---------- -------- ------ ------- ----------
Net income ................... $ 244,489 $ 37,312 $ 335 $ (880) $ 281,256
========== ======== ====== ======= ==========
Net income per Common Share (1) .......... $ 1.47 $ 1.33 $ 0.71 $ 1.41
Average Common Shares Outstanding (1) .... 166,524 27,985 471 198,847
</TABLE>
(1) Adjusted for stock splits and stock dividends, as applicable.
See Notes to Pro Forma Consolidated Financial Statements.
F - 5
<PAGE> 65
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1994 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First The
Huntington Michigan Bank of
Bancshares Bank Winter Pro forma Pro Forma
Incorporated Corporation Park Adjustments (F)
------------ ----------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest income
Loans................................ $ 975,604 $156,755 $3,190 $1,135,549
Securities .......................... 212,257 42,435 640 255,332
Other ............................... 31,860 1,051 98 $ (810)(E)(i) 32,199
---------- -------- ------ ------- ----------
Total interest income .......... 1,219,721 200,241 3,928 (810) 1,423,080
---------- -------- ------ ------- ----------
Interest expense
Deposits ............................ 294,780 77,957 1,270 374,007
Short-term borrowings ............... 106,646 4,395 1 111,042
Long-term debt ...................... 62,245 857 63,102
---------- -------- ------ ----------
Total interest expense ......... 463,671 83,209 1,271 548,151
---------- -------- ------ ----------
Net interest income ............ 756,050 117,032 2,657 (810) 874,929
Provision for loan losses .................. 15,284 6,670 204 22,158
---------- -------- ------ ------- ----------
Net interest income after
provision for loan losses ... 740,766 110,362 2,453 (810) 852,771
---------- -------- ------ ------- ----------
Total non-interest income .................. 213,865 29,462 432 243,759
Total non-interest expense ................. 588,157 95,321 2,191 354 (E)(ii) 686,023
---------- -------- ------ ------- ----------
Income before income taxes ..... 366,474 44,503 694 (1,164) 410,507
Provision for income taxes ................. 123,881 10,776 240 (284)(E)(iii) 134,613
---------- -------- ------ ------- ----------
Net income ..................... $ 242,593 $ 33,727 $ 454 $ (880) $ 275,894
========== ======== ====== ======= ==========
Net income per Common Share (1) ............ $ 1.47 $ 1.21 $ 0.96 $ 1.40
Average Common Shares Outstanding (1) ...... 164,814 27,975 471 197,125
</TABLE>
(1) Adjusted for stock splits and stock dividends, as applicable.
See Notes to Pro Forma Consolidated Financial Statements.
F - 6
<PAGE> 66
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A) A liability of $45 million has been recorded in the pro forma
consolidated balance sheet to reflect management's estimate of
nonrecurring charges related to the First Michigan Acquisition. The
special charge also resulted in an after-tax adjustment to retained
earnings of $36 million. These expenses will be recognized upon
consummation of the First Michigan Acquisition and are expected to
consist generally of the following (shown pre-tax and in millions):
<TABLE>
<S> <C>
Personnel Related.................................... $21
Transaction costs (investment bankers, legal, etc.).. 10
Facilities and Equipment............................. 6
Systems Integration.................................. 5
Other................................................ 3
---
$45
===
</TABLE>
Personnel related costs consist primarily of estimated amounts to
effect the settlement of obligations under existing employment
contracts, severance pay for involuntary terminations, and associated
employee benefits. The remaining costs (other than transaction costs)
identified above are related to the consolidation of bank operations
and systems and include amounts resulting from elimination of redundant
operational facilities, lease terminations, and write-offs of computer
hardware and software due to incompatibility or duplication. Management
continues to review these charges and there can be no assurance that
such expenses will not exceed the amounts described above.
(B) Estimated purchase price for Winter Park of $14.74 million. Huntington
expects that, in advance of consummating the Merger, it will have
repurchased approximately the same number of shares in the open market
as will be issued to effect the Merger. For purposes of the pro forma
financial statements, it was assumed that the cost of these repurchased
shares would equal the estimated purchase price to be paid for Winter
Park.
(C) The excess of purchase price over net assets acquired in the Merger, or
goodwill, approximates $8.8 million.
(D) To eliminate the shareholders' equity of Winter Park.
(E) To reflect (i) the estimated reduction in interest income from funding
the Winter Park-related share repurchase; (ii) the amortization of
goodwill; and (iii) the related income tax effects.
(F) The pro forma consolidated statements of income do not give effect to
anticipated nonrecurring charges related to the First Michigan
Acquisition or the estimated benefit of revenue enhancements and
expense savings associated with the consolidation of the operations of
Huntington, First Michigan, and Winter Park. Earnings per common share
amounts for Huntington, First Michigan, and Winter Park are based on
the historical average number of common shares outstanding for each
company during the period, adjusted as applicable for stock splits and
dividends. The dilutive effects of unexercised stock options are not
significant. For purposes of the pro forma earnings per share
computation, the common shares of First Michigan have been adjusted to
the equivalent shares of Huntington for each period. (As described in
Note (B) above, it is assumed that no incremental shares will be
outstanding in connection with the Winter Park transaction).
F - 7
<PAGE> 67
THE BANK OF WINTER PARK AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996 JUNE 30, 1996
------------------- ------------- -------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,617,512 $ 5,671,407 $ 8,963,828
Federal funds sold 1,810,000 6,800,000 0
------------ ------------ ------------
Total cash and cash equivalents 9,427,512 12,471,407 8,963,828
Investment securities available for sale 18,967,657 14,194,932 10,460,548
Investment securities held to maturity (estimated fair
market value of $498,000 at 6/30/97, $500,000 at
12/31/96 and $488,000 at 6/30/96) 500,000 500,000 500,000
Loans 56,059,060 61,418,122 57,626,649
Less allowance for loan losses (1,014,938) (1,090,804) (993,425)
------------ ------------ ------------
Loans, net 55,044,122 60,327,318 56,633,224
Loans held for sale 83,915 84,345 2,848,529
Advances receivable 43,647 682,535 2,953,792
Premises and equipment, net 3,118,960 2,823,226 2,798,395
Prepaid expenses and other assets 294,771 603,196 1,416,784
Accrued interest receivable 600,434 552,649 504,261
Organizational costs -- -- 122,768
Deferred income taxes, net 269,247 271,598 218,778
------------ ------------ ------------
Total assets $ 88,350,265 $ 92,511,206 $ 87,420,907
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits $ 9,914,288 $ 12,765,964 $ 14,981,704
NOW accounts 9,427,310 9,614,267 9,189,498
Money market accounts 21,265,642 19,831,083 21,156,277
Savings accounts 3,181,241 2,225,642 2,005,203
Time deposits $100,000 and over 11,901,376 10,302,433 7,859,505
Other time deposits 25,341,178 30,636,038 21,751,990
------------ ------------ ------------
Total deposits 81,031,035 85,375,427 76,944,177
Mortgage payable 712,335 722,917 733,332
Federal funds purchased -- -- 3,500,000
Accrued interest payable 435,720 364,950 232,497
Accounts payable and other liabilities 268,986 393,931 880,825
------------ ------------ ------------
Total liabilities 82,448,076 86,857,225 82,290,831
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock - par value $5 per share; authorized
600,000 shares; issued and outstanding 414,009
at 6/30/97 and 12/31/96, and 412,554 at 6/30/96 2,070,045 2,070,045 2,062,770
Additional paid-in capital 2,277,181 2,277,181 2,268,451
Retained earnings 1,566,362 1,322,717 875,341
Net unrealized holding losses on securities (11,399) (15,962) (76,486)
------------ ------------ ------------
Total stockholders' equity 5,902,189 5,653,981 5,130,076
------------ ------------ ------------
Total liabilities and stockholders' equity $ 88,350,265 $ 92,511,206 $ 87,420,907
============ ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-8
<PAGE> 68
THE BANK OF WINTER PARK AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Unaudited)
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans $2,762,273 $3,264,824 $1,364,323 $1,853,757
Investment securities 593,113 344,379 303,658 174,852
Federal funds sold 137,766 51,251 89,179 19,404
---------- ---------- ---------- ----------
Total interest income 3,493,152 3,660,454 1,757,160 2,048,013
INTEREST EXPENSE
Deposits and other borrowed money 1,534,930 1,246,962 773,901 622,626
---------- ---------- ---------- ----------
Net interest income before provision for loan losses 1,958,222 2,413,492 983,259 1,425,387
---------- ---------- ---------- ----------
PROVISION FOR LOAN LOSSES 40,000 130,000 30,000 55,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,918,222 2,283,492 953,259 1,370,387
---------- ---------- ---------- ----------
OTHER INCOME
Service charges 229,165 203,788 120,498 102,142
Fee income 198,577 183,857 105,314 101,155
Gain on sale of loans 2,873 450,812 575 339,706
Other 34,219 20,667 16,207 10,434
---------- ---------- ---------- ----------
Total other income 464,834 859,124 242,594 553,437
---------- ---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 842,176 1,519,802 473,929 1,008,516
Occupancy expense 265,935 264,498 130,105 149,564
Equipment expense 166,103 155,375 85,215 88,567
Stationery and supplies 44,458 58,736 25,518 35,211
Other 660,839 627,500 390,931 377,373
---------- ---------- ---------- ----------
Total other expenses 1,979,511 2,625,911 1,105,698 1,659,231
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 403,545 516,705 90,155 264,593
INCOME TAX EXPENSE 159,900 179,375 44,900 104,175
---------- ---------- ---------- ----------
NET INCOME $ 243,645 $ 337,330 $ 45,255 $ 160,418
========== ========== ========== ==========
EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT $ 0.50 $ 0.71 $ 0.09 $ 0.34
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES 486,990 472,970 490,598 473,143
========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-9
<PAGE> 69
THE BANK OF WINTER PARK AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDING
ADDITIONAL LOSSES TOTAL
COMMON PAID-IN RETAINED ON STOCKHOLDERS'
STOCK CAPITAL EARNINGS SECURITIES EQUITY
----------- ----------- ----------- ----------- -----------
(Unaudited As To Interim Periods)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 2,056,810 $ 2,262,491 $ 203,162 $ (349,296) $ 4,173,167
Net income for year ended -- -- 334,849 -- 334,849
Change in net unrealized
holding losses on securities -- -- -- 368,317 368,317
Common stock issued 5,960 5,960 -- -- 11,920
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 2,062,770 2,268,451 538,011 19,021 4,888,253
Net income for six months
ended June 30, 1996 -- -- 337,330 -- 337,330
Change in net unrealized
holding losses on securities -- -- -- (95,507) (95,507)
----------- ----------- ----------- ----------- -----------
Balance June 30, 1996 2,062,770 2,268,451 875,341 (76,486) 5,130,076
Net income for the six months
ended December 31, 1996 -- -- 447,376 -- 447,376
Change in net unrealized
holding losses on securities -- -- -- 60,524 60,524
Common stock issued 7,275 8,730 -- -- 16,005
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 2,070,045 2,277,181 1,322,717 (15,962) 5,653,981
Net income for the six months
ended June 30, 1997 -- -- 243,645 -- 243,645
Change in net unrealized
holding losses on securities -- -- -- 4,563 4,563
----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997 $ 2,070,045 $ 2,277,181 $ 1,566,362 $ (11,399) $ 5,902,189
=========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-10
<PAGE> 70
<TABLE>
THE BANK OF WINTER PARK AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1997 1996
------------ ------------
(Unaudited)
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 243,645 $ 337,330
Adjustments to reconcile net income to net cash provided by operating
activities:
Provisions for loan losses 40,000 130,000
Depreciation on premises and equipment 90,022 119,640
Accretions of investment security discounts (15,383) (14,875)
Amoritization of investment security premiums 15,961 11,280
Deferred income taxes -- (2,610)
Amortization of organization costs -- 19,389
Loss on sale of investment securities available for sale -- 467
Cash provided by (used for) changes in:
Loans held for sale 430 341,410
Prepaid expenses and other assets 308,425 (886,758)
Accrued interest receivable (47,785) (38,875)
Accounts payable and other liabilities (124,945) 604,893
Accrued interest payable 70,770 (138,066)
------------ ------------
Net cash provided by operating activities 581,140 483,225
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales, maturities/calls of investment securities available for
sale 1,298,712 6,373,265
Purchase of investment securities available for sale (6,065,101) (5,068,116)
Net decrease (increase) in loans 5,243,196 (8,375,291)
Net decreases (increases) in advances receivable 638,888 (2,953,792)
Purchases of premises and equipment (385,756) (1,006,789)
------------ ------------
Net cash provided by (used in) investing activities 729,939 (11,030,723)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (4,344,392) 6,520,101
Principal payments on mortgages payable (10,582) (9,124)
Net increase on federal funds purchased -- 3,500,000
------------ ------------
Net cash (used in) provided by financing activities (4,354,974) 10,010,977
------------ ------------
NET DECREASE IN CASH (3,043,895) (536,521)
CASH AND CASH EQUIVALENTS
Beginning of period 12,471,407 9,500,349
------------ ------------
End of period $ 9,427,512 $ 8,963,828
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,464,160 $ 1,385,028
============ ============
Income taxes $ 453,651 $ --
============ ============
</TABLE>
F-11
<PAGE> 71
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The accounting and reporting policies of The Bank of Winter Park
(the "Bank") and its subsidiary conform to generally accepted
accounting principles and to predominant practices within the
banking industry.
In the opinion of the Bank's management, all adjustments necessary
to present fairly the financial position as of June 30, 1997 and
June 30, 1996, and the results of operations and cash flows for
the periods then ended have been included. The results of the
periods ended June 30, 1997 are not necessarily an indication of
the results to be expected for the fiscal year ending December 31,
1997.
Certain amounts for 1997 and 1996 were reclassified to conform
with statement presentation for June 30, 1997 and June 30, 1996.
These reclassifications have no effect on stockholders' equity or
net income as previously reported.
NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS
------------------------------
SALES OF FINANCIAL ASSETS
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standard ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which was effective for the 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 borrowing. The impact of the
adoption of SFAS No. 125 upon the results of operations of the
Bank was not material.
EARNINGS PER SHARE
In February, 1997, the FASB issued SFAS No. 128, "Earnings Per
Share". SFAS No. 128 simplifies the standards for computing and
presenting earnings per share ("EPS") previously found in 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. 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.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion 15.
Management is currently assessing the financial implications of
implementing SFAS No. 128 and believes the adoption will not have
a material effect on reported earnings per share.
F-12
<PAGE> 72
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS (CONTINUED)
------------------------------------------
REPORTING COMPREHENSIVE INCOME
In June 1997, SFAS No. 130, "Reporting Comprehensive Income", was
adopted. SFAS No. 130 establishes standards for reporting and
display of comprehensive income which includes those revenues,
expenses, gains, and losses of a normal, recurring nature
as-well-as items which are non-recurring, unusual and infrequent.
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 non-recurring in nature 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.
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 believes
its commercial banking and mortgage banking activities constitute
operating segments which will require disclosure about their
respective assets, revenues, profit or loss and other operating
data.
NOTE 3 - PENDING MERGER
--------------
In May 1997, the Bank entered into a merger agreement with
Huntington Bancshares Incorporated ("Huntington"). Huntington is a
registered bank holding company headquartered in Columbus, Ohio.
Huntington is to exchange its common stock for the outstanding
common stock of the Bank in a purchase transaction. Basically, the
number of shares of Huntington common stock to be received for
each share of the Bank's stock will be equal to an exchange ratio
of $30.00, divided by Huntington's stock based on the average
sales price on the five trading days immediately prior to closing.
The acquisition is expected to be completed in the fourth quarter
of 1997, subject to approval by the Bank's shareholders and
applicable regulatory authorities.
NOTE 4 - INCOME TAXES
------------
Federal and state income taxes are provided on income reported for
financial statement purposes and include both current and deferred
income tax expense. Current income tax expense is recorded to
reflect income taxes based upon the tax returns filed with the
appropriate taxing agencies. Deferred income taxes are recorded to
reflect the tax consequences on future years of differences
between the tax bases of assets and liabilities and their
financial reporting amounts at year end. The change in deferred
taxes attributable to the carrying value of investments
categorized as "available-for-sale" is recognized as a change in
stockholders'
F-13
<PAGE> 73
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - INCOME TAXES (CONTINUED)
------------
equity. The change in deferred income taxes attributable to all
other timing differences is recognized as deferred income tax
expense or benefit. The tax benefit related to operating loss and
tax credit carryforwards, if any, are recognized if management
believes, based on available evidence, that is more likely than
not that they will be realized. Investment tax credits, if any,
are accounted for using the flow-through method.
The Bank files consolidated federal and state income tax returns
with its subsidiary, The Bank of Winter Park Mortgage Company.
Federal and state income taxes are calculated on a consolidated
basis and are not allocated to its subsidiary.
NOTE 5 - LOANS AND ALLOWANCE FOR LOAN LOSSES
-----------------------------------
Major categories of loans included in the loan portfolio are:
<TABLE>
<CAPTION>
6/30/97 12/31/96 6/30/96
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Commercial $11,067,656 $11,491,774 $11,961,860
Real estate 40,887,716 44,863,661 40,161,618
Installment loans 4,336,318 5,306,091 5,760,482
----------- ----------- -----------
Total gross loans 56,291,690 61,661,526 57,883,960
Less: unearned income 232,630 243,404 257,311
----------- ----------- -----------
Gross loans net of unearned
income $56,059,060 $61,418,122 $57,626,649
=========== =========== ===========
</TABLE>
Changes in the allowance for loan losses are summarized as
follows:
<TABLE>
<CAPTION>
6/30/97 12/31/96 6/30/96
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Balance, beginning of period $ 1,090,804 $ 838,486 $ 838,486
Provision for loan losses 40,000 280,000 130,000
Loans charged-off (126,116) (54,649) (2,191)
Recoveries 10,250 26,967 27,130
----------- ----------- -----------
Balance, end of period $ 1,014,938 $ 1,090,804 $ 993,425
=========== =========== ===========
</TABLE>
F-14
<PAGE> 74
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6 - UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE
--------------------------------------------------
Effective December 31, 1993, the Bank adopted the investment
categorization and carrying rules as required by Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 115 (FASB No. 115), Accounting for Certain
Investments in Debt and Equity Securities. Under this statement,
the unrealized gain or loss on investment securities available for
sale, net of the applicable deferred income taxes, is shown as a
separate component of stockholders' equity in the balance sheet.
The following is a summary of the effects of the statement of
stockholders' equity as of June 30, 1997, December 31, 1996, and
June 30, 1996:
<TABLE>
<CAPTION>
6/30/97 12/31/96 6/30/96
---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Gross unrealized losses on investment
securities available for sale $ 17,271 $ 24,184 $ 115,889
Deferred income tax liability on
unrealized losses 5,872 8,222 39,403
---------- ---------- ----------
Net decrease in stockholders' equity $ 11,399 $ 15,962 $ 76,486
========== ========== ==========
</TABLE>
NOTE 7 - PREMISES AND EQUIPMENT
----------------------
A summary of premises and equipment is as follows:
<TABLE>
<CAPTION>
6/30/97 12/31/96 6/30/96
---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Land $ 895,000 $ 895,000 $ 895,000
Buildings 1,324,973 1,324,973 1,183,576
Furniture, fixtures and equipment 1,329,946 1,278,095 1,357,392
Construction in process 333,905 -- --
---------- ---------- ----------
$3,883,824 $3,498,068 $3,435,968
Accumulated Depreciation 764,864 674,842 637,573
---------- ---------- ----------
Total premises and equipment, net $3,118,960 $2,823,226 $2,798,395
========== ========== ==========
</TABLE>
NOTE 8 - STOCK OPTION PLAN
-----------------
Certain founding and current directors of the Bank have options to
purchase shares of the Bank's common stock under a stock option
plan. Under the plan, the total number of shares which may be
issued will not exceed 60,000. At June 30, 1997, 911 such options
remained available for grant under the plan and 59,089 had been
granted, but not yet exercised. The options awarded are for $10.25
a share, expire in 2001, and were included in the calculation of
earnings per share as a common stock equivalent.
F-15
<PAGE> 75
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
-----------------
The Bank also has an incentive stock option plan for officers and
key employees that provides for the issuance of up to 20,000
shares of common stock. At June 30, 1997, 2,500 such options
remained available for grant and 17,500 had been granted, but not
yet exercised. These options were included in the calculation of
earnings per share as a common stock equivalent. A summary of the
price per share of the incentive options granted and unexercised
is as follows:
OPTIONS GRANTED
AND UNEXERCISED PRICE PER SHARE
-------------------- ---------------------
1,000 $10.00
1,375 $11.00
15,125 $13.00
--------------------
17,500
====================
A summary of the year of expiration of these options is as
follows:
OPTIONS GRANTED
AND UNEXERCISED EXPIRATION DATE
-------------------- ---------------------
500 2003
500 2005
1,375 2006
15,125 2007
--------------------
17,500
====================
NOTE 9 - EARNINGS PER SHARE
------------------
Net income per common and common equivalent share has been
computed by dividing net income by the weighted average common and
common equivalent shares outstanding during the periods. The
weighted average common and common equivalent shares outstanding
has been adjusted to include the number of shares that would have
been outstanding if the stock options granted had been exercised,
with the proceeds being used to buy shares from the market (i.e.,
the treasure stock method). Net income per common and common
equivalent shares represents both primary and fully diluted per
share information.
F-16
<PAGE> 76
REX MEIGHEN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
509 S. HYDE PARK AVENUE
POST OFFICE BOX 1790, TAMPA, FL 33601-1790
(813) 251-1010 - FAX (813) 251-9253
WILLIAM J. FERLITA REX MEIGHEN (1892-1976)
JOHN C. ROBERTS WM. H STAFFORD (1909-1977)
WM. DOUGLAS STAFFORD JOHN K. MILLER (1915-1977)
MARTIN E. BOWKER FRED F. LADO (1911-1993)
J. ROBERT LANE -------
WILLIAM J. FERLITA, JR.
GERALD P. GIGLIA RETIRED:
ROBERT E. VALDES (1988)
MARK W. EASTLAND, JR. (1989)
M.R. MEIGHEN (1989)
HAROLD G. GIBSON (1992)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
The Bank of Winter Park and Subsidiary
Winter Park, Florida
We have audited the consolidated balance sheet of The Bank of Winter Park and
subsidiary as of December 31, 1996, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Bank of Winter Park and
subsidiary as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/Rex Meighen & Company
Rex Meighen & Company
Certified Public Accountants
Tampa, Florida
March 11, 1997
MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS - FLORIDA INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
F-17
<PAGE> 77
<TABLE>
<CAPTION>
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<S> <C>
Cash and due from banks $ 5,671,407
Federal funds sold 6,800,000
------------
Total cash and cash equivalents 12,471,407
Investment securities available for sale 14,194,932
Investment securities held to maturity (estimated
fair market value of $500,000) 500,000
Loans, less allowance for loan losses of $1,090,804 60,327,318
Loans held for sale 84,345
Advances receivable 682,535
Premises and equipment, net 2,823,226
Prepaid expenses and other assets 603,196
Accrued interest receivable 552,649
Deferred income taxes, net 271,598
------------
Total assets $ 92,511,206
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand deposits $ 12,765,964
NOW accounts 9,614,267
Money market accounts 19,831,083
Savings accounts 2,225,642
Time deposits $100,000 and over 10,302,433
Other time deposits 30,636,038
------------
Total deposits 85,375,427
Mortgage payable 722,917
Accrued interest payable 364,950
Accounts payable and other liabilities 393,931
------------
Total liabilities 86,857,225
============
COMMITMENTS AND CONTINGENCIES (Notes K and L)
STOCKHOLDERS' EQUITY
Common stock - par value $5 per share; authorized
600,000 shares; issued and outstanding 414,009 shares 2,070,045
Additional paid-in capital 2,277,181
Retained earnings 1,322,717
Net unrealized holding losses on securities (15,962)
------------
Total stockholders' equity 5,653,981
------------
Total liabilities and stockholders' equity $ 92,511,206
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-18
<PAGE> 78
<TABLE>
<CAPTION>
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME
<S> <C>
Loans $5,930,393
Investment securities available for sale 734,590
Federal funds sold 179,216
----------
Total interest income 6,844,199
INTEREST EXPENSE
Deposits and other borrowed money 2,821,441
----------
Net interest income 4,022,758
PROVISION FOR LOAN LOSSES 280,000
----------
Net interest income after provision for loan losses 3,742,758
----------
OTHER INCOME
Service charges 440,248
Fee income 1,063,966
Gain on sale of loans 546,327
Gain on sale of assets 349,136
Other 54,179
----------
Total other income 2,453,856
----------
OTHER EXPENSES
Salaries and employee benefits 2,614,839
Occupancy expense 550,742
Equipment expense 326,957
Stationery and supplies 137,798
Other 1,360,203
----------
Total other expenses 4,990,539
----------
INCOME BEFORE INCOME TAXES 1,206,075
INCOME TAX EXPENSE 421,369
----------
NET INCOME $ 784,706
==========
EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT $ 1.66
==========
AVERAGE NUMBER OF SHARES 473,955
==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-19
<PAGE> 79
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL HOLDING TOTAL
COMMON PAID-IN RETAINED LOSSES ON STOCKHOLDERS'
STOCK CAPITAL EARNINGS SECURITIES EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 2,062,770 $ 2,268,451 $ 538,011 $ 19,021 $ 4,888,253
Net income -- -- 784,706 -- 784,706
Change in net unrealized holding
losses on securities -- -- -- (34,983) (34,983)
Common stock issued 7,275 8,730 -- -- 16,005
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 $ 2,070,045 $ 2,277,181 $ 1,322,717 $ (15,962) $ 5,653,981
=========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-20
<PAGE> 80
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 784,706
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 280,000
Depreciation on premises and equipment 196,734
Accretions of investment security discounts (11,938)
Deferred income taxes (90,728)
Amortization of organization costs 28,724
Loss on sale of investment securities available for sale 467
Cash provided by (used for) changes in:
Loans held for sale 3,105,594
Prepaid expenses and other assets 44,381
Accrued interest receivable (87,263)
Accounts payable and other liabilities 117,999
Accrued interest payable (5,613)
------------
Net cash provided by operating activities 4,363,063
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales, maturities/calls of investment securities
available for sale 8,201,351
Purchase of investment securities available for sale (10,530,538)
Net increase in loans (12,219,385)
Advances (682,535)
Purchases of premises and equipment (1,241,484)
Proceeds from sale of premises and equipment 132,770
------------
Net cash used in investing activities (16,339,821)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 14,951,351
Principal payments on mortgages payable (19,539)
Common stock issued 16,005
------------
Net cash provided by financing activities 14,947,817
------------
NET INCREASE IN CASH 2,971,059
CASH AND CASH EQUIVALENTS
Beginning of year 9,500,348
------------
End of year $ 12,471,407
============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-21
<PAGE> 81
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
General:
The consolidated financial statements include the accounts and transactions
of The Bank of Winter Park (the "Bank") and its wholly-owned subsidiary, The
Bank of Winter Park Mortgage Company (the "Mortgage Company"), formerly
known as Transland Financial Services, Inc. ("Transland"). On August 30,
1996, the Bank sold certain assets of Transland, including the name,
Transland Financial Services, Inc. All significant intercompany accounts
have been eliminated in consolidation.
The Bank was incorporated as a Florida state chartered bank in 1988,
received approval for a charter from the Comptroller of Florida on May 15,
1989, and commenced operation on that same date.
The Bank provides a full range of banking services to individuals and
corporate customers through four offices located in central Florida. The
Bank is subject to State and Federal bank regulatory authorities and
undergoes periodic regulatory examinations.
Basis of Financial Statement Presentation:
The accounting and reporting policies of the Bank conform with generally
accepted accounting principles and with reporting guidelines as prescribed
by banking regulatory authorities. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan
losses. Management believes the allowance for losses on loans is adequate.
While management uses available information to recognize losses on loans,
including independent appraisals for significant properties, future
additions to the allowances may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for losses on
loans. Such agencies may require the Bank to recognize additions to the
allowance based on their judgments about information available to them at
the time of their examination.
Investments:
Statement of Financial Accounting Standards No. 115 ("FAS 115"), Accounting
for Certain Investments in Debt and Equity Securities, sets the standard for
classification of and accounting for investments in equity securities that
have readily determinable fair values, and investments in debt securities
which are to be classified as held-to-maturity securities,
available-for-sale securities, or trading securities.
Debt securities that the Bank has the intent to hold to maturity are
classified as held-to-maturity securities and reported at amortized cost.
Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with unrealized
gains and losses excluded from earnings and reported as a separate component
of stockholders' equity.
The Bank classifies its investments at the purchase date in accordance with
the above-described guidelines. Premiums or discounts on securities at the
date of purchase are being amortized or accreted, respectively, over the
estimated life of the security. Gains and losses realized on the disposition
of securities are based on the specific identification method and are
reflected in other income.
F-22
<PAGE> 82
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Loans:
Loans receivable are stated at unpaid principal balance, less an allowance
for loan losses and net deferred loan origination fees and costs.
Interest on loans is accounted for on the accrual basis. Generally, the
Bank's policy is to discontinue the accrual of interest on loans delinquent
over ninety days unless fully secured and in the process of collection. The
accrued and unpaid interest is reversed from current income and thereafter
interest is recognized only to the extent payments are received. A
nonaccrual loan may be restored to accrual basis when interest and principal
payments are current and prospect for future recovery are no longer in
doubt.
In May 1993, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 114 ("FAS 114"), Accounting by Creditors
for Impairment of a Loan, which sets the standard for recognition of loan
impairment and the measurement methods for certain impaired loans and loans
whose terms are modified in troubled debt restructurings.
Under FAS 114, a loan is impaired when it is probable that a creditor will
be unable to collect the full amount of principal and interest due according
to the contractual terms of the loan agreement. When a loan is impaired, a
creditor has a choice of ways to measure the impairment. The measurement of
impairment may be based on (1) the present value of the expected future cash
flows of the impaired loan discounted at the loan's original effective
interest rate, (2) the observable market price of the impaired loan, or (3)
the fair value of the collateral of a collateral-dependent loan. Creditors
may select the measurement method on a loan-by-loan basis, except that
collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. A creditor in a troubled debt
restructuring involving a restructured loan measures impairment by
discounting the total expected future cash flows at the loan's original
effective rate of interest.
Loans Held for Sale:
Loans held for sale are recorded at the lower of amortized cost or market.
Premises and Equipment:
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Charges to income for depreciation and amortization are
computed using straight-line and accelerated methods over the assets'
estimated useful lives. When properties or equipment are sold or otherwise
disposed of, the gain or loss resulting from the disposition is credited or
charged to income. Expenditures for maintenance and repairs are charged
against income and renewals and betterments are capitalized.
Allowance for Loan Losses:
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectibility of principal is unlikely.
Recoveries of amounts previously charged-off are credited to the allowance.
The allowance for loan losses is based on management's evaluation of various
factors including prevailing and anticipated economic conditions,
diversification and size of the loan portfolio, current financial status and
credit standing of the borrower, the status and level of nonperforming
assets, past and expected loan loss experience, adequacy of collateral,
specific impaired loans and economic conditions. Allowances for impaired
loans are generally determined based on collateral values or the present
value of estimated cash flows.
F-23
<PAGE> 83
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Loan Fees:
The portion of loan fees on originated loans that exceeds the cost of
underwriting and closing loans is deferred. The deferred loan fees are
recognized over the lives of the related loans as an adjustment of yield.
The adjustment is accounted for by the straight-line method, which is not
materially different from the adjustment resulting from the use of the
interest method.
Income Taxes:
Provisions for income taxes are based on amounts reported in the statements
of income, after exclusion of non-taxable income such as interest on state
and municipal securities, and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred taxes are computed on the liability method as
prescribed in FAS No. 109, Accounting for Income Taxes.
Gains/Losses on Sale of Mortgage Loans:
Gains or losses on sales of mortgage loans are recognized based upon the
difference between the selling price and the carrying value of the related
mortgage sold. All loans sold are with servicing released.
Off Balance Sheet Financial Instruments:
In the ordinary course of business, the Bank has entered into off balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
Statement of Cash Flows:
For purposes of reporting cash flows, cash includes cash on hand, amounts on
deposit in non-interest bearing accounts with other commercial banks, and
Federal funds sold.
Cash paid for interest and income taxes for the year ended December 31, 1996
were as follows:
Interest $ 2,827,054
Income taxes $ 162,200
NOTE B - RESTRICTIONS ON CASH
The Bank is required to maintain reserve balances in accordance with Federal
Reserve Bank requirements. At December 31, 1996, this reserve balance was
$250,000.
F-24
<PAGE> 84
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE C - INVESTMENT SECURITIES
The amortized cost and estimated fair value of investments in debt and equity
securities available for sale and held to maturity for December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Securities available for sale:
U. S. Treasury $ 3,489,447 $ 2,994 $ 2,446 $ 3,489,995
U. S. Government agencies 7,971,076 10,598 36,314 7,945,360
Mortgage-backed securities 2,528,593 4,023 3,039 2,529,577
Other 230,000 -- -- 230,000
----------- ----------- ----------- -----------
Total $14,219,116 $ 17,615 $ 41,799 $14,194,932
=========== =========== =========== ===========
Securities held to maturity:
U. S. Government agencies $ 500,000 $ -- $ -- $ 500,000
=========== =========== =========== ===========
</TABLE>
The fair value of securities fluctuates during the investment period. No
provision for loss has been made in connection with the decline of fair value
below book value, because the securities are purchased for investment purposes
and the decline is not deemed to be other than temporary. Temporary declines in
fair value of securities available for sale of $15,962 at December 31, 1996 (net
of deferred income taxes of $8,222) is regarded as an adjustment to
stockholders' equity. The estimated fair value of securities is determined on
the basis of market quotations.
At December 31, 1996, securities with amortized cost of approximately $2,278,516
were pledged to secure deposits and for other purposes.
The amortized cost and estimated market value of debt and equity securities at
December 31, 1996, by contractual maturities, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less $ 3,765,675 $ 3,769,232
Due after one year through five years 9,171,500 9,146,458
Due after five years through ten years 1,412,534 1,410,468
Due after ten years 369,407 368,774
----------- -----------
$14,719,116 $14,694,932
=========== ===========
</TABLE>
Proceeds from sales and maturities/calls of investment securities available for
sale during 1996 were $8,201,351. Realized losses recognized on sales of
investment securities available for sale were $467 during 1996. There were no
realized gains on investment securities available for sale for 1996.
F-25
<PAGE> 85
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE D - LOANS
The loan portfolio at December 31, 1996 is classified as follows:
Commercial $ 11,491,774
Real estate - construction and development 12,313,705
Real estate 32,549,956
Installment and other loans 5,306,091
------------
Total loans 61,661,526
Less: unearned income (243,404)
allowance for loan losses (1,090,804)
------------
Net loans $ 60,327,318
============
The following is a summary of the transactions for the year ended December 31,
1996 in the allowance for loan losses:
Balance, beginning of year $ 838,486
Provision for loan losses 280,000
Loans charged-off (54,649)
Recoveries 26,967
------------
Balance, end of year $ 1,090,804
============
Loans on which interest was not being accrued totaled $567,557 at December 31,
1996. Had interest been accruing on these non-accrual loans at original contract
rates, interest income would have been increased approximately $52,057 for 1996.
A loan is considered impaired when, according to the contractual terms of the
contract, it is probable that the Bank will be unable to collect all amounts
due. At December 31, 1996, the Bank had a recorded investment in impaired loans
totalling $567,557, with allowances against these loans of $68,113 included in
the allowance for loan losses. Transactions during the year in the allowance for
loan losses relating to impaired loans were not material. The average recorded
investment in impaired loans during 1996 was $543,944.
Interest income on impaired loans is not recognized as all the impaired loans
are on nonaccrual. Any cash payments received on an impaired loan go directly to
principal reduction.
F-26
<PAGE> 86
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE E - PREMISES AND EQUIPMENT
A summary of the December 31, 1996 consolidated investment in premises and
equipment follows:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION & NET BOOK ESTIMATED
COST AMORTIZATION VALUE USEFUL LIVES
---------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Premises (including $895,000 land) $2,219,973 $ 175,554 $2,044,419 7 - 31.5 years
Furniture, fixtures and equipment 1,278,095 499,288 778,807 5 - 10 years
---------- ---------- ------------
$3,498,068 $ 674,842 $ 2,823,226
========== ========== ============
</TABLE>
Other expenses for the year ended December 31, 1996, includes depreciation and
amortization of premises and equipment of $196,734.
NOTE F - DEPOSITS
Time deposits at December 31, 1996 totaled $40,938,471. Maturities of such
deposits are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1997 $ 40,098,965
1998 $ 833,873
1999 $ 5,633
A summary of interest expense on deposits and other borrowings is as follows:
Interest-bearing demand deposits $ 818,456
Savings deposits 45,378
Time deposits less than $100,000 1,244,178
Time deposits of $100,000 or greater 697,223
Other 16,206
---------------
$ 2,821,441
===============
</TABLE>
NOTE G - BORROWINGS
At December 31, 1996, the Bank had mortgages payable of $421,861 and $301,056,
bearing interest of 8% and 10 3/4%, respectively. Total principal and interest
payments of approximately $8,200 are payable monthly until maturity. The
mortgages mature in September 2009 and July 2015, respectively.
At December 31, 1996, the Bank has two available lines-of-credit of $5,000,000
each. Each line bears interest of LIBOR + 2% and the FHLB's daily credit rate
plus .25%. The lines are secured by mortgage loans pledged at the time of the
advance. The Bank also had two unsecured lines of credit of $1,000,000 each.
None of the lines had been drawn on at December 31, 1996.
F-27
<PAGE> 87
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE H - REGULATORY CAPITAL MATTERS
The Federal Reserve Board and other bank regulatory agencies have adopted
risk-based capital guidelines for banks and bank holding companies. The main
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of banking organizations and to take into
account the different risks among banking organizations' assets, liabilities and
off-balance sheet items. Bank regulatory agencies have supplemented the
risk-based capital standard with a leverage ratio for Tier I capital to total
reported assets.
Failure to meet the capital adequacy guidelines and the framework for prompt
corrective actions could initiate actions by the regulatory agencies which could
have a material effect on the financial statements.
As of December 31, 1996, the most recent notification from the FDIC, the Bank
was categorized as adequately capitalized under the regulatory framework for
prompt corrective action. To remain categorized as adequately capitalized, it
will have to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as disclosed in the table below. There are no conditions or
events since the most recent notification that management believes have changed
the prompt corrective action category.
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE ACTION
ADEQUACY PURPOSES PROVISIONS
------------------------- ----------------------------
ACTUAL (more than (more than (more than (more than
---------------------- or equal to) or equal to) or equal to) or equal to)
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- -------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996: (dollars in thousands)
Total risk-based capital
(to risk-weighted assets) $ 6,352 9.03% $ 5,628 8.00% $ 7,035 10.00%
Tier I capital
(to risk-weighted assets) $ 5,477 7.79% $ 2,814 4.00% $ 4,221 6.00%
Tier I capital
(to adjusted total assets) $ 5,477 5.93% $ 3,693 4.00% $ 4,616 5.00%
</TABLE>
NOTE I - COMMON STOCK AND STOCK OPTION PLANS
Certain founding and current directors of the Bank have options to purchase
shares of the Bank's common stock under a stock option plan. Under the plan, the
total number of shares which may be issued will not exceed 60,000. At December
31, 1996, 911 such options remained available for grant under the plan and
59,089 had been granted, but not yet exercised. The options awarded are for
$10.25 a share and expire in 2001.
The Bank also has an incentive stock option plan for officers and key employees
that provides for the issuance of up to 20,000 shares of common stock. At
December 31, 1996, 15,875 such options remained available for grant and 4,125
had been granted, but not yet exercised. Of the options granted and unexercised,
there are 1,000 at $10.00 and 3,125 at $11.00. Further, 1,750 of these options
expire in 1997, 500 expire in 2003, 500 expire in 2005 and 1,375 expire in 2006.
F-28
<PAGE> 88
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE J - INCOME TAXES
The provision for income taxes for December 31, 1996 is summarized as follows:
<TABLE>
<S> <C>
CURRENT
Federal $ 459,264
State 52,833
---------
512,097
DEFERRED ---------
Federal (79,225)
State (11,503)
---------
(90,728)
---------
Total $ 421,369
=========
</TABLE>
The following is a reconciliation of the income tax expense for the year ended
December 31, 1996 computed at the Federal statutory rate of 34% and the income
tax provision:
<TABLE>
<S> <C>
Tentative tax computed at statutory rate $ 410,066
Increase (decrease) resulting from:
State income tax, net of Federal tax benefit 26,892
Tax exempt interest (20,008)
Valuation allowance 9,606
Other (5,187)
---------
Income tax expense $ 421,369
=========
</TABLE>
The provision for deferred income taxes is based on the liability method
prescribed by FAS 109 and represents the change in the Bank's net deferred
income tax asset during the year. Deferred income tax assets have been provided
for temporary differences related to allowance for loan losses, bad debts,
unrealized loss on investment securities available for sale and deferred loan
fees. Deferred income tax liabilities have been provided for temporary
differences related to depreciation.
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 are
presented below:
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Allowance for loan losses $ 268,787
Unrealized loss on investment securities available for sale 8,222
Deferred loan fees 82,757
Other 21,835
---------
Total deferred tax assets 381,601
Less, valuation allowance --
---------
Net deferred tax asset 381,601
----------
Deferred tax liabilities:
Premises and equipment, due to differences in depreciation
methods and useful lives (110,003)
---------
Total deferred tax liabilities (110,003)
---------
Net deferred tax asset $ 271,598
=========
</TABLE>
F-29
<PAGE> 89
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE J - INCOME TAXES (CONTINUED)
Although realization of the deferred tax asset is not assured, the Bank believes
the deferred tax asset will be realized and has not established a valuation
allowance.
NOTE K - COMMITMENTS AND CONTINGENCIES
The financial statements do not reflect commitments to extend credit or letters
of credit of $14,033,631 at December 31, 1996, which arise in the normal course
of business and which involve elements of credit risk, interest rate risk and
liquidity risk. The Bank uses the same credit policies in making commitments to
extend credit as it does for extension of credit shown on the balance sheets.
In the ordinary course of business, the Bank is both claimant and defendant in
various legal proceedings. In the opinion of management, the resolutions of such
matters will not have a material effect on the financial statements.
The following is a schedule of future minimum annual rentals under the
noncancellable operating leases of the Bank's facilities:
YEAR ENDING DECEMBER 31,
1997 $ 222,659
1998 184,730
1999 131,628
2000 104,640
---------
$ 643,657
=========
Rent expense for the year ended December 31, 1996 was $263,283 and is included
in occupancy expense in the accompanying consolidated statements of income.
NOTE L - CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments and standby letters of credit
have been granted to customers in central Florida. 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.
NOTE M - RETIREMENT PLAN
The Bank sponsors an employee savings plan which qualified as a 401(k) plan
under the Internal Revenue Code. Under the plan, the Bank makes contributions in
the form of the Bank's common stock based on fair market value as of December 31
of the prior year. The contribution is limited to 50% of the employees' 401(k)
contribution with a maximum of 3% of the employees' annual earnings.
F-30
<PAGE> 90
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE N - RELATED PARTY TRANSACTIONS
The Bank holds loans and engages in transactions in the ordinary course of
business with certain of its directors and senior officers. Total loans to such
persons and affiliates at January 1, 1996, amounted to approximately $3,659,214,
and at December 31, 1996, amounted to approximately $2,759,725. During 1996,
origination of related party loans totaled $2,441,811 and payments on related
party loans totaled $3,341,300.
At December 31, 1996, directors and senior officers of the Bank and their
related interests had $2,037,435 available in lines-of-credit.
NOTE O - BRANCH OPENING
During 1996, the Bank opened a branch located in Longwood, Florida. The Bank has
received regulatory approval from the FDIC to open another branch in Orlando,
Florida. However, it is awaiting approval from the state.
NOTE P - EARNINGS PER SHARE
Net income per common and common equivalent share has been computed by dividing
net income by the weighted average common and common equivalent shares
outstanding during the periods. The weighted average common and common
equivalent shares outstanding has been adjusted to include the number of shares
that would have been outstanding if the stock options granted had been
exercised, with the proceeds being used to buy shares from the market (i.e., the
treasure stock method). Net income per common and common equivalent shares
represents both primary and fully diluted per share information.
F-31
<PAGE> 91
KPMG Peat Marwick LLP
111 North Orange Avenue, Suite 1600
P.O. Box 3031
Orlando, Florida 32802
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
The Bank of Winter Park
and Subsidiary:
We have audited the accompanying consolidated balance sheets of The Bank of
Winter Park and subsidiary as of December 31, 1995 and 1994 and the related
consolidated statements of income, shareholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Bank'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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 financial position of The Bank of Winter
Park and subsidiary at December_31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
February 1, 1996
F-32
<PAGE> 92
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 4,750,348 2,689,782
Federal funds sold 4,750,000 300,000
----------- -----------
Total cash and cash equivalents 9,500,348 2,989,782
Investment securities available for sale 11,754,378 10,946,313
Investment securities held to maturity (estimated market value
of $501,250 at December 31, 1995) 500,000 --
Loans, less allowance for loan losses of $838,486 and
$599,798 in 1995 and 1994, respectively 48,387,933 35,570,464
Loans held for sale 3,189,939 --
Premises and equipment, net 1,911,246 707,808
Prepaid expenses and other assets 530,026 147,008
Accrued interest receivable 465,386 306,762
Deferred income taxes, net 166,967 315,707
Federal Home Loan Bank stock, at cost 152,900 144,800
Organization costs 142,157 --
----------- -----------
Total assets $76,701,280 51,128,644
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-33
<PAGE> 93
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY 1995 1994
----------------------------------- ---- ----
<S> <C> <C>
Liabilities:
Deposits:
Noninterest bearing $11,000,786 7,484,862
Interest bearing 59,423,290 39,123,740
----------- -----------
Total deposits 70,424,076 46,608,602
Accounts payable and other liabilities 275,932 219,923
Mortgage payable 742,456 --
Accrued interest payable 370,563 126,952
----------- -----------
Total liabilities 71,813,027 46,955,477
----------- -----------
Shareholders' equity:
Common stock, par value $5 per share; authorized
600,000 shares, issued and outstanding 412,554 and
411,362 shares in 1995 and 1994, respectively 2,062,770 2,056,810
Additional paid-in capital 2,268,451 2,262,491
Retained earnings 538,011 203,162
Unrealized gain (loss) on investment securities available
for sale, net 19,021 (349,296)
----------- -----------
Total shareholders' equity 4,888,253 4,173,167
Commitments and contingencies (Note 15)
----------- -----------
Total liabilities and shareholders' equity $76,701,280 51,128,644
=========== ===========
</TABLE>
F-34
<PAGE> 94
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income:
Loans $4,581,188 3,190,185
Investment securities available for sale 767,607 639,550
Investment securities held to maturity 14,099 --
Federal funds sold 213,612 98,308
---------- ----------
Total interest income 5,576,506 3,928,043
Interest expense:
Deposits and other borrowed money 2,172,332 1,270,763
---------- ----------
Net interest income 3,404,174 2,657,280
Provision for loan losses 252,500 204,000
---------- ----------
Net interest income after provision for loan losses 3,151,674 2,453,280
---------- ----------
Other income:
Service charges 350,457 305,973
Fee income 221,236 68,384
Gain on sale of investment securities available for sale 4,627 37,343
Gain on sale of loans 82,630 --
Other 11,371 19,904
---------- ----------
Total other income 670,321 431,604
---------- ----------
Other expenses:
Salaries and employee benefits 1,656,460 919,651
Occupancy expense 463,807 363,523
Depreciation 152,203 116,010
Data processing 118,517 87,388
Stationery and supplies 91,488 63,486
Legal and professional 83,872 86,267
Marketing and community relations 81,804 42,191
Deposit and other insurance 73,227 124,581
Directors' fees 73,221 48,200
Amortization of organization costs 21,687 5,248
Other 462,860 334,325
---------- ----------
Total other expenses 3,279,146 2,190,870
---------- ----------
Income before income taxes 542,849 694,014
Income tax expense 208,000 240,072
---------- ----------
Net income $ 334,849 453,942
========== ==========
Earnings per share $ .71 .96
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-35
<PAGE> 95
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
INVESTMENT
ADDITIONAL SECURITIES TOTAL
COMMON PAID-IN RETAINED AVAILABLE FOR SHAREHOLDERS'
STOCK CAPITAL EARNINGS SALE, NET EQUITY
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $2,056,810 2,262,491 (250,780) -- 4,068,521
Net income -- -- 453,942 -- 453,942
Unrealized loss on investment
securities available for sale,
net -- -- -- (349,296) 349,296
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 $2,056,810 2,262,491 203,162 (349,296) 4,173,167
Net income -- -- 334,849 -- 334,849
Change in unrealized loss on
investment securities available
for sale, net 368,317 368,317
Common stock issued 5,960 5,960 -- -- 11,920
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 $2,062,770 $2,268,451 $ 538,011 $ 19,021 $4,888,253
========== ========== ========== ========== ==========
</TABLE>
F-36
<PAGE> 96
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 334,849 453,942
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 252,500 204,000
Deferred loan origination fees, net 169,274 47,977
Depreciation on premises and equipment 152,203 116,010
Net accretions of discounts and amortization of premiums
on investment securities available for sale (50,794) 13,374
Deferred income taxes (41,000) (37,610)
Amortization of organization costs 21,687 5,248
Gain on sale of investment securities available for sale (4,627) (37,343)
Gain on sale of other real estate owned __ (3,616)
Cash provided by (used for) changes in:
Loans held for sale (3,189,939) 4,119,152
Prepaid expenses and other assets (383,018) (2,595)
Accrued interest receivable (158,624) (15,374)
Accounts payable and other liabilities 56,009 128,022
Accrued interest payable 243,611 9,769
------------ ------------
Net cash (used in) provided by operating activities (2,591,869) 5,000,950
------------ ------------
Cash flows used in investing activities:
Proceeds from sales, maturities/calls of investment securities
available for sale 6,166,698 4,448,050
Purchases of investment securities available for sale (6,361,285) (5,471,817)
Purchase of investment securities held to maturity (500,000) --
Loans (net of collections) (13,239,243) (8,037,291)
Proceeds from sale (purchase) of
Federal Home Loan Bank stock (8,100) 92,800
Purchases of premises and equipment (1,364,903) (5,125)
Disposals of premises and equipment 9,262 --
Proceeds from the sale of other real estate owned -- 93,458
Organization costs (163,844) --
------------ ------------
Net cash used in investing activities (15,461,415) (8,879,925)
------------ ------------
</TABLE>
(Continued)
F-37
<PAGE> 97
THE BANK OF WINTER PARK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows provided by financing activities:
Deposits (net of withdrawals) made by customers 23,815,474 2,575,779
Proceeds from mortgages payable 750,000 --
Principal payments on mortgages payable (7,544) --
Common stock issued 11,920 --
------------ ------------
Net cash provided by financing activities 24,569,850 2,575,779
------------ ------------
Net increase (decrease) in cash and cash equivalents 6,510,566 (1,303,190)
Cash and cash equivalents at beginning of year 2,989,782 4,292,972
------------ ------------
Cash and cash equivalents at end of year $ 9,500,348 2,989,782
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,928,721 1,260,000
============ ============
Income taxes $ 314,140 240,072
============ ============
Transfer of investment securities to investment securities
available for sale upon adoption of FAS 115 $ -- 10,427,814
============ ============
Transfer of loan from loans held for sale to loans $ -- 87,640
============ ============
Market value adjustment - investment securities available for sale:
Market value adjustment - investments 28,820 (529,237)
Deferred income tax liability (asset) 9,799 (179,941)
------------ ------------
Unrealized gain (loss) on investment securities
available for sale, net $ 19,021 (349,296)
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-38
<PAGE> 98
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following is a description of the basis of presentation and the
significant accounting and reporting policies which The Bank of Winter
Park (the "Bank") follows in preparing and presenting its financial
statements.
(A) REPORTING ENTITY
----------------
The Bank was incorporated as a Florida state chartered bank in
1988. The Bank received approval for a charter from the
Comptroller of Florida on May 15, 1989 and commenced operations
on that same date. The Bank's primary market is Central Florida.
In 1995, the Bank purchased a mortgage banking company, TransLand
Financial Services, Inc. (the "mortgage company"). The mortgage
company is a wholly owned subsidiary of the Bank.
(B) PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements of the Bank include the
accounts of the Bank and its wholly owned subsidiary, TransLand
Financial Services, Inc. All significant intercompany accounts
have been eliminated in consolidation.
(C) CASH EQUIVALENTS
----------------
For purposes of the statement of cash flows, the Bank considers
cash and due from banks, federal funds sold and non-interest
bearing deposits in other banks due within three months to be
cash equivalents.
(D) INVESTMENT SECURITIES HELD TO MATURITY AND INVESTMENT SECURITIES
----------------------------------------------------------------
AVAILABLE FOR SALE
------------------
The Bank reports certain securities at fair value except for
those securities which they have the positive intent and ability
to hold to maturity. Investments to be held for indefinite
periods of time and not intended to be held to maturity are
classified as available for sale and are carried at fair value.
Unrealized holding gains (losses) are included in shareholders'
equity net of the effect of income taxes. Gains and losses on the
sale of investment securities available for sale are determined
on the specific identification method.
Securities that management has the intent and the Bank has the
ability at the time of purchase or origination to hold until
maturity are classified as investment securities held to
maturity. Securities in this category are carried at amortized
cost adjusted for accretion
(Continued)
F-39
<PAGE> 99
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
of discounts and amortization of premiums using the level yield
method over the estimated life of the securities. If a security
has a decline in fair value below its amortized cost that is
other than temporary, then the security will be written down to
its new cost basis by recording a loss in the consolidated
statement of income.
(E) LOANS
-----
Loans receivable that the Bank has the intent and ability to hold
until maturity or payoff are reported at their outstanding unpaid
principal balance reduced by any charge-offs or specific
valuation accounts, net of any deferred fees on originated loans.
Loan origination fees are capitalized and recognized in income
over the contractual life of the loans, adjusted for estimated
prepayments based on the Bank's historical prepayment experience.
The Bank does not defer incremental direct underwriting costs as
management considers these costs to be immaterial. If the loan is
prepaid, the remaining unamortized fees are charged to
operations. Amortization is ceased for non-accrual loans.
Commitment fees relating to the commitments are recognized over
the commitment period on a straight-line basis. If the commitment
is exercised during the commitment period, the remaining
unamortized commitment fee at the time of exercise is recognized
over the life of the loan as an adjustment of yield.
Loans are placed on nonaccrual status when the loan becomes 90
days past due as to interest or principal, unless the loan is
both well secured and in the process of collection, or when the
full timely collection of interest or principal becomes
uncertain. When a loan is placed on nonaccrual status, the
accrued and unpaid interest receivable is written off and the
loan is accounted for on the cash or cost recovery method
thereafter until qualifying for return to accrual status.
The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against the
allowance when management believes that the collectibility of the
principal is unlikely. The allowance is an estimated amount that
management believes will be adequate to absorb losses inherent in
the loan portfolio and commitments to extend credit, based on
evaluations of its collectibility. The evaluations take into
consideration such factors as changes in the nature and volume of
the portfolio, overall portfolio quality, specific problem loans
and commitments, and current and anticipated economic conditions
that may affect the borrowers' ability to pay. While management
uses the best information available to recognize the losses on
loans, future additions to the allowance may be necessary based
on changes in economic conditions.
Regulatory examiners may require the Bank to recognize additions
to the allowance based upon their judgment about the information
available to them at the time of their examination.
(Continued)
F-40
<PAGE> 100
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
(E), CONTINUED
The Bank adopted the provisions of Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan", as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosure", on January 1, 1995. The Bank, considering current
information and events regarding the borrower's ability to repay
their obligations, considers a loan to be impaired when it is
probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan agreement. When a
loan is considered to be impaired, the amount of the impairment
is measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, the
secondary market value of the loan, or the fair value of the
collateral for collateral dependent loans. Impaired loans are
written down to the extent that principal is judged to be
uncollectible and, in the case of impaired collateral dependent
loans where repayment is expected to be provided solely by the
underlying collateral and there is no other available and
reliable sources of repayment, are written down to the lower of
cost or collateral value. Impairment losses are included in the
allowance for loan losses. Cash receipts on impaired loans are
applied to reduce the principal amount of such loans until the
principal has been recovered and are recognized as interest
income thereafter.
In accordance with SFAS No. 114 as amended by SFAS No. 118, the
Bank records impairment in the value of its loans as an addition
to the allowance for loan losses. Any changes in the value of
impaired loans due to the passage of time or provisions of
estimates are reported as adjustments to provision expense in the
same manner in which impairment was initially recognized.
Adoption of SFAS No. 114 as amended by SFAS No. 118 had no impact
on the level of the overall allowance for loan losses or on
operating results, and does not affect the Bank's policies
regarding write-offs, recoveries or income recognition.
(F) LOANS HELD FOR SALE
-------------------
Loans held for sale are recorded at the lower of amortized cost
or market.
(G) ORGANIZATION COSTS
------------------
Organization costs are amortized over five years using the
straight-line method.
(H) PREMISES AND EQUIPMENT
----------------------
Premises and equipment are stated at cost less accumulated
depreciation which is computed on the straight-line method over
the estimated useful lives on the assets which range from 5 to 40
years.
(Continued)
F-41
<PAGE> 101
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1), CONTINUED
(I) INCOME TAXES
------------
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that included the enactment
date. Deferred tax assets are recognized and subject to
management's judgment that realization is more likely than not.
(J) GAINS/LOSSES ON SALE OF MORTGAGE LOANS
--------------------------------------
Gains or losses on sales of mortgage loans are recognized based
upon the difference between the selling price and the carrying
value of the related mortgage sold. All loans sold are with
servicing released.
(K) USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statement and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
(L) RECLASSIFICATIONS
-----------------
Certain previously reported amounts have been reclassed to
conform to current presentation.
(2) RESTRICTIONS ON CASH
--------------------
The Bank is required to maintain reserve balances in accordance with
Federal Reserve Bank requirements. At December 31, 1995 and 1994, these
reserve balances were $250,000 and $200,000, respectively.
(Continued)
F-42
<PAGE> 102
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(3) INVESTMENT SECURITIES HELD TO MATURITY AND INVESTMENT SECURITIES
----------------------------------------------------------------
AVAILABLE FOR SALE
------------------
The amortized cost and estimated market values of investment securities
held to maturity and available for sale at December 31, 1995 and 1994
are as follows:
INVESTMENT SECURITIES HELD TO MATURITY:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
----------------- ------------- -------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995:
Obligations of U.S.
government agency $ 500,000 1,250 - 501,250
================= ======== ======== ==========
INVESTMENT SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1995:
Obligations of U.S.
government agencies 8,381,666 20,786 - 8,402,452
U.S. Treasury securities 497,508 3,977 - 501,485
Collateralized mortgage
obligations 2,846,384 4,057 2,850,441
----------------- -------- -------- ----------
$ 11,725,558 28,820 - 11,754,378
================= ======== ======== ==========
DECEMBER 31, 1994:
Obligations of U.S.
government agencies 5,188,194 - (264,004) 4,924,190
U.S. Treasury securities 3,469,877 - (27,217) 3,442,660
Collateralized mortgage
obligations 2,817,479 - (238,016) 2,579,463
----------------- -------- -------- ----------
$ 11,475,550 - (529,237) 10,946,313
================= ======== ======== ==========
</TABLE>
(Continued)
F-43
<PAGE> 103
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(3), CONTINUED
The amortized cost and estimated market value of investment securities
held to maturity and available for sale at December 31, 1995, by
contractual maturity, are below. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AVAILABLE FOR SALE:
AMORTIZED ESTIMATED
COST MARKET VALUE
---------------- ----------
<S> <C> <C>
Due in one year or less $ 4,478,615 4,498,055
Due after one year through five years 6,247,883 6,255,703
Due after five years through ten years 999,060 1,000,620
---------------- ----------
$ 11,725,558 11,754,378
================ ==========
</TABLE>
The investment securities held to maturity mature on July 17, 2000.
Proceeds from sales and maturities/calls of investment securities
available for sale during 1995 and 1994 were $6,166,698 and $4,448,050,
respectively. Gross realized gains recognized on sales of investment
securities available for sale were $4,627 and $37,343 during 1995 and
1994, respectively. There were no realized losses on investment
securities available for sale for 1995 and 1994.
At December 31, 1995 and 1994, the Bank has $2,964,512 and $4,270,598,
respectively, in investment securities pledged to the state of Florida
as collateral on public fund deposits and, in addition, at December 31,
1995 and 1994, $750,000 and $500,000, respectively, in investment
securities pledged to a bank as collateral for federal funds purchased.
(Continued)
F-44
<PAGE> 104
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(4) LOANS
-----
Major categories of loans included in the loan portfolio at December 31,
1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Real estate:
Permanent conventional $ 25,877,737 20,175,670
Construction 10,170,708 4,289,399
------------ ----------
Total real estate 36,048,445 24,465,069
Commercial 9,681,815 9,345,220
Installment 3,492,164 2,521,443
Overdrafts 230,392 24,092
------------ ----------
49,452,816 36,355,824
Less:
Allowance for loan losses (838,486) (599,798)
Deferred loan origination fees (226,397) (185,562)
------------ ----------
Net loans $ 48,387,933 35,570,464
============ ==========
</TABLE>
At December 31, 1995 and 1994, nonaccrual loans were $212,741 and
$299,933, respectively. If interest due on all nonaccrual loans had been
accrued at the original contract rates, estimated interest income would
have been increased by $18,416 and $10,663 in 1995 and 1994,
respectively.
The recorded investment in impaired loans at December 31, 1995 was
$249,211. There is no related allowance for loan losses for the impaired
loans at December 31, 1995. The average recorded investment in impaired
loans during 1995 was $166,000. Interest income recognized on impaired
loans during 1995 was $22,094.
The activity in the allowance for loan losses for the years ended
December 31, 1995 and 1994 is as follows:
1995 1994
---- ----
Balance, beginning of year $ 599,798 448,493
Provision for loan losses 252,500 204,000
Loans charged-off (48,791) (109,230)
Recoveries 34,979 56,535
--------- -------
Balance, end of year $ 838,486 599,798
========= =======
(Continued)
F-45
<PAGE> 105
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(4), CONTINUED
Certain principal stockholders, directors, employees and their related
interests were indebted to the Bank as summarized below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of year $ 2,109,695 1,687,225
Additional new loans 2,789,946 844,015
Repayments on outstanding loans (1,031,654) (421,545)
----------- ----------
Balance, end of year $ 3,867,987 $2,109,695
=========== ==========
</TABLE>
All such loans were made in the ordinary course of business. At
December 31, 1995 and 1994, principal stockholders, directors and
employees of the Bank and their related interests had $1,572,174 and
$1,116,215, respectively, available in lines of credit.
(5) PREMISES AND EQUIPMENT
----------------------
A summary of premises and equipment at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Land $ 150,000 --
Building and building improvements 1,209,917 329,630
Furniture, fixtures and equipment 1,069,261 757,195
---------- -------
2,429,178 1,086,825
Less accumulated depreciation 517,932 379,017
---------- -------
$1,911,246 707,808
========== =======
</TABLE>
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Bank disclose
estimated fair values for financial instruments. The following methods
and assumptions were used by the Bank in estimating fair values of
financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS: The carrying amount of cash and cash
equivalents (demand deposits maintained by the Bank at various
financial institutions and federal funds sold) represents fair
value.
(Continued)
F-46
<PAGE> 106
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(6), CONTINUED
INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY: The
Bank's investment securities available for sale and held to
maturity represent investments in U.S. Government obligations, U.S.
Government Agency securities, and collateralized mortgage
obligations. The fair value of the U.S. Government obligations,
U.S. Government Agency securities and collateralized mortgage
obligations was estimated based on bid quotations received from
securities dealers.
FEDERAL HOME LOAN BANK STOCK: Fair value approximates carrying
value.
LOANS AVAILABLE FOR SALE: Loans available for sale consist of
residential mortgage loans originated by the mortgage company for
sale in the secondary market. The fair value is estimated using the
current dealer commitments to purchase loans. These loans are
priced to be sold without servicing rights retained.
LOANS: For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on
carrying values. Fair values for commercial real estate, commercial
and consumer loans other than variable rate loans are estimated
using discounted cash flow analysis, using interest rates currently
being offered for loans with similar terms for borrowers of similar
credit quality. Fair values for impaired loans are estimated using
discounted cash flow analysis or underlying collateral values,
where applicable.
DEPOSITS: The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at December 31,
1995 (that is their carrying amounts). The carrying amounts of
variable rate, fixed term money market accounts and certificates of
deposit (CDs) approximate their fair value at the reporting date.
Fair values for fixed rate CDs are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
MORTGAGES PAYABLE: The carrying amount of mortgages payable
approximates fair value as the interest rates on the underlying
instruments approximate current market rates.
COMMITMENTS: Fair values for off-balance sheet lending commitments
are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
(Continued)
F-47
<PAGE> 107
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(6), CONTINUED
The following table presents the carrying amounts and estimated fair
values of the Bank's financial instruments at December 31, 1995. SFAS No.
107, "Disclosures About Fair Value of Financial Instruments", defines
fair value of a financial instrument as the amount at which the
instrument would be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 9,500,348 9,500,348
Investment securities available for sale 11,754,378 11,754,378
Investment securities held to maturity 500,000 501,250
Loans (carrying amount net of allowance
for loan loss of $838,486) 48,387,933 48,851,910
Loans held for sale 3,189,939 3,189,939
Financial liabilities:
Deposits:
Without stated maturities $ 35,915,883 36,100,000
With stated maturities 34,508,193 34,000,000
Mortgages payable 742,456 742,456
</TABLE>
The carrying amounts shown in the table are included in the consolidated
balance sheet under the indicated captions
(7) DEPOSITS
--------
<TABLE>
<CAPTION>
A detail of deposits at December 31, 1995 and 1994 follows:
1995 1994
------------ ------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 11,000,786 7,484,862
Interest bearing:
Interest-bearing demand deposits 23,136,437 19,253,736
Savings deposits 1,778,660 1,676,620
Time deposits less than $100,000 21,696,559 8,992,278
Time deposits of $100,000 or greater 12,811,634 9,201,106
------------ ------------
$ 70,424,076 46,608,602
============ ==========
</TABLE>
(Continued)
F-48
<PAGE> 108
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(7), CONTINUED
Included in interest-bearing deposits are certificates of deposit issued
in amounts of $100,000 or more which have remaining maturities at
December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Three months or less $ 1,581,896 3,590,296
Three through six months 4,770,032 1,700,447
Six through twelve months 5,800,178 3,600,898
Thereafter 659,528 309,465
----------- ----------
$12,811,634 9,201,106
=========== ==========
</TABLE>
A summary of interest expense on deposits and other borrowings is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest-bearing demand deposits $ 814,355 603,547
Savings deposits 43,057 43,485
Time deposits less than $100,000 967,562 358,989
Time deposits of $100,000 or greater 337,220 245,375
Other 10,138 19,367
-------------- ---------
$ 2,172,332 1,270,763
============== =========
</TABLE>
The Bank had deposits from directors, officers and employees and their
related interests of approximately $4,296,832 and $3,483,760 at December
31, 1995 and 1994, respectively.
(8) FEDERAL FUNDS PURCHASED
-----------------------
The Bank had $3,500,000 and $6,000,000 available in line of credit
commitments to purchase federal funds from its correspondent banks as of
December 31, 1995 and 1994 , respectively.
(9) OTHER BORROWED FUNDS
--------------------
At December 31, 1995, the Bank had mortgages payable of $436,555 and
$305,901, bearing interest of 8% and 10-3/4%, respectively. Total
principal and interest payments of approximately $8,000 are payable
monthly until maturity. The mortgages mature in September 2009 and July
2015, respectively.
At December 31, 1995, the Bank had two available lines of credit of
$5,000,000 each. Each line bears interest of LIBOR + 2% or the FHLB's
daily credit rate plus .25%. The lines are secured by mortgage loans
pledged at the time of the advance. Neither line had been drawn on at
December 31, 1995 or 1994.
(Continued)
F-49
<PAGE> 109
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(10) SHAREHOLDERS' EQUITY
--------------------
The President of the Bank and the Bank entered into a phantom stock
agreement during 1992. The agreement provides that the President be
credited with having purchased 10,000 shares of Bank stock at $10 per
share. The President shall be paid the difference between the purchase
price ($10 per share) and the market value of the stock upon either (a)
normal retirement, (b) the sale of controlling interest in the Bank, or
(c) his discharge without cause. The market value of the stock at
December 31, 1995 was equal to or less than $10.00 per share. The
President also has available an option to purchase additional shares of
stock, in any increment, up to 10,000 shares. No options were exercised
during the years ended December 31, 1995 and 1994.
Pursuant to the Bank's stock option plans, its directors (other than the
President) have the option to purchase up to 60,000 shares at $10.25 per
share on the date the option is exercised. The options will not be
exercisable after the expiration of ten years from the date of the grant.
In addition, the officers and full-time key employees have options to
purchase up to 20,000 shares at market value. There have been no options
exercised during the years ended December 31, 1995 or 1994.
(11) INCOME TAXES
------------
The provision for income taxes for 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
YEAR ENDED DECEMBER 31, 1995:
<S> <C> <C> <C>
Federal $ 227,000 (36,000) 191,000
State 22,000 (5,000) 17,000
--------- ------- -------
$ 249,000 (41,000) 208,000
========= ======= =======
YEAR ENDED DECEMBER 31, 1994:
Federal 249,620 (33,809) 215,811
State 28,062 (3,801) 24,261
--------- ------- -------
$ 277,682 (37,610) 240,072
========= ======= =======
</TABLE>
(Continued)
F-50
<PAGE> 110
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(11), CONTINUED
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 197,078 130,995
Unrealized loss on investment securities available
for sale -- 179,941
Deferred loan fees 70,226 66,871
--------- -------
Total deferred tax assets 267,304 377,807
Less valuation allowance -- --
Net deferred tax asset 267,304 377,807
--------- -------
Deferred tax liabilities:
Premises and equipment, due to differences in
depreciation methods and useful lives (90,538) (62,100)
Unrealized gain on investment securities
available for sale (9,799) --
--------- -------
Total deferred tax liabilities (100,337) (62,100)
--------- -------
Net deferred tax asset $ 166,967 315,707
========= =======
</TABLE>
The Bank has recorded a deferred tax asset of $166,967 and $315,707 as of
December 31, 1995 and 1994, respectively. Although realization of the
deferred tax asset is not assured, the Bank believes that it has paid
sufficient taxes in prior carryback years which will enable it to realize
the net deferred tax asset.
(Continued)
F-51
<PAGE> 111
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(11), CONTINUED
A reconciliation between the actual tax expense and the "expected" tax
expense (computed by applying the U.S. Federal corporate tax rate of 34%
to income before income taxes) is a follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
"Expected" tax expense at statutory federal rate $ 184,569 235,964
State income taxes, net of federal income tax benefit 11,220 16,012
Travel and entertainment 4,360 2,163
Officers life insurance 3,081 2,386
Contributions carryover - (4,945)
Other 4,770 (11,508)
------------- -------
Actual tax expense $ 208,000 240,072
============= =======
</TABLE>
(12) RENT
----
The following is a schedule of future minimum annual rentals under the
noncancellable operating leases of the Bank's facilities:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C> <C>
1996 $133,453
1997 140,126
1998 147,132
1999 90,424
Thereafter 5,129
--------
$516,264
========
</TABLE>
Rent expense for the years ended December 31, 1995 and 1994 were
$176,995 and $186,358, respectively, and is included in occupancy
expense in the accompanying consolidated statements of income.
(13) EMPLOYEE SAVINGS PLAN
---------------------
The Bank sponsors an employee savings plan which qualifies as a 401(k)
plan under the Internal Revenue Code. Under the plan, the Bank makes
contributions in the form of the Bank's common stock based on fair
market value as of December 31 of the prior year. The contribution is
limited to 50% of the employees' 401(k) contribution with a maximum of
3% of the employees' annual earnings.
(Continued)
F-52
<PAGE> 112
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(14) REGULATORY CAPITAL
------------------
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became
effective on December 19, 1992. In addition to the prompt corrective
action requirements, FDICIA includes significant changes to the legal
and regulatory environment for insured depository institutions,
including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the Federal regulatory agencies,
increased reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital
categories, in declining order, are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." Institutions categorized as
"undercapitalized" or worse are subject to certain restrictions,
including the requirement to file a capital plan with its primary
Federal regulator, prohibitions on the payment of dividends and
management fees, restrictions on executive compensation, and increased
supervisory monitoring, among other things. Other restrictions may be
imposed on the institution by the FDIC, including requirements to
raise additional capital, sell assets, or sell the entire institution.
Once an institution becomes "critically undercapitalized" it must
generally be placed in receivership or conservatorship within 90 days.
The following table summarizes the capital thresholds for each prompt
corrective action capital categories. An institution's capital
category is based on whether it meets the threshold for all three
capital ratios within the category.
<TABLE>
<CAPTION>
TIER 1 TOTAL
LEVERAGE RISK-BASED RISK-BASED
CATEGORIES RATIO RATIO RATIO
<S> <C> <C> <C>
"Well capitalized" 5% or higher 6% or higher 10% or higher
"Adequately capitalized" 4% or higher 4% or higher 8% or higher
"Undercapitalized" less than 4% less than 4% less than 8%
"Significantly undercapitalized" less than 3% less than 3% less than 6%
"Critically undercapitalized" An institution is considered "critically undercapitalized" if
its ratio of tangible equity to total assets is 2% or less.
</TABLE>
At December 31, 1995 and 1994, respectively, the Bank's total leverage
capital ratio was 6.6% and 10.07%, Tier 1 risk-based ratio was 8.42%
and 10.68%, and total risk-based ratio was 10% and 12.09%. At December
31, 1995 and 1994, management believes the Bank is in the "well
capitalized" category.
(Continued)
F-53
<PAGE> 113
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(15) CREDIT COMMITMENTS
------------------
The Bank has outstanding at any time a significant number of
commitments to extend credit. These arrangements are subject to strict
credit control assessments and each customer's credit worthiness is
evaluated on a case-by-case basis. A summary of commitments to extend
credit and standby letters of credit written at December 31, 1995 and
1994 are as follows:
1995
----
Standby letters of credit $ 680,932
Available lines of credit 12,422,539
Because many commitments expire without being funded in whole or part,
the contract amounts are not estimates of future cash flows.
Loan commitments written have off-balance-sheet credit risk because
only original fees are recognized in the statement of financial
position until the commitments are fulfilled or expire. Credit risk
represents the accounting loss that would be recognized at the
reporting date if counterparts failed completely to perform as
contracted. The credit risk amounts are equal to the contractual
amounts, assuming that the amounts are fully advanced and that, in
accordance with the requirements of FASB Statement No. 105,
"Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations
of Credit Risk", collateral or other security is of no value.
The Bank's policy is to require customers to provide collateral prior
to the disbursement of approved loans. The amount of collateral
obtained, if it is deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, real estate and income producing commercial
properties.
Standby letters of credit are contractual commitments issued by the
Bank to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers.
(16) CONCENTRATION OF CREDIT RISK
----------------------------
Most of the Bank's business activity is with customers located in the
Central Florida area. The majority of commercial and mortgage loans
are granted to customers residing in this area. Generally, commercial
loans are secured by real estate, and mortgage loans are secured by
either first or second mortgages and residential or commercial
property. As of December 31, 1995, there was sufficient collateral to
support the Bank's loan portfolio. Although the Bank has a diversified
loan portfolio, a substantial portion of its debtors' ability to honor
their contracts is dependent upon the economic conditions in the
Bank's market area.
(Continued)
F-54
<PAGE> 114
THE BANK OF WINTER PARK AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(17) BRANCH OPENING
--------------
During 1995, the Bank opened a branch located in South Orlando which
began operations in February 1995. The Bank has received regulatory
approval to open another branch in Longwood, Florida which is
scheduled to open March 1, 1996.
F-55
<PAGE> 115
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Bank of Winter Park (the "Company" or "Bank") is a Florida state
chartered bank located in Winter Park, Florida. The Bank provides a full range
of banking services to individuals and corporate customers through four offices
located in Central Florida. The Bank is subject to State and Federal bank
regulatory authorities and undergoes periodic regulatory examinations.
Its sole wholly-owned subsidiary, The Bank of Winter Park Mortgage
Company, is currently inactive. On August 30, 1996, the Bank sold certain assets
of the subsidiary. Prior to August 1996, the subsidiary's primary activity was
related to residential mortgage banking.
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 therein.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
COMPARISON OF BALANCE SHEETS AT JUNE 30, 1997 AND DECEMBER 31, 1996
Overview
Total assets of the Company were $88,350,000 at June 30, 1997 and
$92,511,000 at December 31, 1996, a decrease of $4,161,000. Total gross
portfolio loans before unearned income decreased by $5,370,000 from $61,662,000
at the end of the prior year to $56,292,000 for the six months ended June 30,
1997. Total deposits decreased by $4,344,000 from $85,375,000 at year-end 1996
to $81,031,000.
Investment Securities
Investment securities, consisting primarily of U.S. Treasury, federal
agency and mortgage-backed securities, were $19,468,000 at June 30, 1997
compared to $14,695,000 at December 31, 1996, an increase of $4,773,000. During
the first six months of 1997, management purchased additional securities due to
the funds provided by the reduction in loans and to increase its yield on liquid
assets. Concurrently, federal funds sold, all on an overnight basis, decreased
by $4,990,000 from $6,800,000 at the prior year-end to $1,810,000 at June 30,
1997. At June 30, 1997, the Company had recorded all its investment securities
as "available for sale," carrying them at their market value, except for one
$500,000 U.S. Government agency which is classified as held to maturity.
Loans and Loans Held for Sale
Total gross portfolio loans before unearned income decreased $5,370,000
from $61,662,000 at year-end to $56,292,000 at June 30, 1997. The Bank's loan
decline in the first six months of 1997 was primarily the result of a decline in
residential construction loans. During 1996, the Bank purchased 372 residential
constructions loans from its subsidiary with a typical term of six months. In
August 1996, the Bank sold certain assets of the subsidiary and effectively
ceased the purchase and origination of residential construction loans. As these
372 residential construction loans matured and paid off, a decline in real
estate loans occurred along with other declines in commercial loans and
installment loans. The following table reflects the Bank's loans and loans held
for sale at June 30, 1997 and December 31, 1996 (in thousands):
F-56
<PAGE> 116
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
6/30/97 12/31/96 (DECREASE) (DECREASE)
------- ------- ------- -----
Portfolio loans:
<S> <C> <C> <C> <C>
Commercial $11,068 $11,492 $ (424) (3.69)%
Real estate 40,888 44,864 (3,976) (8.86)%
Installment and other loans 4,336 5,306 (970) (18.28)%
------- ------- ------- -----
Total gross loans 56,292 61,662 (5,370) (8.71)%
Less: unearned income 233 244 (11) 4.51%
------- ------- ------- -----
Gross loans net of unearned income $56,059 $61,418 $(5,359) (8.73)%
======= ======= ======= =====
Residential loans held for sale $ 84 $ 84 -- --
======= ======= ======= =====
</TABLE>
Allowance for Loan Losses
The allowance for loan losses amounted to $1,015,000 at June 30, 1997,
compared to $1,091,000 at December 31, 1996. Activity in the allowance for loan
losses during the six month's ended June 30, 1997 included loan charge-offs (net
of recoveries) of $116,000 and a $40,000 provision for loan losses.
The following is a summary of the transactions in the allowance for loan
losses for the six months ended June 30, 1997 and June 30, 1996 and the year
ended December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
------------------- ------------
1997 1996 1996
----- ----- ----
<S> <C> <C> <C>
Balance at beginning of period $1,091 $ 838 $ 838
Charge-offs:
Commercial 68 -- 18
Real Estate -- 1 32
Installment and other loans 58 1 5
------ ------ ------
126 2 55
------ ------ ------
Recoveries:
Commercial -- 26 27
Real estate 10 -- --
Installment and other loans -- 1 1
------ ------ ------
10 27 28
------ ------ ------
Net charge-offs (recoveries) 116 (25) 27
------ ------ ------
Provision for loan losses 40 130 280
------ ------ ------
Balance at end of period $1,015 $ 993 $1,091
====== ====== ======
Ratio of net charge-offs (recoveries)
during the period to average loans
outstanding during the period .20% (.04)% .05%
====== ====== ======
</TABLE>
F-57
<PAGE> 117
Nonperforming Assets
Nonperforming assets (consisting all of loans) amounted to $1,521,000 or
1.72% of total assets at June 30, 1997, compared to $1,687,000 or 1.82% of total
assets at December 31, 1996. Nonperforming assets at June 30, 1997, included
three loans to one borrower totaling $589,000. The borrower has filed Chapter 11
and is awaiting a reorganization plan. All three loans are secured by business
assets.
Potential Problem Loans
As part of management's evaluation of the loan portfolio and as required by
regulations, the Bank classifies certain performing loans as potential problem
loans based on certain attributes and definitions. Adverse classifications
include loans that are performing in accordance with their terms but that
exhibit certain deficiencies. Two such categories where known information about
possible credit problems of the borrower causes management to have serious
doubts as to the ability of such borrowers to comply with the present loan
repayment terms ("Potential Problem Loans") are defined as follows:
SUBSTANDARD ASSETS - A Substandard asset is inadequately protected by the
current sound worth and paying capacity of the obligor or of the collateral
pledged, if any. Assets so classified have a well-defined weakness or weaknesses
that jeopardize the liquidation of the debt. They are characterized by the
distinct possibility that the institution will sustain some loss if the
deficiencies are not corrected.
DOUBTFUL ASSETS - A Doubtful asset has all the weaknesses inherent in one
classified Substandard with the added characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
conditions, and values, highly questionable or improbable.
As of June 30, 1997, loans meeting the above definitions are as follows (in
thousands):
<TABLE>
<CAPTION>
Additional
Nonperforming Potential Total Adversely
Loans Problem Loans(1) Classified Loans
------------- ---------------- ----------------
<S> <C> <C> <C>
Substandard $ 884 $ 915 $1,799
Doubtful 85 17 102
------ ------ ------
969 $ 932 $1,901
====== ======
Other nonperforming loans 552
------
$1,521
======
(1) Potential problem loans not included in nonperforming assets.
</TABLE>
Additional potential problem loans as of June 30, 1997 include two loans
amounting, in the aggregate, to $780,000 or 84% of the total. One loan, in the
amount of $300,000, is to an antique automobile dealership that in the past has
experienced problems in making large contractual principal reductions. The
second loan, in the amount of $480,000, is participated 75% with the Small
Business Administration. Accordingly, the Bank's exposure on this loan is
limited to $120,000. The loan is secured by accounts receivable which currently
may not be adequate to repay 100% of the loan balance. Both of these loans are
current as to principal and interest.
F-58
<PAGE> 118
Deposits
Total deposits were $81,031,000 or 91.72% of total assets at June 30,
1997, compared to $85,375,000 at December 31, 1996, a decrease of $4,344,000.
Non-interest bearing deposits decreased $2,852,000 from December 31, 1996 to
June 30, 1997 and interest-bearing deposits decreased $1,492,000 during the same
period. From December 31, 1996 to June 30, 1997, deposits were as follows (in
thousands):
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
6/30/97 12/31/96 (DECREASE) (DECREASE)
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 9,914 $12,766 $(2,852) (22.34)%
Interest bearing:
Interest checking 9,427 9,614 (187) (1.95)%
Money market 21,266 19,831 1,435 7.24 %
Savings 3,181 2,226 955 42.90 %
Time deposits $100,000 and over 11,902 10,302 1,600 15.53 %
Other time deposits 25,341 30,636 (5,295) (17.28)%
------- ------- ------- ------
Total deposits $81,031 $85,375 $(4,344) (5.09)%
======= ======= ======= ======
</TABLE>
Management believes that the Bank does not have a concentration of
deposits from any one source, the loss of which would have a material adverse
effect on the business of the Bank. Management believes that substantially all
of the depositors are residents in its primary market area.
Stockholders' Equity
Stockholders' equity was $5,902,000 at June 30, 1997, or 6.68% of total
assets, compared to $5,654,000 or 6.11% of total assets at December 31, 1996.
The Bank's regulatory capital ratios as of June 30, 1997, December 31, 1996, and
June 30, 1996, were as follows:
<TABLE>
<CAPTION>
MINIMUM
"WELL
CAPITALIZED"
6/30/97 12/31/96 6/30/96 REQUIREMENTS
------ -------- ------- -----------
<S> <C> <C> <C> <C>
Total risk-based capital
(to risk-weighted assets) 10.18% 9.03% 8.16% 10.00%
Tier I core capital
(to risk-weighted assets) 8.93% 7.79% 6.91% 6.00%
Tier I leverage capital
(to adjusted total assets) 6.35% 5.93% 5.68% 5.00%
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
1996
Overview
Net income for the six months ended June 30, 1997 was $244,000 or $.50
per share, compared to $337,000 or $.71 per share for the same period of 1996, a
decline of $93,000 for the six month period. The Company's return on average
assets and return on average equity also declined to .55% and 8.34%
respectively, for the first six months of 1997, compared to .87% and 12.92%,
respectively, for the first six months of 1996.
F-59
<PAGE> 119
Analysis of Net Interest Income
Net interest income for the first six months of 1997 was $1,958,000,
compared to $2,413,000 for 1996. This $455,000 or 18.86% decrease was primarily
the result of an increase in nonaccruing loans and a drop in noninterest bearing
demand deposits with a corresponding increase in time deposits of approximately
$5 million. Interest income was $3,493,000 for the six months ended June 30,
1997, a decrease of $167,000 over the same period of 1996, while interest
expense increased by $288,000.
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, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- ----------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net of unearned income $ 57,577 $ 2,762 9.59% $ 56,756 $ 3,265 11.50%
Securities 19,081 593 6.22% 11,235 344 6.13%
Interest bearing deposits in banks 1,388 43 6.20% 410 9 4.39%
Federal funds sold 3,636 95 5.23% 1,560 42 5.39%
------------- ----------- ------------ ----------- ------------ -----------
Total interest-earning assets 81,682 3,493 8.55% 69,961 3,660 10.46%
----------- ------------ ------------ -----------
Non interest-earning assets 7,619 7,852
------------- -----------
Total assets $ 89,301 $ 77,813
============= ===========
Interest-bearing liabilities:
Savings 2,676 26 1.94% 1,949 24 2.46%
Money market and interest checking 29,525 455 3.08% 25,347 364 2.87%
Time deposits 38,387 1,054 5.49% 31,232 853 5.46%
Other borrowings 0 0 0.00% 260 6 4.62%
------------- ----------- ------------ ----------- ------------ -----------
Total interest-bearing liabilities 70,588 1,535 4.35% 58,788 1,247 4.24%
----------- ------------ ------------ -----------
Non interest-bearing liabilities 12,861 13,807
Stockholders' equity 5,852 5,218
------------- -----------
Total liabilities and equity $ 89,301 $ 77,813
============= ===========
Net interest income/net interest spread $ 1,958 4.20% $ 2,413 6.22%
=========== ============ ============ ===========
Net interest margin 4.79% 6.90%
============ ===========
</TABLE>
F-60
<PAGE> 120
<TABLE>
<CAPTION>
INCREASE (DECREASE)
CHANGES IN NET INTEREST INCOME DUE TO(1)
------------------------------
VOLUME RATE TOTAL
------------- ------------- --------------
<S> <C> <C> <C>
Interest earning assets:
Loans, net of unearned income $ 39 $ (542) $ (503)
Securities 244 5 249
Interest bearing deposits in banks 31 3 34
Federal funds sold 54 (1) 53
------------- ------------- --------------
Total change in interest income 368 (535) (167)
------------- ------------- --------------
Interest bearing liabilities:
Savings 7 (5) 2
Money market and interest checking 64 27 91
Time deposits 197 4 201
Other borrowings (6) -- (6)
------------- ------------- --------------
Total change in interest expense 262 26 288
------------- ------------- --------------
Increase (decrease) in net interest income $ 106 $(561) $(455)
============= ============= ==============
- ----------------------
(1) Changes in net interest income due to changes in volume and rate are
based on absolute values.
</TABLE>
Noninterest Income
Noninterest income for the first six months of 1997 was $465,000,
compared to $859,000 for the same period in 1996, a decrease of $394,000. Of the
decrease, $448,000 was the result of decreased income from the mortgage banking
subsidiary related to the sale of loans. On August 30, 1996, the Bank sold
certain assets of the mortgage banking subsidiary, effectively making the
subsidiary inactive.
The following table reflects the components of noninterest income for the
six months ended June 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
---------------------------------------------------
INCREASE
1997 1996 (DECREASE)
--------------- -------------- --------------
<S> <C> <C> <C>
Service charges $ 229 $ 204 $ 25
Fee income 199 184 15
Gains on sale of loans 3 451 (448)
Other 34 20 14
-------------- ------------- -------------
Total noninterest income $ 465 $ 859 $ (394)
============== ============= =============
</TABLE>
Noninterest Expense
Noninterest expenses for the first six months of 1997 were $1,980,000
compared to $2,626,000 for the same period in 1996, a decrease of $646,000. The
major factor responsible for the expense decrease was the sale of the Company's
mortgage banking subsidiary which accounted for substantially all of the
decrease in employees from June 30, 1996 to June 30, 1997. During the six months
ended June 30, 1997, the Bank incurred certain expenses related to the pending
merger totaling $37,000. In addition during 1997 the Company charged off
approximately $50,000 of assets deemed uncollectible on the financial statements
of the subsidiary. Both these items are included in other operating expense for
the six months ended June 30, 1997.
F-61
<PAGE> 121
The following table reflects the components of noninterest expense for
the six months ended June 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
----------------------------------------------------
INCREASE
1997 1996 (DECREASE)
---------------- -------------- --------------
<S> <C> <C> <C>
Salaries and employee benefits $ 842 $ 1,520 $ (678)
Occupancy expense 266 264 2
Equipment expense 166 155 11
Stationery and supplies 45 59 (14)
Other operating expense 661 628 33
------------- ------------- --------------
Total noninterest expense $ 1,980 $ 2,626 $ (646)
============= ============= ==============
</TABLE>
YEARS ENDED DECEMBER 31, 1996 AND 1995
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1996 AND 1995
Overview
Total assets of the Company were $92,511,000 at December 31, 1996 and
$76,701,000 at December 31, 1995, an increase of $15,810,000. This growth was
primarily the result of the expansion of the Company's mortgage banking
subsidiary during 1996 and the establishment of three additional locations.
Total gross portfolio loans before unearned income increased by $12,209,000 from
$49,453,000 at the end of 1995 to $61,662,000 at the end of 1996. Total deposits
increased by $14,951,000 from $70,424,000 at year-end 1995 to $85,375,000 at
year-end 1996.
Investment Securities
The Company's investment securities consisted of U.S. Treasury
securities, securities of other U.S. Government agencies and corporations and
mortgage-backed securities. The total investment portfolio increased $2,441,000
from $12,254,000 at the end of 1995 to $14,695,000 at the end of 1996. Of the
$14,695,000 at December 31, 1996, $14,195,000 was classified as available for
sale and $500,000 was classified as held to maturity.
Loans and Loans Held for Sale
Total gross portfolio loans before unearned income at December 31, 1996
were $61,662,000 compared to $49,453,000 at December 31, 1995. The $12,209,000
increase in gross portfolio loans was primarily comprised of an $8,816,000
increase in real estate loans to $44,864,000 or (72.8% of total loans).
Commercial (business) loans not secured by real estate increased $1,810,000,
while installment and other loans increased $1,583,000. Residential loans held
for sale were $84,000 at December 31, 1996 compared to $3,190,000 at December
31, 1995. The decrease relates to the discontinuation of the mortgage banking
subsidiary in August 1996. The following table reflects the Bank's loans and
loans held for sale at December 31, 996 and December 31, 1995 (in thousands):
F-62
<PAGE> 122
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
12/31/96 12/31/95 (DECREASE) (DECREASE)
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Portfolio loans:
Commercial $ 11,492 $ 9,682 $ 1,810 18.69%
Real estate 44,864 36,048 8,816 24.46%
Installment and other loans 5,306 3,723 1,583 42.52%
--------------- --------------- ---------------- --------------
Total gross loans 61,662 49,453 12,209 24.69%
Less: unearned income 243 226 17 7.52%
--------------- --------------- ---------------- --------------
Gross loans net of unearned income $ 61,419 $ 49,227 $ 12,192 24.77%
=============== =============== ================ ==============
Residential loans held for sale $ 84 $ 3,190 $ (3,106) (97.37)%
=============== =============== ================ ==============
</TABLE>
Allowance for Loan Losses
The allowance for loan losses amounted to $1,091,000 at December 31,
1996, compared to $838,000 at December 31, 1995. Activity in the allowance
during 1996 included loan charge-offs (net of recoveries) of $27,000 and a
$280,000 provision for loan losses.
The following is a summary of the transactions in the allowance for loan
losses for the years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance at beginning of period $ 838 $ 600
Charge-offs:
Commercial 18 25
Real estate 32 11
Installment and other loans 5 13
--------- ---------
55 49
--------- ---------
Recoveries:
Commercial 27 32
Real estate - -
Installment and other loans 1 3
--------- ---------
28 35
--------- ---------
Net charge-offs 27 14
--------- ---------
Provision for loan losses 280 252
--------- ---------
Balance at end of period $ 1,091 $ 838
========= =========
Ratio of net charge-offs during the period to
average loans outstanding during the period .05% .03%
========= =========
</TABLE>
F-63
<PAGE> 123
Nonperforming Assets
Nonperforming assets (consisting all of loans) amounted to $1,687,000 or
1.82% of total assets at December 31, 1996, as compared to $868,000 or 1.13% of
total assets at December 31, 1995. Nonperforming assets increased $819,000 from
the prior year-end. The increase is primarily attributed to a 24.69% increase in
gross loans at the end of 1996 compared to the prior year end.
Deposits
Total deposits were $85,375,000 at December 31, 1996, compared to
$70,424,000 at the prior year-end, an increase of $14,951,000. Non-interest
bearing deposits increased $1,765,000 from December 31, 1995 to December 31,
1996 and interest-bearing deposits increased $13,186,000 during the same period.
From December 31, 1995 to December 31, 1996, deposits were as follows (in
thousands):
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
12/31/96 12/31/95 (DECREASE) (DECREASE)
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 12,766 $ 11,001 $ 1,765 16.04%
Interest bearing:
Interest checking 9,614 8,601 1,013 11.78%
Money market 19,831 14,535 5,296 36.44%
Savings 2,226 1,779 447 25.12%
Time deposits $100,000 and over 10,302 12,812 (2,510) (19.59)%
Other time deposits 30,636 21,696 8,940 41.21%
-------- -------- -------- -----
TOTAL DEPOSITS $ 85,375 $ 70,424 $ 14,951 21.23%
======== ======== ======== =====
</TABLE>
Stockholders' Equity
Stockholders' equity of the Company was $5,654,000 at December 31, 1996,
or 6.11% of total assets compared to $4,888,000 or 6.37% of total assets at
December 31, 1995. At December 31, 1996, the Bank's capital ratios were all in
excess of minimum regulatory guidelines for an institution to be considered
"adequately capitalized."
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND
1995
Overview
Consolidated net income for 1996 was $785,000 or $1.66 per share,
compared to $335,000 or $.71 per share for 1995. Return on average assets for
1996 was .93% compared to .53% in 1995, while return on average equity was
14.66% compared to 7.15% for 1995.
Analysis of Net Interest Income
Net interest income for 1996 was $4,023,000 compared to $3,404,000 for
1995. This $619,000 or 18.18% increase was primarily the result of additional
income from balance sheet growth and a more favorable mix of earning assets.
Interest income was $6,844,000 for 1996, an increase of $1,268,000 over 1995.
During the same period, interest expense increased by $649,000 from $2,172,000
for 1995 to $2,821,000 for 1996. Asset yield decreased 41 basis points from
9.70% for 1995 to 9.29% for 1996 and average earning assets increased
$16,251,000. The average cost of interest-bearing liabilities decreased 12 basis
points from 4.44% to 4.32%. Net interest spread decreased 29 basis points from
5.26% for 1995 to 4.97% for 1996 and net interest margin, which includes the
benefit of noninterest bearing funds, decreased from 5.93% for 1995 to 5.46% for
1996.
F-64
<PAGE> 124
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 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1996 1995
-------------------------------------------- ------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------- ----------- ------------ ----------- ------------ ------------
Interest earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $ 57,984 $ 5,930 10.23% $ 41,114 $ 4,581 11.14%
Securities 12,238 735 6.00% 12,730 782 6.14%
Interest bearing deposits in banks 357 18 5.04% 39 2 5.13%
Federal funds sold 3,123 161 5.16% 3,568 211 5.91%
------------- ----------- ------------ ----------- ------------ ------------
Total interest-earning assets 73,702 6,844 9.29% 57,451 5,576 9.70%
----------- ------------ ------------ ------------
Non interest-earning assets 11,024 5,522
------------- -----------
Total assets $ 84,726 $ 62,973
============= ===========
Interest-bearing liabilities:
Savings 2,090 45 2.15% 1,774 43 2.42%
Money market and interest checking 27,950 819 2.93% 20,925 611 2.92%
Time deposits 35,025 1,941 5.54% 26,114 1,513 5.79%
Other borrowings 294 16 5.44% 83 5 6.02%
------------- ----------- ------------ ----------- ------------ ------------
Total interest-bearing liabilities 65,359 2,821 4.32% 48,896 2,172 4.44%
----------- ------------ ------------ ------------
Non interest-bearing liabilities 14,013 9,395
Stockholders' equity 5,354 4,682
------------- -----------
Total liabilities and equity $ 84,726 $ 62,973
============= ===========
Net interest income/net interest spread $ 4,023 4.97% $ 3,404 5.26%
=========== ============ ============ ============
Net interest margin 5.46% 5.93%
============ ============
</TABLE>
<TABLE>
<CAPTION>
INCREASE (DECREASE)
CHANGES IN NET INTEREST INCOME DUE TO(1)
------------------------------
VOLUME RATE TOTAL
------------- ------------- --------------
<S> <C> <C> <C>
Interest earning assets:
Loans, net of unearned income $ 1,725 $ (376) $ 1,349
Securities (29) (18) (47)
Interest bearing deposits in banks 16 -- 16
Federal funds sold (23) (27) (50)
------------ ------------ --------------
Total change in interest income 1,689 (421) 1,268
------------- ----------- --------------
Interest bearing liabilities:
Savings 7 (5) 2
Money market and interest checking 206 1 207
Time deposits 494 (65) 429
Other borrowings 12 (1) 11
------------ ------------ --------------
Total change in interest expense 719 (70) 649
------------ ------------ --------------
Increase (decrease) in net interest income $ 970 $ (351) $ 619
============ ============ ==============
</TABLE>
- --------
(1) Changes in net interest income due to changes in volume and rate are
based on absolute values.
F-65
<PAGE> 125
Noninterest Income
Noninterest income for 1996 was $2,454,000 compared to $670,000 for 1995,
an increase of $1,784,000. Increases from loan fee income of $843,000, gain on
sale of loans of $464,000 and gain on sale of assets of $349,000 accounted for
most of the increase in noninterest income. During 1995 the Company acquired the
residential mortgage banking subsidiary which increased its activity in 1996
resulting in additional loan fee income and gain on sale of loans compared to
1995. In August 1996, the Company sold certain assets of the subsidiary for a
gain of $349,000.
The following table reflects the components of noninterest income for the
years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
INCREASE
1996 1995 (DECREASE)
--------------- -------------- ---------------
<S> <C> <C> <C>
Service charges on deposit accounts $ 440 $ 350 $ 90
Fee income 1,064 221 843
Gain on sale of loans 547 83 464
Gain on sale of assets 349 0 349
Other income 54 16 38
--------------- -------------- ---------------
Total noninterest income $ 2,454 $ 670 $ 1,784
=============== ============== ===============
</TABLE>
Noninterest Expense
Total noninterest expenses for 1996 were $4,991,000 compared to
$3,279,000 for the same period in 1995, an increase of $1,712,000. The primary
portion of the change was due to the increase of salaries and benefits from
$1,656,000 in 1995 to $2,615,000 in 1996, a net increase of $959,000. During
1995 the Company purchased a residential mortgage banking subsidiary. The
subsidiary continued to increase its activities during 1996 until certain assets
were sold in August 1996. Additional increases in 1996's noninterest expense
were the result of higher operating expenses due to the establishment of several
additional locations. In March of 1996, the Company opened a new banking office
facility in Longwood, Florida (the Longwood branch). Also in 1996 the Bank moved
its operations and data processing center to a new leased facility located at
Curry Ford Road in Orlando, Florida. In addition to housing the operations
center, the Company intends to establish a retail banking operation at this
facility. In late 1995, the Bank purchased a facility at 988 East Semoran
Boulevard, Casselberry, Florida. The building is currently being renovated for a
retail banking office and the Company expects to open the branch in early 1998.
The following table reflects the components of noninterest expense for
the years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
INCREASE
1996 1995 (DECREASE)
---------------- -------------- --------------
<S> <C> <C> <C>
Salaries and employee benefits $ 2,615 $ 1,656 $ 959
Occupancy expense 551 464 87
Equipment expense 327 271 56
Stationery and supplies 138 92 46
Other operating expense 1,360 796 564
---------------- -------------- --------------
Total noninterest expense $ 4,991 $ 3,279 $ 1,712
================ ============== ==============
</TABLE>
F-66
<PAGE> 126
Income Taxes
Income tax expense for 1996 was $421,000 or 35% of income before taxes,
compared to $208,000 or 38% of income before taxes for the same period in 1995,
an increase of $213,000.
YEARS ENDED DECEMBER 31, 1995 AND 1994
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
Overview
Total assets were $76,701,000 at December 31, 1995 compared to
$51,129,000 at year-end 1994, an increase of $25,572,000 or 50.01%. This growth
was primarily the result of the expansion of the Company's mortgage banking
subsidiary. Total gross portfolio loans before unearned income increased by
$13,097,000 from $36,356,000 at the end of 1994 to $49,453,000 at the end of
1995. Total deposits increased by $23,815,000 from $46,609,000 at year-end 1994
to $70,424,000 at year-end 1995.
Investment and Mortgage-Backed Securities
The Company's investment securities consisted of U.S. Treasury
securities, securities of other U.S. Government agencies and corporations and
mortgage-backed securities. The total investment portfolio increased $1,308,000
from $10,946,000 at the end of 1994 to $12,254,000 at the end of 1995. Of the
$12,254,000 at December 31, 1995, $11,754,000 was classified as available for
sale and $500,000 was classified as held to maturity.
Loans and Loans Held for Sale
Total gross portfolio loans before unearned income at December 31, 1995
were $49,453,000 compared to $36,356,000 at December 31, 1994. The $13,097,000
increase in gross portfolio loans was primarily comprised of an $11,583,000
increase in real estate loans to $36,048,000 (or 72.9% of gross portfolio
loans). Residential loans held for sale were $3,190,000 at December 31, 1995
compared to none at December 31, 1994. The increase relates to the increased
activity in the residential mortgage banking subsidiary purchased during 1995.
Commercial (business) loans not secured by real estate increased $337,000, while
installment and other loans increased $1,177,000. The following table reflects
the Bank's loans and loans held for sale at December 31, 1995 and December 31,
1994 (in thousands):
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
12/31/95 12/31/94 (DECREASE) (DECREASE)
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Portfolio loans:
Commercial $ 9,682 $ 9,345 $ 337 3.61%
Real estate 36,048 24,465 11,583 47.35%
Installment and other loans 3,723 2,546 1,177 46.23%
--------------- --------------- ---------------- ---------------
Total gross loans 49,453 36,356 13,097 36.02%
Less: unearned income 226 186 40 21.51%
--------------- --------------- ---------------- ---------------
Gross loans net of unearned income $ 49,227 $ 36,170 $ 13,057 36.10%
=============== ============== =============== ==============
Residential loans held for sale $ 3,190 $ -- $ 3,190 100.00%
=============== ============== =============== ==============
</TABLE>
F-67
<PAGE> 127
Allowance for Loan Losses
The allowance for loan losses amounted to $838,000 at December 31, 1995,
an increase of $238,000 from the $600,000 allowance at December 31, 1994.
Activity in the allowance during 1995 included loan charge-offs (net of
recoveries) of $14,000 and a $252,000 provision for loan losses.
The following is a summary of the transactions in the allowances for
loan losses for the years ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Balance at beginning of period $ 600 $ 448
Charge-offs:
Commercial 25 6
Real estate 11 85
Installment and other loans 13 18
--------- ---------
49 109
--------- ---------
Recoveries:
Commercial 32 48
Real estate - -
Installment and other loans 3 9
--------- ---------
35 57
--------- ---------
Net charge-offs 14 52
--------- ---------
Provision for loan losses 252 204
--------- ---------
Balance at end of period $ 838 $ 600
========= =========
Ratio of net charge-offs during the period to
average loans outstanding during the period .03% .16%
========= =========
</TABLE>
Nonperforming Assets
Nonperforming assets (consisting all of loans) amounted to $868,000 or
1.13% of total assets at December 31, 1995, as compared to $487,000 or .95% of
total assets. Non performing assets increased $381,000 from December 31, 1994 to
December 31, 1995. The increase is primarily attributed to a 36.0% increase of
gross loans at the end of 1995 compared to 1994.
F-68
<PAGE> 128
Deposits
Total deposits were $70,424,000 at December 31, 1995, compared to
$46,609,000 at December 31, 1994, an increase of $23,815,000 or 51.1%.
Non-interest bearing deposits increased $3,516,000 from December 31, 1994 to
December 31, 1995 and interest-bearing deposits increased $20,299,000 during the
same period. From December 31, 1994 to December 31, 1995, deposits were as
follows (in thousands):
<TABLE>
<CAPTION>
DOLLAR PERCENTAGE
INCREASE INCREASE
12/31/95 12/31/94 (DECREASE) (DECREASE)
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits $11,001 $ 7,485 $ 3,516 46.97%
Interest bearing:
Interest checking 8,601 7,104 1,497 21.07%
Money market 14,535 12,150 2,385 19.63%
Savings 1,779 1,677 102 6.08%
Time deposits $100,000 and over 12,812 9,201 3,611 39.25%
Other time deposits 21,696 8,992 12,704 141.28%
------- ------- ------- ------
Total deposits $70,424 $46,609 $23,815 51.10%
======= ======= ======= ======
</TABLE>
Stockholders' Equity
Stockholders' equity of the Company was $4,888,000 at December 31, 1995
or 6.37% of total assets compared to $4,173,000 or 8.16% of total assets at
December 31, 1994. At December 31, 1995 and 1994, management believes the Bank
was in the "well capitalized" category under the Federal Deposit Insurance
Corporation Improvement Act of 1991.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 AND
1994
Overview
Consolidated net income for 1995 was $335,000 or $.71 per share, compared
to $454,000 or $.96 per share for 1994. Return on average assets for 1995 was
.53% compared to .91% in 1994 while return on average equity was 7.15% for 1995
compared to 11.00% in 1994.
Analysis of Net Interest Income
Net interest income for 1995 was $3,404,000 compared to $2,657,000 for
1994. This $747,000 or 28.11% increase was primarily the result of additional
income from balance sheet growth and a more favorable mix of earning assets.
Interest income was $5,576,000 for 1995, an increase of $1,648,000 over 1994.
During the same period, interest expense increased by $901,000 from $1,271,000
for 1994 to $2,172,000 for 1995. Asset yield increased 119 basis points from
8.52% for 1994 to 9.71% for 1995 and average earning assets increased
$11,371,000. The average cost of interest-bearing liabilities increased 116
basis points from 3.28% to 4.44%. Net interest spread increased 3 basis points
from 5.24% for 1994 to 5.27% for 1995 and net interest margin, which includes
the benefit of noninterest bearing funds, increased from 5.77% for 1994 to 5.93%
for 1995.
F-69
<PAGE> 129
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, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1995 1994
------------------------------------------ --------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net of unearned income $ 41,114 $ 4,581 11.14% $ 32,199 $ 3,190 9.91%
Securities 12,730 782 6.14% 11,477 640 5.58%
Interest bearing deposits in banks 39 2 5.13% 9 -- --
Federal funds sold 3,568 211 5.91% 2,395 98 4.09%
------------- ----------- ------------ ----------- ----------- ------------
Total interest-earning assets 57,451 5,576 9.71% 46,080 3,928 8.52%
----------- ------------ ----------- ------------
Non interest-earning assets 5,522 3,823
------------- -----------
Total assets $ 62,973 $ 49,903
============= ===========
Interest-bearing liabilities:
Savings 1,774 43 2.42% 1,881 44 2.34%
Money Market/Interest checking 20,925 611 2.92% 18,277 510 2.79%
Time deposits 26,114 1,513 5.79% 18,584 716 3.85%
Other borrowings 83 5 6.02% 15 1 6.67%
------------- ----------- ------------ ----------- ----------- ------------
Total interest-bearing liabilities 48,896 2,172 4.44% 38,757 1,271 3.28%
----------- ------------ ----------- ------------
Non interest-bearing liabilities 9,395 7,021
Stockholders' equity 4,682 4,125
------------- -----------
Total liabilities and equity $ 62,973 $ 49,903
============= ===========
Net interest income/net interest spread $ 3,404 5.27% $ 2,657 5.24%
=========== ============ =========== ============
Net interest margin 5.93% 5.77%
============ ============
</TABLE>
<TABLE>
<CAPTION>
INCREASE (DECREASE)
CHANGES IN NET INTEREST INCOME DUE TO(1)
------------------------------
VOLUME RATE TOTAL
------------- ------------- --------------
Interest earning assets:
<S> <C> <C> <C>
Loans, net of unearned income $ 993 $ 398 $ 1,391
Securities 77 65 142
Interest bearing deposits in banks 2 -- 2
Federal funds sold 70 43 113
------------- ------------- --------------
Total change in interest income 1,142 506 1,648
------------- ------------- --------------
Interest bearing liabilities:
Savings Accounts (2) 1 (1)
Money Market and NOW Accounts 77 24 101
Time deposits 436 361 797
Borrowings 4 -- 4
------------- ------------- --------------
Total change in interest expense 515 386 901
------------- ------------- --------------
Increase (decrease) in net interest income $ 627 $ 120 $ 747
============= ============= ==============
- ------------------------
(1) Changes in net interest income due to changes in volume and rate are based
on absolute values.
</TABLE>
F-70
<PAGE> 130
Noninterest Income
Noninterest income for 1995 was $670,000 compared to $432,000 for 1994,
an increase of $238,000. Increases from loan fee income of $152,000 and gain on
sale of loans of $83,000 accounted for most of the increase in noninterest
income. During 1995, the Company acquired the residential mortgage banking
subsidiary which resulted in additional loan fee income and gain on sale of
loans.
The following table reflects the components of noninterest income for
the years ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
INCREASE
1995 1994 (DECREASE)
----- ----- -----
<S> <C> <C> <C>
Service charges on deposit accounts $ 350 $ 306 $ 44
Fee income 221 69 152
Gain on sale of loans 83 0 83
Other income 16 57 (41)
----- ----- -----
Total noninterest income $ 670 $ 432 $ 238
===== ===== =====
</TABLE>
Noninterest Expense
Total noninterest expenses for 1995 were $3,279,000 compared to
$2,191,000 for the same period in 1994, an increase of $1,088,000. The primary
portion of the change was due to the increase of salaries and benefits from
$920,000 in 1994 to $1,656,000 in 1995, a net increase of $736,000. During 1995
the Company purchased a residential mortgage banking subsidiary. The mortgage
banking activities accounted for a substantial portion of the increase in
salaries and employee benefits. Additional increases in 1995's noninterest
expense were the result of higher operating expenses due to the establishment of
an additional location. In February of 1995, the Company opened a new banking
office facility in Edgewood, Florida (the Pine Castle branch).
The following table reflects the components of noninterest expense for
the years ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
INCREASE
1995 1994 (DECREASE)
---------------- -------------- --------------
<S> <C> <C> <C>
Salaries and employee benefits $ 1,656 $ 920 $ 736
Occupancy expense 464 364 100
Equipment expense 271 203 68
Stationery and supplies 92 63 29
Other operating expense 796 641 155
---------------- ------------- -------------
Total noninterest expense $ 3,279 $ 2,191 $ 1,088
================ ============= =============
</TABLE>
Income Taxes
Income tax expense for 1995 was $208,000 or 38% of income before taxes,
compared to $240,000 or 35% of income before taxes for the same period in 1994,
a decrease of $32,000.
F-71
<PAGE> 131
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT AT JUNE 30, 1997
Liquidity
The Asset/Liability Management Committee ("ALCO") 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 customer 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 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 unsecured lines of credit,
reverse repurchase agreements and/or the FHLB. At June 30, 1997 the Bank had two
unsecured lines of credit totaling $1,500,000. None of the lines had been drawn
at June 30, 1997.
FHLB borrowings, known as "advances," are typically secured by the
Company's mortgage loan portfolio and/or investment securities. The terms and
rates charged for FHLB advances vary in response to general economic conditions.
As a shareholder of the FHLB, the Company 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 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, 1997, the Company had no outstanding advances from
the FHLB.
At June 30, 1997, the Bank's liquidity ratio, consisting of net cash and
investments of $25.7 million divided by net deposits and short-term liabilities
of $78.6 million, was 32.66% compared to 28.75% at December 31, 1996. Net liquid
assets were $18.0 million in excess of the amount required by Florida banking
regulations.
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 ALCO the responsibility to monitor and report
on interest-rate risk, devise strategies to manage interest-rate risk, monitor
loan originations and deposit activity, and approval 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 institutions'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 period 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 twelve months.
F-72
<PAGE> 132
With the assistance of an outside company, the Bank uses an industry
standard computer modeling system to analyze the impact of interest rate risk.
The system attempts to simulate the asset and liability base and project future
operating results under a variety of interest rate and spread assumptions.
Through this management tool, management can also, among other things, project
the effects of changing its asset and liability mix and modifying its balance
sheet, and identify appropriate investment opportunities. The results of these
simulations are evaluated within the context of the interest-rate risk policy,
which sets out target levels for the appropriate level of interest-rate risk.
The policy is to maintain a cumulative one-year gap of no more than 25%
of total assets. Management attempts to conform to this policy primarily by
managing the maturity distribution of the investment portfolio and emphasizing
loan originations and loan purchases carrying variable interest rates tied to
interest-sensitive indices. Additionally, the Company has joined the FHLB to
enhance its liquidity position and to provide it with the ability to utilize
long-term fixed-rate advances to improve the match between interest-earning
assets and interest-bearing liabilities in certain periods. Currently,
off-balance-sheet hedging instruments are not used to manage overall interest
rate risk.
The cumulative one year gap at June 30, 1997, was $16,992,000 or a
negative 19.23% (expressed as a percentage of total assets). Management will
attempt to moderate any lengthening of the repricing structure of earning assets
by emphasizing variable-rate assets and, where appropriate, match-funding
longer-term fixed rate loans with FHLB advances.
The following table presents the maturities or repricing of
interest-earning assets and interest-bearing liabilities at June 30, 1997. 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 scheduled maturities. Other interest bearing deposits such
as interest checking, money market and savings accounts are assumed to reprice
in the first three months, since these deposits are due to the customer on
demand.
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<PAGE> 133
<TABLE>
<CAPTION>
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 1997
0 - 3 Months 4 - 12 Months 1 - 5 Years
------------------------ ---------------------- ------------------------
Yield/ Yield/ Yield/
Amount Rate Amount Rate Amount Rate
---------- ---------- ---------- --------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
U.S. Treasury securities and
government agencies $ 1,500 5.44% $ 2,493 5.63% $ 10,941 5.97%
Mortgage-backed securities 164 6.08% 636 5.73% 2,460 6.68%
Federal funds sold 1,810 5.39% -- -- -- --
Interest bearing deposits in banks 3,428 5.47% -- -- -- --
FHLB stock -- -- -- -- -- --
Loans net of unearned income 41,466 9.66% 1,654 9.82% 10,970 9.72%
---------- ---------- ---------- --------- ---------- ----------
Total interest-earning assets 48,368 9.06% 4,783 7.09% 24,371 7.73%
---------- ---------- ---------- --------- ---------- ----------
Interest-bearing liabilities:
Deposits:
Interest checking 9,428 1.51% -- -- -- --
Money market 21,266 3.83% -- -- -- --
Savings 3,181 2.01% -- -- -- --
Time deposits 19,130 5.67% 17,138 5.45% 974 5.47%
Mortgages payable -- -- -- -- -- --
---------- ---------- ---------- --------- ---------- ----------
Total interest-bearing liabilities 53,005 3.97% 17,138 5.45% 974 5.47%
---------- ---------- ---------- --------- ---------- ----------
Excess (deficiency) of interest-
earning assets over interest-
bearing liabilities $ (4,637) 5.09% $ (12,355) 1.64% $ 23,397 2.26%
========== ========== ========== ========= ========== ==========
Cumulative excess (deficiency) of
interest-earning assets over
interest bearing liabilities $ (4,637) 5.09% $ (16,992) 4.55% $ 6,405 4.17%
========== ========== ========== ========= ========== ==========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities as a percent of
total assets (5.25)% (19.23)% 7.25%
========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 1997
Over 5 Years
------------------------
Yield/
Amount Rate
---------- ----------
<S> <C> <C>
Interest-earning assets:
U.S. Treasury securities and
government agencies $ 998 6.82%
Mortgage-backed securities -- --
Federal funds sold -- --
Interest bearing deposits in banks -- --
FHLB stock 276 7.25%
Loans net of unearned income 2,053 8.84%
---------- ----------
Total interest-earning assets 3,327 8.10%
---------- ----------
Interest-bearing liabilities:
Deposits:
Interest checking -- --
Money market -- --
Savings -- --
Time deposits -- --
Mortgages payable 712 10.75%
---------- ----------
Total interest-bearing liabilities 712 10.75%
---------- ----------
Excess (deficiency) of interest-
earning assets over interest-
bearing liabilities $ 2,615 (2.65)%
========== ==========
Cumulative excess (deficiency) of
interest-earning assets over
interest bearing liabilities $ 9,020 4.09%
========== ==========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities as a percent of
total assets 10.21%
==========
</TABLE>
EFFECTS OF INFLATION
As a financial institution, the majority of the Company's assets are
monetary in nature and, therefore, differ greatly from those of most industrial
or commercial companies that have significant investments in fixed assets. The
effects of inflation on the financial condition and results of operations,
therefore, are less significant than the effects of changes in interest rates.
The most significant effect of inflation is on noninterest expense, which tends
to rise during periods of general inflation.
F-74
<PAGE> 134
FUTURE ACCOUNTING REQUIREMENT
The FASB has issued Statement and Financial Accounting Standards No. 125
("SFAS 125"). The statement provides accounting and reporting standards for
transfers and servicing of financial assets as well as extinguishment of
liabilities. The statement also provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. SFAS 125 is effective for transfers and servicing of financial
assets as well as extinguishment of liabilities occurring in 1997. Management
does not anticipate SFAS 125 will have a material impact on the Bank.
F-75
<PAGE> 135
EXHIBIT A
---------
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of May
22, 1997, between THE HUNTINGTON NATIONAL BANK, a banking association organized
under the laws of the United States, with its principal office located at 41
South High Street, Columbus, Ohio ("Huntington Bank"), and THE BANK OF WINTER
PARK, a bank organized and existing under the laws of the State of Florida, with
its principal office located at 2006 Aloma Avenue, Winter Park, Florida ("Winter
Park Bank"), each acting pursuant to a resolution of its board of directors
adopted or to be adopted by a vote of a majority of its directors, pursuant to
the authority given by and in accordance with provisions of the National Bank
Act, as amended (12 U.S.C. Sections 215a and 215a-1), the Federal Deposit
Insurance Act, as amended (12 U.S.C. Section 1831u), and the Florida Statutes
(Section 658.2953). Huntington Bank and Winter Park Bank are sometimes
hereinafter collectively referred to as the "Constituent Associations" or
separately as a "Constituent Association."
RECITALS
A. Huntington Bank is a wholly owned subsidiary of Huntington
Bancshares Incorporated, a Maryland corporation ("Huntington").
B. As of March 31, 1997, Huntington Bank had total capital of
$40,000,000, divided into 4,000,000 shares of common stock, par value $10.00 per
share ("Huntington Bank Common"), surplus of $40,035,000, and undivided profits,
including capital reserves and net unrealized holding gains (losses) on
available for sale securities, of $743,986,000.
D. Winter Park Bank is authorized to issue 600,000 shares of common
stock, $5.00 par value per share ("Winter Park Common"), of which 414,009 shares
are issued and outstanding as of the date hereof, exclusive of treasury shares,
with an additional 76,589 shares being subject to outstanding stock options
previously granted (collectively, the "Winter Park Stock Options" and
individually, a "Winter Park Stock Option") under certain stock option plans and
other arrangements of Winter Park Bank (collectively, the "Winter Park Stock
Option Plans").
E. The parties hereby desire that Winter Park Bank be merged into
Huntington Bank upon and subject to the terms and conditions contained herein.
AGREEMENT
In consideration of the foregoing recitals, which shall constitute a
part of this Agreement, and the mutual promises contained herein, the parties
agree as follows:
ARTICLE 1
THE MERGER
----------
Subject to the terms and conditions hereof, and the terms and
conditions contained in a certain Supplemental Agreement, of even date herewith,
among Huntington, Huntington Bank, and Winter Park Bank (the "Supplemental
Agreement"), which is incorporated herein by reference, at the "Effective Time"
(as such term is defined in Article 2 hereof), Winter Park Bank shall be merged
into Huntington Bank (the "Merger"). Huntington Bank shall be the receiving
association in the Merger (the "Surviving Association") and shall continue its
corporate existence under the laws of the United States following the
consummation of the Merger. At the Effective Time, the separate existence and
corporate organization of Winter Park Bank shall cease.
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<PAGE> 136
ARTICLE 2
EFFECTIVE TIME
--------------
The Merger shall be effective at 11:59 p.m., local Florida time (the
"Effective Time"), on the "Effective Date," which date shall be the date of
consummation of the Merger as certified by the Comptroller of the Currency,
which date shall not precede June 1, 1997, or the date of expiration of the last
required waiting period following receipt of the last regulatory approval
required in order to consummate the Merger.
ARTICLE 3
EFFECT OF THE MERGER
--------------------
3.1 NAME. The name of the Surviving Association shall be "The
Huntington National Bank."
3.2 ARTICLES OF ASSOCIATION AND BYLAWS. The Articles of Association and
Bylaws of Huntington Bank in effect at the Effective Time shall be the articles
of association and bylaws of the Surviving Association, until amended in
accordance with law.
3.3 OFFICES. The principal executive office of Huntington Bank
immediately prior to the Effective Time shall be the principal executive offices
of the Surviving Association.
3.4 CAPITAL. Upon consummation of the Merger, the amount of capital
stock of the Surviving Association shall be $40,000,000, divided into 4,000,000
shares of common stock, par value $10.00 per share. At the Effective Time, the
Surviving Association shall have a surplus of not less than $42,312,181, and
undivided profits, including capital reserves and net unrealized holding gains
(losses) on available for sale securities, which, when combined with its capital
and surplus, will not be less than the combined capital structures of the
Constituent Associations as stated in the Recitals to this Agreement, adjusted,
however, for normal earnings and expenses, Huntington Bank's normal and
customary dividends paid prior to the Effective Time, and for accounting
adjustments between the date of the latest available quarterly statements of
condition of the Constituent Associations and the Effective Time of the Merger.
3.5 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided by the applicable provisions of the laws of the United
States. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, (i) the corporate existence of each of the Constituent
Associations shall be merged into and continued in the Surviving Association;
(ii) all rights, franchises, and interests of each Constituent Association in
and to every type of property (real, personal, and mixed) and choses in action
shall be transferred to and vested in the Surviving Association by virtue of the
Merger without any further deed or other transfer; (iii) the Surviving
Association, upon the Merger and without any order or other action on the part
of any court or otherwise, shall hold and enjoy all rights of property,
franchises, and interest, including appointments, designations, and nominations,
and all other rights and interests as trustee, executor, administrator,
registrar of stock and bonds, guardian of estates, assignee, receiver, and
committee of estates of lunatics, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by any one of the Constituent Associations at the Effective
Time; and (iv) the Surviving Association shall be liable for all liabilities of
each Constituent Association.
3.6 FURTHER ACTIONS. From time to time, as and when requested by the
Surviving Association or by its successors, the officers and directors of Winter
Park Bank in office at the Effective Time shall execute and deliver such
instruments and shall take or cause to be taken such further or other action as
shall be necessary in order to vest or perfect in the Surviving Association, or
to confirm of record or otherwise, title to, and possession of, all the assets,
property, interests, rights, privileges, immunities, powers, franchises, and
authority of Winter Park Bank and otherwise to carry out the purposes of this
Agreement.
A-2
<PAGE> 137
ARTICLE 4
CONVERSION OF SHARES
--------------------
4.1 HUNTINGTON BANK COMMON. All shares of Huntington Bank Common that
are issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding shares of Huntington Bank Common at and
after the Effective Time.
4.2 WINTER PARK COMMON.
(a) At the Effective Time, each share of Winter Park Common
(excluding the Canceled Shares (as defined in Section 4.2(b) below), and
excluding Dissenting Shares (as defined in Section 4.3 below)) issued and
outstanding at the Effective Time shall cease to be outstanding and shall, by
virtue of the Merger and without further action on the part of the holders
thereof, be converted into and exchanged for the right to receive a number of
whole shares of Huntington common stock, without par value ("Huntington Common")
equal to the quotient of $30.00 divided by the Price Per Share of Huntington
Common (as defined below) (such quotient, as adjusted below, if necessary, being
the "Exchange Ratio"). Notwithstanding the above, if the sum of the number of
shares of Winter Park Common (excluding Canceled Shares, but including
Dissenting Shares) outstanding at the Effective Time plus the number of shares
of Winter Park Common that are subject to outstanding Winter Park Stock Options
as of the Effective Time exceeds 490,973 shares, the Exchange Ratio determined
pursuant to the preceding sentence will be automatically adjusted by multiplying
the original Exchange Ratio (prior to this adjustment) by the quotient obtained
by dividing 490,973 by the sum of the number of shares of Winter Park Common
(excluding Canceled Shares, but including Dissenting Shares) issued and
outstanding on the Effective Date plus the number of shares subject to the
Winter Park Stock Options outstanding on the Effective Date.
(b) The "Price Per Share of Huntington Common" shall be the
average of the closing sale prices for a share of Huntington Common as reported
on the Nasdaq National Market on the five trading days immediately preceding the
two business days before the Effective Time.
(c) No fractional shares of Huntington Common shall be issued.
Each holder of Winter Park Common who would otherwise be entitled to receive a
fraction of a share of Huntington Common shall instead be entitled to receive
cash in an amount equal to the product resulting from multiplying such fraction
by the Price Per Share of Huntington Common. No interest shall be payable with
respect to such cash payment.
(d) Notwithstanding the above, any and all shares of Winter
Park Common held by Winter Park Bank, Huntington, Huntington Bank, or any direct
or indirect majority-owned subsidiary of any of them, in each case other than in
a fiduciary capacity or as a result of debts previously contracted (the
"Canceled Shares"), shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
(e) Any unexercised Winter Park Stock Option that remains
outstanding immediately prior to the Effective Time shall be converted
automatically at the Effective Time into an option to purchase shares of
Huntington Common under the Huntington 1994 Stock Option Plan or similar
Huntington plan (a "Huntington Stock Option"), with (i) the number of shares of
Huntington Common to be subject to a particular Huntington Stock Option to be
determined by converting the number of shares of Winter Park Common subject to
the Winter Park Stock Option into a number of Huntington Common shares in
accordance with the procedure for converting outstanding Winter Park Common
shares into Huntington Common shares as set forth in this Section 4.2, except
that all fractional shares will be rounded to the nearest whole share, and (ii)
the exercise price for each share of Huntington Common subject to a particular
Huntington Stock Option to be equal to the exercise price per Winter Park Common
share under the Winter Park Stock Option divided by the Exchange Ratio
determined in accordance with Section 4.2(a) above; provided, however, that, in
the case of any Winter Park Stock Option to which Section 421 of the Internal
Revenue Code of 1986, as amended (the "Code"), applies by reason of its
qualification under Section 422 of the Code, the terms of the Huntington Stock
Option into which such Winter Park Stock Option is to be converted, including
the option price, the number of shares of Huntington Common purchasable pursuant
to such option, and the terms and conditions
A-3
<PAGE> 138
of exercise of such option, shall be determined so as to comply with Section
424(a) of the Code. Upon such conversion, all rights under any and all stock
options and stock option plans previously granted or adopted by Winter Park
shall terminate.
4.3 DISSENTING SHAREHOLDERS. Any holder of shares of Winter Park Common
who perfects his dissenters' rights in accordance with and as contemplated by 12
U.S.C. 215a (the "Dissenters' Rights Law") shall be entitled to receive the
value of such shares in cash as determined pursuant to such provision of
Dissenters' Rights Law; provided, that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder has complied
with the applicable provisions of the Dissenters' Rights Law and surrendered to
Huntington the certificate or certificates representing the shares ("Dissenting
Shares") for which payment is being made. In the event that after the Effective
Time a dissenting shareholder of Winter Park fails to perfect, or effectively
withdraws or loses, his right to appraisal and of payment for his shares,
Huntington Bank shall issue and deliver the consideration to which such holder
of shares of Winter Park Common is entitled under this Article 4 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of Winter Park Common held by him. If and to the extent
required by applicable Dissenters' Rights Law, Huntington Bank will establish an
escrow account with an amount sufficient to satisfy the maximum aggregate
payment that may be required to be paid to dissenting shareholders. Upon
satisfaction of all claims of dissenting shareholders, the remaining escrowed
amount, reduced by payment of the fees and expenses of the escrow agent, will be
returned to the Surviving Corporation.
ARTICLE 5
EXCHANGE OF CERTIFICATES
(a) As promptly as practicable after the Effective Date,
Huntington Bank or its nominee (the "Exchange Agent"), shall prepare and mail to
each holder of record of any shares of Winter Park Common (other than the
Canceled Shares or Dissenting Shares) at the Effective Time a letter of
transmittal containing instructions for the surrender of all certificates for
shares of Winter Park Common. Upon the surrender by such holder of a certificate
or certificates for shares of Winter Park Common standing in such holder's name
to the Exchange Agent in accordance with the instructions set forth in the
letter of transmittal, such holder shall be entitled to receive in exchange
therefor a certificate representing the number of whole shares of Huntington
Common into which the shares represented by the certificate or certificates so
surrendered shall have been converted and, if applicable, a check payable to
such holder in the amount necessary to pay for any fractional share of
Huntington Common which such holder would otherwise have been entitled to
receive, in accordance with Section 4.2(c) hereof. No interest shall be payable
with respect to either the whole shares of Huntington Common or the cash payable
in lieu of fractional shares. Immediately after the third anniversary of the
Effective Date, the Exchange Agent shall deliver to the Surviving Corporation
any unclaimed balance of cash owing with respect to fractional shares and such
cash shall be retained by, and become the property of, the Surviving
Corporation, free and clear of any claims whatsoever.
(b) Neither Huntington, the Surviving Association, nor the
Exchange Agent, shall be obligated to deliver a certificate for Huntington
Common or a check for cash in lieu of a fractional share to a former shareholder
of Winter Park Bank until such former shareholder surrenders the certificate or
certificates representing shares of Winter Park Common standing in such former
shareholder's name or, if such former shareholder is unable to locate such
certificate or certificates, an appropriate affidavit of loss and indemnity
agreement and bond as may be required by Huntington. Until so surrendered, each
outstanding certificate for shares of Winter Park Common shall be deemed for all
corporate purposes (except the payment of dividends) to evidence ownership of
the number of whole shares of Huntington Common into which the shares of Winter
Park Common represented thereby shall have been converted.
(c) After the Effective Date and until the outstanding
certificates formerly representing shares of Winter Park Common are so
surrendered, no dividends or distributions payable to holders of record of
Huntington Common shall be paid to the holders of such outstanding Winter Park
Bank certificates in respect thereof. Promptly upon surrender of such
outstanding certificates there shall be paid to the holders of the certificates
for Huntington
A-4
<PAGE> 139
Common issued in exchange therefor the amount of dividends and other
distributions, if any, which theretofore became payable with respect to such
full shares of Huntington Common, but which have not theretofore been paid on
such stock. No interest shall be payable with respect to the payment of any
dividends or other distributions. All such dividends or other distributions
unclaimed at the end of one year from the Effective Date shall, to the extent
such dividends have been previously paid to the Exchange Agent, be repaid by the
Exchange Agent to Huntington, and thereafter the holders of such outstanding
certificates for Winter Park Common shall look, subject to applicable escheat,
unclaimed funds, and other laws, only to Huntington as general creditors for
payment thereof.
(d) The stock transfer books of Winter Park Bank shall be
closed as of the close of business on the day that is two business days prior to
the Effective Date.
(e) Huntington is empowered to adopt additional reasonable
rules and regulations with respect to the matters referred to in this Article 5
not inconsistent with the provisions of this Agreement.
(f) Adoption of this Agreement by the shareholders of Winter
Park Bank shall constitute ratification of the appointment of the Exchange
Agent.
ARTICLE 6
SHAREHOLDER APPROVAL
--------------------
This Agreement shall be submitted to the shareholders of Huntington
Bank and Winter Park Bank for approval in accordance with applicable law as soon
as reasonably practicable following the execution of this Agreement.
ARTICLE 7
MISCELLANEOUS PROVISIONS
------------------------
7.1 AMENDMENT. At any time prior to the Effective Time, the parties
hereto may amend, modify, or supplement this Agreement by mutual agreement,
whether before or after the shareholders of Winter Park Bank have adopted this
Agreement, provided that the consideration as determined in Section 4.2 hereof
shall not be changed after the shareholders of Winter Park Bank have adopted
this Agreement without the approval of such shareholders in the same manner as
required for the adoption of this Agreement; and provided, further, that this
Agreement may not be amended, modified, or supplemented, except by an instrument
in writing executed and delivered by each of the parties hereto.
7.2 TERMINATION. Unless extended by the mutual agreement of the parties
hereto, this Agreement may be terminated, notwithstanding the adoption thereof
by the shareholders of Huntington Bank or Winter Park Bank in the manner and
under the circumstances set forth in the Supplemental Agreement.
7.3 ENTIRE AGREEMENT. This Agreement, together with the Supplemental
Agreement and any exhibits hereto or thereto, constitutes the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements and understandings, oral or written, among the
parties with respect to such subject matter and no party shall be liable or
bound to the others in any manner by any covenants, representations, or
warranties except as specifically set forth herein or therein.
7.4 CAPTIONS. The captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
A-5
<PAGE> 140
7.5 ASSIGNMENT. Neither this Agreement nor any rights, interests, or
obligations hereunder shall be assigned or transferred by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other parties.
7.6 BENEFIT. Nothing in this Agreement, express or implied, is intended
to confer upon any person or entity other than the parties hereto, Huntington,
and their respective successors in interest any rights or remedies under or by
reason of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, but
such counterparts taken together shall constitute one and the same instrument.
7.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio without regard to its conflict of
laws principles, except to the extent that federal law governs certain aspects
of the Merger.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE HUNTINGTON NATIONAL BANK
By: /s/Peter E. Geier
--------------------------------------
Peter E. Geier, President and Chief
Operating Officer
THE BANK OF WINTER PARK
By: /s/Robert S. Harrell
---------------------------------------
Robert S. Harrell, Chairman
A-6
<PAGE> 141
EXHIBIT B
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT (this "Agreement") is made as of May 22,
1997, among HUNTINGTON BANCSHARES INCORPORATED, a Maryland corporation
("Huntington"), THE HUNTINGTON NATIONAL BANK, a banking association organized
under the laws of the United States ("Huntington Bank"), and THE BANK OF WINTER
PARK, a bank organized and existing under the laws of the State of Florida
("Winter Park Bank").
RECITALS
A. Huntington is a bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHCA"). Huntington owns all of the outstanding
capital stock of Huntington Bank.
B. Huntington desires to acquire Winter Park Bank by a merger of Winter
Park Bank with and into Huntington Bank (the "Merger"), in accordance with the
terms of this Agreement and of a certain Agreement and Plan of Merger, of even
date herewith, among Huntington Bank and Winter Park Bank (the "Merger
Agreement").
C. The parties hereto desire to enter into this Agreement for the
purpose of setting forth the terms and conditions of the agreement between them
relating to the Merger, as well as certain representations, warranties, and
covenants made by each party as an inducement to the other parties to execute
and deliver the Merger Agreement and to consummate the Merger.
AGREEMENT
In consideration of the foregoing Recitals, which shall constitute a
part of this Agreement, and of the mutual promises contained herein, the parties
agree as follows:
SECTION 1. DEFINITIONS
1.01 DEFINITIONS CONTAINED ELSEWHERE IN THIS AGREEMENT. For the
purposes of this Agreement, the following terms shall have the meanings assigned
to them in the preamble and Recitals of this Agreement:
(a) "Agreement";
(b) "BHCA";
(c) "Huntington";
(d) "Huntington Bank";
(e) "Merger";
(f) "Merger Agreement"; and
(g) "Winter Park Bank".
1.02 DEFINITIONS CONTAINED IN THE MERGER AGREEMENT. For the purposes of
this Agreement, the following terms shall have the meanings assigned to them in
the Merger Agreement:
B-1
<PAGE> 142
(a) "Dissenters' Rights Law";
(b) "Dissenting Shares";
(c) "Effective Date";
(d) "Effective Time";
(e) "Exchange Agent";
(f) "Huntington Common";
(g) "Winter Park Common";
(h) "Winter Park Stock Option Plans";
(i) "Winter Park Stock Options" or a "Winter Park Stock
Option"; and
(j) "Surviving Association."
1.03 OTHER DEFINITIONS. For the purposes of this Agreement, certain
other terms shall be defined as follows:
(a) "Accord" means the Legal Opinion Accord of the American
Bar Association Section of Business Law (1991);
(b) "Acquisition Proposal" means an inquiry received from, or
an offer or proposal made by or on behalf of, any other corporation, firm,
association, person, or other entity relating to (i) the possible sale or other
disposition of more than 25 percent of the shares of the capital stock or any
other class of voting securities of Winter Park Bank, including, but not limited
to, an exchange or tender offer therefor, (ii) the possible sale or other
disposition of a majority of the assets of Winter Park Bank, (iii) a merger or
consolidation involving Winter Park Bank, other than a transaction in which
Winter Park Bank will be the owner of all of the stock of the surviving
corporation following the transaction, or (iv) a merger or consolidation
involving Winter Park Bank, other than a transaction in which Winter Park Bank
will be the surviving association and the current shareholders of Winter Park
Bank will be the owners of a majority of the stock of the surviving association
following the transaction;
(c) "Affiliate" of a party means a subsidiary, Principal
Shareholder, director, or executive officer of such party;
(d) "Audited Financial Statements" means the financial
statements (which need not be in a comparative format) of Winter Park Bank,
consisting of balance sheets as of December 31, 1996 and 1995, and statements of
income, cash flows, and changes in shareholders' equity for the fiscal years
ended or ending December 31, 1996, 1995, and 1994, with the reports thereon of
Winter Park Bank's independent certified public accountants;
(e) "BIF" means the Bank Insurance Fund of the FDIC;
(f) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended;
(g) "Closing Date" means the last business day of the month
in which the conditions specified in Sections 6.01 and 6.02 hereof have been
satisfied, or such other day as the parties shall mutually agree;
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(h) "Code" means the Internal Revenue Code of 1986, as
amended;
(i) "Confidential Information" of or relating to a party means
any and all information received from or on behalf of such party or their
Affiliates, employees, or agents concerning the Merger, the terms of this
Agreement or the Merger Agreement, or the assets, business, operations, or
financial condition of such party or their Affiliates, unless and to the extent
that any such information is in the public domain;
(j) "Consent" means any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any person or entity
pursuant to any Contract, law, rule, regulation, Order, or Permit.
(k) "Contract" means any written or, to the Knowledge of
Winter Park Bank, oral agreement, arrangement, authorization, commitment,
contract, indenture, instrument, lease, obligation, plan, practice, restriction,
understanding or undertaking of any kind or character, or other document to
which Winter Park Bank is a party or that is binding on Winter Park Bank or its
capital stock, assets, or business.
(l) "CRA" means the Community Reinvestment Act of 1977, as
amended;
(m) "Default" means (i) any breach or violation of or default
under any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any liability,
obligation, penalty, cost, or expense of any type under, any Contract, Order, or
Permit;
(n) "Disclosure Memorandum" means the Disclosure Memorandum
which is to be delivered by Winter Park Bank to Huntington and Huntington Bank
pursuant to Section 2 hereof;
(o) "Employee Benefit Plans" means any and all "employee
benefit plans," as defined in ERISA;
(p) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended;
(q) "Environmental Law" means CERCLA, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Federal Water Pollution Control Act, the Clean
Water Act, the Clean Air Act, regulations promulgated thereunder, and any other
federal, state, county, municipal, local, foreign, provincial, or other statute,
law, ordinance, or regulation which may relate to or deal with human health or
the environment, all as may be amended from time to time;
(r) "FDIC" means the Federal Deposit Insurance Corporation;
(s) "Hazardous Substances" means (i) any "hazardous substance"
as defined in Section 101(14) of CERCLA or regulations promulgated thereunder;
(ii) any "solid waste," "hazardous waste," or "infectious waste," as such terms
are defined in any other Environmental Law; (iii) asbestos, urea-formaldehyde,
polychlorinated biphenyls (PCBs), nuclear fuel or material, chemical waste,
radioactive material, explosives, known carcinogens, petroleum products and
by-products, and other dangerous, toxic, or hazardous pollutants, contaminants,
chemicals, materials, or substances listed or identified in, or regulated by,
any Environmental Law; and (iv) any other substances or materials which are
classified or considered to be hazardous or toxic under any Environmental Law;
(t) "Huntington Companies" means Huntington and all of its
"significant subsidiaries" as defined in Rule 405 of Regulation C promulgated by
the SEC under the 1933 Act.
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(u) "Interim Financial Statements" mean the unaudited
financial statements of Winter Park Bank, consisting of balance sheets as of
March 31, 1997 and 1996, and statements of income, cash flows, and changes in
shareholders' equity for the three-month period ended on March 31, 1997 and
1996, prepared in accordance with generally accepted accounting principles
applied on a consistent basis;
(v) "Knowledge" means, with respect to either Huntington or
Winter Park Bank, awareness of those facts that are known or should have been
known by the chairman, president, chief executive officer (if other than the
chairman or the president), chief financial officer, chief accounting officer,
chief credit officer, general counsel, any assistant general counsel, or any
senior or executive vice president of Huntington or Winter Park Bank,
respectively.
(w) "Lien" means any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than Liens for current property taxes not yet due and
payable and pledges to secure deposits.
(x) "1933 Act" means the Securities Act of 1933, as amended;
(y) "1934 Act" means the Securities Exchange Act of 1934, as
amended;
(z) "OCC" means the Office of the Comptroller of the Currency;
(aa) "Order" means any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or regulatory authority.
(bb) "Permit" means any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Winter Park Bank is a party or
that is or may be binding upon or inure to the benefit of any Winter Park Bank
or its securities, assets, or business.
(cc) "Principal Shareholder" of a party means a person who
owns five percent or more of the outstanding shares of any class of the capital
stock of such party;
(dd) "Real Property" means any and all real property owned or
leased by Winter Park Bank as of the date of this Agreement or acquired at any
time after the date of this Agreement and prior to the Effective Time, together
with any and all improvements thereon;
(ee) "Registration Statement" means the registration statement
on the appropriate form filed or to be filed by Huntington with the SEC under
the provisions of the 1933 Act for the purpose of registering the shares of
Huntington Common to be issued by Huntington in the Merger pursuant to the terms
of the Merger Agreement, including, but not limited to, the prospectus and proxy
statement to be included therein as a part thereof;
(ff) "SEC" means the Securities and Exchange Commission; and
(gg) "Warrant" means the warrant to purchase certain shares of
Winter Park Common issued or to be issued by Winter Park Bank to Huntington
pursuant to Section 8.13 of this Agreement.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF WINTER PARK BANK
Winter Park Bank represents and warrants to Huntington and Huntington
Bank that, except as set forth in the Disclosure Memorandum which shall be
delivered by Winter Park Bank to Huntington on or before the date that is
fifteen business days after the date of this Agreement:
2.01 ORGANIZATION AND AUTHORITY. Winter Park Bank is a bank duly
organized, validly existing, and in good standing under the laws of the State of
Florida, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and has the corporate power and
authority to own its properties and assets, to carry on its business as it is
presently being conducted, and, subject to the approval of its shareholders, to
enter into and carry out its obligations under this Agreement and under the
Merger Agreement. Winter Park Bank's deposits are insured by the BIF in
accordance with the provisions of the Federal Deposit Insurance Act.
2.02 CAPITALIZATION. The authorized capital stock of Winter Park Bank
consists of 600,000 shares of Winter Park Common, of which 414,009 shares were
issued and outstanding as of the date of this Agreement, exclusive of treasury
shares. All of the outstanding shares of Winter Park Common are duly and validly
authorized, issued, and outstanding and are fully paid and nonassessable. There
are no existing options, warrants, or commitments of any kind which might
require the issuance by Winter Park Bank of any additional shares of Winter Park
Common or other equity securities of Winter Park Bank, except the 76,589 Winter
Park Common shares subject to Winter Park Stock Options, an additional 375
Winter Park Common shares subject to options which may be granted during the
term of this Agreement, and the Warrant. The Disclosure Memorandum will include
a true and correct copy of each Winter Park Stock Option Plan and a list of all
option holders under each such plan, the number of shares subject to options
held by each, the exercise price or prices of such options, and the dates each
option was granted, becomes exercisable, and terminates.
2.03 SUBSIDIARIES. The Disclosure Memorandum will list all corporations
in which Winter Park Bank owns, directly or indirectly, five percent or more of
any class of capital stock as of the date of this Agreement, and indicate, with
respect to the equity securities of each such corporation as of such date, the
number of shares of each class authorized, the number of shares outstanding, and
the number of shares owned or controlled directly or indirectly by Winter Park
Bank.
2.04 DIRECTORS, OFFICERS, AND PRINCIPAL SHAREHOLDERS. The Disclosure
Memorandum will contain a true and complete list of all directors, executive
officers, and Principal Shareholders of Winter Park Bank. Such list will
identify all person who are deemed to be "affiliates" of Winter Park Bank for
purposes of Rule 145 of the 1933 Act.
2.05 AUTHORIZATION.
(a) The execution, delivery, and performance of this Agreement and the
Merger Agreement by Winter Park Bank, and the consummation of the transactions
contemplated hereby and thereby have been duly approved by the Board of
Directors of Winter Park Bank, subject to the adoption of the Merger Agreement
and this Agreement by the shareholders of Winter Park Bank.
(b) Other than in connection or compliance with the provisions of
applicable state corporate and securities laws, rules, and regulations, and
other than Consents required from applicable regulatory authorities, no notice
to, filing with, or Consent of, any public body or authority is necessary for
the consummation by Winter Park of the Merger and the other transactions
contemplated in the Merger Agreement and this Agreement.
2.06 ABSENCE OF DEFAULTS. Neither the execution and delivery of this
Agreement or the Merger Agreement, nor the consummation of the Merger, nor
compliance by Winter Park Bank with any provisions hereof or thereof will (i)
conflict with or result in a breach of any provision of Winter Park Bank's
Articles of Association or Bylaws, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation
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of any Lien on any assets or properties of Winter Park Bank under, any material
Contract or Permit of Winter Park Bank, or (iii) subject to receipt of the
requisite approvals referred to in Section 6.02 of this Agreement, violate any
law, rule, regulation, or Order applicable to Winter Park Bank or any of its
assets, properties, or rights.
2.07 FINANCIAL STATEMENTS. Winter Park Bank has delivered the 1996
Audited Financial Statements and the Interim Financial Statements to Huntington.
The 1996 Audited Financial Statements and the Interim Financial Statements
present, fairly and accurately, the financial position and results of operations
of Winter Park Bank on a consolidated basis at the dates shown and for the
periods indicated in accordance with generally accepted accounting principles or
regulatory accounting principles applied on a consistent basis. There are no
obligations or liabilities, whether absolute, accrued, or contingent (including,
without limiting the generality of the foregoing, liabilities for taxes), of
Winter Park Bank which are required in accordance with generally accepted
accounting principles to be reflected or disclosed in the 1996 Audited Financial
Statements or the Interim Financial Statements which have not been so reflected
or disclosed.
2.08 TITLE TO PROPERTIES.
(a) The Disclosure Memorandum will set forth a complete and
correct list of all of the Real Property. Winter Park Bank has good and
marketable title to all of the Real Property listed as owned by it in the
Disclosure Memorandum and valid leasehold interests in all of the Real Property
listed as leased by it in the Disclosure Memorandum, free and clear of any Liens
and encumbrances except taxes and assessments not delinquent and utility and
other easements that do not interfere with the use of the property for the
business being conducted thereon. The Real Property and the present use thereof
by Winter Park Bank do not violate any local zoning or similar land use laws,
any governmental regulations, or any restrictive covenants. To the Knowledge of
Winter Park Bank, after reasonable investigation, (i) the Real Property and the
use thereof by Winter Park Bank do not encroach upon any property owned by any
other person, and (ii) no property owned by any other person encroaches upon any
of the Real Property.
(b) Concurrently with its delivery of the Disclosure
Memorandum, Winter Park Bank will deliver to Huntington complete and correct
copies of all deeds and leases relating to the Real Property listed in the
Disclosure Memorandum.
(c) Winter Park Bank has good and marketable title to all of
its personal property, including without limitation all contractual rights and
assets reflected in the 1996 Audited Financial Statements or acquired after
December 31, 1996 (except for assets sold or otherwise disposed of in the
ordinary course of business since such date or assets which, either individually
or in the aggregate, are not material to the operations or financial condition
of Winter Park Bank), free and clear of any Lien or encumbrance. All tangible
properties used in the business of Winter Park Bank are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Winter Park's past practices.
2.09 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved against on the 1996 Audited Financial Statements, Winter Park Bank
has no liabilities, whether absolute, accrued, contingent, or otherwise, due or
to become due, including without limitation any liabilities as guarantor under
any guaranty or liabilities for taxes, except liabilities and taxes incurred in
the ordinary course of business, which have had or will have a material adverse
effect on the business, financial condition, or results of operations of Winter
Park Bank.
2.10 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, Winter Park
Bank has not:
(a) made or permitted to be made any changes in its capital or
corporate structure, certificate or articles of association, regulations,
bylaws, or other charter documents;
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(b) merged with any other corporation or bank, or permitted
any other corporation or bank to merge into or consolidate with it; acquired
control over any other firm, bank, corporation, or organization; or created any
subsidiaries;
(c) except as reflected in the Disclosure Memorandum, issued,
sold, delivered, or agreed to issue, sell, or deliver any additional shares of
its capital stock or any options, warrants, or rights to acquire any such
capital stock, or securities convertible into or exchangeable for such capital
stock, except for the Warrant and except for capital stock issued pursuant to
the exercise of Winter Park Stock Options issued prior to the date of this
Agreement, in accordance with their respective terms;
(d) purchased, sold, transferred, or otherwise acquired or
disposed of, or agreed to purchase, sell, transfer, acquire, or dispose of, any
capital stock or other securities of any kind, or options or other rights to
acquire any such securities, of any other entity other than in the ordinary
course of business;
(e) incurred any indebtedness, obligations, or liabilities,
whether absolute, accrued, contingent, or otherwise, including, without
limitation, liabilities as guarantor under any guaranty, other than
indebtedness, obligations, and liabilities incurred in the ordinary course of
its business or incurred under the Contracts referred to in Section 2.18 hereof;
(f) issued as borrower any promissory notes, guarantees, or
other evidences of indebtedness, other than in the ordinary course of business;
(g) forgiven or canceled any indebtedness or contractual
obligation, other than in the ordinary course of business;
(h) mortgaged, pledged, or subjected to any Lien or lease any
of its assets, tangible or intangible, or permitted or suffered any such asset
to be subjected to any Lien or lease, other than in the ordinary course of
business;
(i) purchased, sold, transferred, liquidated, or otherwise
acquired or disposed of any assets or properties, or entered into any Contract
for any such purchase, sale, transfer, liquidation, acquisition, or disposition,
other than in the ordinary course of business;
(j) entered into any lease of real or personal property other
than in the ordinary course of business;
(k) declared, paid, made, or set apart any sum or property
for, any dividend or other distribution, or otherwise paid or transferred any
funds or property to its shareholders;
(l) except as reflected in the Disclosure Memorandum,
increased the wages, salaries, compensation, pension or other fringe benefits,
or perquisites payable to any executive officer by more than five percent of the
amount thereof in effect as of December 31, 1996, or granted any severance or
termination pay, or entered into any Contract to make or grant any severance or
termination pay, or entered into any employment or consulting Contract which is
not terminable by Winter Park Bank, without cause and without penalty or
severance obligation, upon notice of 30 days or less;
(m) made any loans or loan commitments, other than in the
ordinary course of business, to any Affiliate of Winter Park Bank (or any person
or business entity controlled by or affiliated with such Affiliate);
(n) modified, altered, amended, terminated, or withdrawn from
participation in any Employee Benefit Plan or any other plan or benefit provided
to one or more employees, or paid or distributed any sum from any such plan
except to participants in the ordinary course of the operation of the plan, or
made any payment or
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contribution to any such plan except as required by the terms of such plan or
consistent with past practices, but, in any event, not to exceed five percent of
eligible salaries, in the aggregate, on an annual basis;
(o) entered into any transaction involving the expenditure of
more than 50,000, other than in the ordinary course of business, except pursuant
to and in accordance with the terms of the Contracts referred to in Section 2.18
hereof;
(p) adopted any change in any accounting policy or method;
(q) revalued any asset or adjusted any reserve other than in
the ordinary course of business;
(r) failed to keep in full force and effect insurance and
bonds at least equal in amount and scope of coverage to the insurance and bonds
carried on December 31, 1996;
(s) suffered any material adverse change in its business,
financial condition, income, assets, or liabilities;
(t) suffered any damage, destruction, or loss (whether or not
covered by insurance) which has had a material adverse effect, in any case or in
the aggregate, on its business, financial condition, operations, projects,
properties, or assets;
(u) suffered any strike, work stoppage, slow-down, or other
labor disturbance; or
(v) suffered any loss of employees or customers which has had
a material adverse effect on its business, operations, or prospects.
2.11 TAXES. Winter Park Bank has filed or caused to be filed all
federal and other tax returns which are required to be filed and have paid or
made provision for payment of all taxes shown as due on such returns. No
deficiencies for any tax, assessment, or governmental charge have been proposed,
asserted, or assessed against Winter Park Bank that have not been settled and
paid. There is no audit examination, deficiency, or refund claim or proceedings
with respect to any such taxes that is currently pending or, to the Knowledge of
Winter Park, contemplated and Winter Park Bank has not executed an extension or
waiver of any statute of limitations on the assessment or collection of any
taxes due that is currently in effect. The federal income tax returns of Winter
Park Bank have not bee audited by the Internal Revenue Service since 1992.
2.12 LABOR MATTERS. Winter Park Bank is not a party to any collective
bargaining or other union agreement with any of its employees, nor is it
involved in any strike or other labor dispute.
2.13 LITIGATION. There is no action, suit, proceeding, or claim by any
governmental agency or other person or entity nor any investigation by any
governmental agency pending or, to the Knowledge of Winter Park Bank, threatened
against (i) Winter Park Bank, (ii) the assets, business, or goodwill of Winter
Park Bank, or (iii) any Affiliate of Winter Park Bank, in relation to the
business of Winter Park Bank or any such person's capacity as an Affiliate of
Winter Park Bank. Winter Park Bank knows of no basis or grounds for any such
action, suit, proceeding, claim, or investigation. Winter Park Bank is not
subject to any supervisory agreement, consent order or decree, cease and desist
order, or other restriction on the business or assets of Winter Park Bank.
2.14 ENVIRONMENTAL MATTERS.
(a) Winter Park Bank is and has been at all times in
substantial compliance with all applicable Environmental Laws and has not
engaged in any activity resulting in a material violation of any applicable
Environmental Law. No investigations, inquiries, Orders, hearings, actions, or
other proceedings by or before any court or governmental agency are pending or,
to the Knowledge of Winter Park Bank, threatened in connection with
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any alleged violation of any applicable Environmental Law by Winter Park Bank or
in relation to any part of the Real Property. No claims have been made or, to
the Knowledge of Winter Park Bank, threatened at any time by any third party
against Winter Park Bank relating to damage, contribution, cost recovery,
compensation, loss, or injury resulting from any Hazardous Substance. Winter
Park Bank has not caused or permitted any Hazardous Substance to be integrated
into the Real Property or any component thereof in such manner or quantity as
may reasonably be expected to or in fact would pose a threat to human health or
the value of the Real Property. To the Knowledge of Winter Park Bank, none of
the Real Property has been used by Winter Park Bank for the storage or disposal
of Hazardous Substances nor is any of the Real Property contaminated by any
Hazardous Substance. To the Knowledge of Winter Park Bank, none of the Real
Property has in the past contained or presently contains any underground storage
tanks. To the Knowledge of Winter Park Bank, Winter Park Bank has no interest,
direct or indirect, in any property owned by a third party which has been
contaminated by Hazardous Substances (excluding any property as to which the
sole interest of Winter Park Bank is that of a lien holder or mortgagee, but
including any property as to which title has been taken by Winter Park Bank
pursuant to mortgage foreclosure or similar proceeding and any property as to
which Winter Park Bank has participated in the financial management to a degree
sufficient to influence the property's treatment of Hazardous Substances).
(b) To the Knowledge of Winter Park Bank, the representations
set forth in paragraph (a) above are also true and correct in relation to any
and all real property owned or leased by it at any time prior to the date of
this Agreement, together with any improvements located thereon.
2.15 COMMUNITY REINVESTMENT ACT COMPLIANCE. Winter Park Bank is in
compliance with the applicable provisions of the CRA and the regulations
promulgated thereunder, and Winter Park Bank has received a CRA rating of
satisfactory or better from the FDIC. Winter Park Bank knows of no fact or
circumstance or set of facts or circumstances which would cause Winter Park Bank
to fail to comply with such provisions or to cause the CRA rating of Winter Park
Bank to fall below satisfactory.
2.16 COMPLIANCE WITH LAWS. Winter Park Bank holds all Permits of, and
has made all filings, applications, and registrations with, all governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted and there has occurred no Default under
any such Permit or other such filings. Winter Park Bank has conducted its
businesses so as to comply in all material respects with all applicable
statutes, regulations, rules, and Orders.
2.17 INFORMATION PROVIDED BY WINTER PARK BANK. None of the information
supplied or to be supplied by Winter Park Bank for inclusion in the Registration
Statement, application for approval, or any other document to be filed with the
SEC, OCC, the Florida Department of Banking and Finance, or any other federal or
state regulatory authority in connection with the transactions contemplated
herein or in the Merger Agreement is or will be false or misleading with respect
to any material fact, or omits or will omit any material fact necessary in order
to make the statements therein not misleading.
2.18 MATERIAL CONTRACTS.
(a) The Disclosure Memorandum will contain a complete and
correct list of all Contracts of the following types, to which Winter Park Bank
is a party, by which either Winter Park Bank or any of its property is bound, or
which has been authorized by Winter Park Bank:
(i) promissory notes, guaranties, mortgages, security
agreements, or other evidences of indebtedness of Winter Park Bank;
(ii) partnership or joint venture agreements;
(iii) employment, bonus, compensation, severance, or
consulting agreements;
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(iv) collective bargaining agreements;
(v) Employee Benefit Plans and any other plans, benefits,
programs of benefits, or deferred compensation arrangements for the benefit of
directors, employees, or former or retired employees;
(vi) agreements or commitments for sale (otherwise than in the
ordinary course of business) of assets exceeding $50,000 in the aggregate;
(vii) agreements or commitments for capital expenditures in
excess of $50,000 in the aggregate;
(viii) agreements or other documents creating Liens relating
to any Real Property or personal property owned, rented, or leased by Winter
Park Bank and used in connection with its business;
(ix) leases of, commitments to lease, and other agreements
relating to the lease or rental of, Real Property or personal property by Winter
Park Bank and used in connection with its business;
(x) all policies of insurance and fidelity bonds of Winter
Park Bank;
(xi) all direct or indirect loans or guaranties of loans to
any director, officer, or Principal Shareholder of Winter Park Bank or their
spouses or children or any partnership, corporation, or other entity in which
any such director, officer, or Principal Shareholder or their spouses or
children, have a significant (ten percent or more) interest; and
(xii) all other Contracts not made in the ordinary course of
business.
(b) Concurrently with its delivery of the Disclosure
Memorandum, Winter Park Bank will deliver to Huntington complete and correct
copies of all written Contracts, together with all amendments thereto, listed in
the Disclosure Memorandum and a complete and correct written description of all
oral Contracts listed in the Disclosure Memorandum.
(c) As of and through the date of this Agreement: (i) each
Contract of Winter Park Bank is valid and subsisting and in full force and
effect in all material respects; (ii) Winter Park Bank has in all material
respects performed all obligations required to be performed by it to date under
such Contracts; and (iii) no event or condition exists which constitutes or,
after notice or lapse of time, would constitute, a material Default on the part
of Winter Park Bank under any such Contract or, to the Knowledge of Winter Park
Bank, on the part of any other party to such Contract.
2.19 EMPLOYEE BENEFIT PLANS.
(a) As of the date hereof:
(i) all Employee Benefit Plans maintained by Winter Park Bank
comply in all material respects with the applicable provisions of ERISA and the
Code and all such Employee Benefit Plans have been administered to date in
compliance with the applicable provisions of ERISA, the Code, and any other
legislation regulating employee benefit plans;
(ii) each Employee Benefit Plan that is an employee pension
benefit plan (as defined in Section 3(2) of ERISA) that is intended to be a
qualified plan under Section 401(a) of the
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Code has been amended to comply in all material respects with the current law,
rules, and regulations and Winter Park Bank has obtained favorable determination
letters with respect to all such plans which takes into account the Tax Reform
Act of 1986 and subsequent legislation for which a determination letter is
available from the Internal Revenue Service, and Winter Park Bank is not aware
of any circumstances likely to result in revocation of any such favorable
determination letter;
(iii) to the Knowledge of Winter Park, all reporting and
disclosure requirements of ERISA and the Code have been met in all material
respects by all such Plans;
(iv) to the Knowledge of Winter Park, Winter Park Bank has no
liability on account of any accumulated funding deficiency (as defined in
Section 412 of the Code) or on account of any failure to make contributions to
or pay benefits under any such plan nor is Winter Park Bank aware of any claim
pending or threatened to be brought by any party regarding such matters;
(v) to the Knowledge of Winter Park, no prohibited transaction
has occurred with respect to any of the Employee Benefit Plans that would
result, directly or indirectly, in the imposition of any excise tax under ERISA
or the Code;
(vi) to the Knowledge of Winter Park, no reportable event under
ERISA has occurred with respect to any of the Employee Benefit Plans;
(vii) Winter Park Bank is not a defendant in any lawsuit or
criminal action concerning its conduct as a fiduciary, party-in-interest, or
disqualified person with respect to any plans;
(viii) Winter Park Bank is not engaged in litigation or a
continuing controversy with or, to the Knowledge of Winter Park Bank, under
investigation or examination by, the Department of Labor, Internal Revenue
Service, Justice Department, or Pension Benefit Guaranty Corporation involving
compliance with ERISA or the provisions of the Code relating to Employee Benefit
Plans; and
(ix) Winter Park Bank is not required to contribute to an
Employee Benefit Plan that is a "multi-employer plan" within the meaning of
Section 3(37) of ERISA.
(b) The Disclosure Memorandum lists all Employee Benefit Plans
and any and all other benefit plans, policies, or programs currently in effect
for directors, employees, former employees, and retired employees of Winter Park
Bank including, without limitation, those providing any form of medical, health,
and dental insurance, severance pay and benefits continuation, relocation
assistance, vacation pay, tuition aid, and matching gifts for charitable
contributions to educational or cultural institutions, whether or not subject to
ERISA. The Disclosure Memorandum includes complete and correct copies of all
such plans or programs, including each trust or other Contract under which any
trustee or custodian holds funds or property of the plans, all current financial
and actuarial reports, all current reporting and disclosure documents and
filings, and currently effective Internal Revenue Service rulings or
determination letters in respect thereof.
2.20 INSURANCE POLICIES. The Disclosure Memorandum will contain a
complete and correct list of the insurance policies and fidelity bonds currently
maintained by Winter Park Bank. Concurrently with its delivery of the Disclosure
Memorandum, Winter Park Bank will deliver to Huntington complete and correct
copies of all such policies and bonds currently in effect together with all
riders and amendments thereto. All premiums due thereon have been paid and
Winter Park Bank has complied in all respects with the provisions of such
policies and bonds. Winter Park Bank has not failed to give any notice or
present any claim under any insurance policy or fidelity bond in due and timely
fashion. Winter Park Bank has not received notice from any insurance carrier
that (i) such insurance will be canceled
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or that coverage thereunder will be reduced or eliminated, or (ii) premium costs
with respect to such policies of insurance will be substantially increased.
There are presently no claims pending under such policies of insurance.
2.21 CAPITAL REQUIREMENTS. Winter Park Bank is in compliance with all
currently applicable capital requirements and guidelines prescribed by all
appropriate federal or state regulatory agencies.
2.22 LOAN LOSS RESERVES. Since December 31, 1996, Winter Park Bank has
not incurred any unusual or extraordinary loan losses. The allowance for loan
losses reflected on the financial statements of Winter Park Bank has been
determined in accordance with generally accepted accounting principles and in
accordance with all applicable regulations of all appropriate regulatory
agencies and is adequate in all respects. Winter Park Bank has no Knowledge of
any potential losses that have not been considered in establishing the current
allowance for loan losses.
2.23 BROKERS; CERTAIN FEES. Neither Winter Park Bank nor any of its
Affiliates or employees, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions, or
finder's fees in connection with this Agreement or the Merger Agreement, or the
transactions contemplated herein or therein, except that Winter Park Bank has
retained Carson Medlin to perform certain investment banking services in
connection with the Merger. The Disclosure Memorandum will contain a complete
and correct list as of the date of this Agreement of all written or oral
agreements between Winter Park Bank and Carson Medlin. Concurrently with its
delivery of the Disclosure Memorandum, Winter Park Bank will deliver to
Huntington complete and correct copies of all written agreements between Winter
Park Bank and Carson Medlin, together with any and all amendments thereto,
listed in the Disclosure Memorandum and a complete and correct written
description of all oral agreements between Winter Park Bank and Carson Medlin
listed in the Disclosure Memorandum.
2.24 MATERIAL FACTS. Neither this Agreement, the Merger Agreement, the
Disclosure Memorandum, nor any list, schedule, or certificate furnished to
Huntington by or on behalf of Winter Park Bank contains any untrue statement of
a material fact or omits a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which made.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF HUNTINGTON AND HUNTINGTON BANK
Huntington and Huntington Bank represent and warrant to Winter Park
Bank as follows:
3.01 ORGANIZATION AND AUTHORITY OF HUNTINGTON. Huntington is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified, and has the corporate
power and authority to own its properties and assets, to carry on its business
as it is presently being conducted, and to enter into and carry out its
obligations under this Agreement. Huntington is duly registered as a bank
holding company under the BHCA.
3.02 ORGANIZATION AND AUTHORITY OF HUNTINGTON BANK. Huntington Bank is
a national banking association duly organized, validly existing, and in good
standing under the laws of the United States, is duly qualified to do business
and is in good standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified, and has
the corporate power and authority to own its properties and assets, to carry on
its business as it is presently being conducted, and to enter into and carry out
its obligations under this Agreement and the Merger Agreement.
3.03 AUTHORIZATION OF HUNTINGTON. The execution, delivery, and
performance of this Agreement by Huntington, and the consummation of the
transactions contemplated hereby, have been duly approved by the Board of
Directors of Huntington. The approval or adoption of this Agreement by the
shareholders of Huntington is not required under Maryland law or under the
charter or bylaws of Huntington.
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3.04 AUTHORIZATION OF HUNTINGTON BANK. The Merger and the execution,
delivery, and performance of this Agreement and the Merger Agreement by
Huntington Bank, and the consummation of the transactions contemplated hereby
and thereby, will have been duly approved by the Board of Directors of
Huntington Bank prior to the filing of the regulatory approvals specified in
Section 5.02 hereof. The approval of the Merger and the adoption of this
Agreement and the Merger Agreement by the sole shareholder of Huntington Bank
will be obtained prior to the filing of the regulatory approvals specified in
Section 5.02 hereof.
3.05 CAPITAL STOCK. The authorized capital stock of Huntington consists
of (i) 300,000,000 shares of Huntington Common, of which 144,739,081 shares are
issued and outstanding as of April 30, 1997, and (ii) 6,617,808 shares of
Huntington preferred stock, without par value, none of which are issued or
outstanding. All of the issued and outstanding shares of Huntington Common are,
and all of the shares of Huntington Common to be issued in exchange for share of
Winter Park Common upon consummation of the Merger, when issued in accordance
with the terms of this Agreement, will be, duly and validly issued and
outstanding and fully paid and nonassessable. None of the outstanding shares of
Huntington Common have been, and none of the shares of Huntington Common to be
issued in exchange for shares of Winter Park Common upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past shareholders of Huntington.
3.06 ABSENCE OF DEFAULTS. Neither the execution and delivery of this
Agreement or, in the case of Huntington Bank, the Merger Agreement, nor the
consummation of the Merger, nor compliance by Huntington or Huntington Bank with
any provisions hereof or thereof will (i) conflict with or result in a breach of
any provision of their respective charters or by-laws, or (ii) constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any assets or properties of Huntington or Huntington
Bank under, any material Contract or Permit of Huntington or Huntington Bank, or
(iii) subject to receipt of the requisite approvals referred to in Section 6.02
of this Agreement, violate any law, rule, regulation, or Order applicable to
Huntington or Huntington Bank or any of their respective assets, properties, or
rights.
3.07 FINANCIAL STATEMENTS. Huntington has delivered to Winter Park Bank
its Annual Report on Form 10-K for the year ended December 31, 1996 (the "Form
10-K"). The financial statements included in such Form 10-K present, fairly and
accurately, the consolidated financial position of Huntington as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows of Huntington for the periods indicated in accordance
with generally accepted accounting principles or regulatory principles applied
on a consistent basis. Since December 31, 1996, except as disclosed in filings
with the SEC after the date thereof, there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a material adverse effect on the business, financial condition,
or results of operations of Huntington.
3.08 LEGAL PROCEEDINGS. There is no action, suit, proceeding, or claim
by any governmental agency or other person or entity nor any investigation by
any governmental agency pending or, to the Knowledge of Huntington or Huntington
Bank threatened, that seeks to enjoin, delay, or prevent the execution,
delivery, or performance of this Agreement or the completion of the transactions
contemplated herein.
3.09 FILING OF REPORTS. Huntington Common is registered pursuant to
Section 12 of the 1934 Act. Huntington has been subject to the reporting
requirements of Section 13 of the 1934 Act for a period of at least 90 days
prior to the date hereof and has filed all reports required to be filed
thereunder during the twelve months preceding the date hereof. Since January 1,
1996, Huntington has filed with the SEC all documents and reports (including all
amendments, exhibits, and schedules thereto and documents incorporated by
reference therein) required to be filed by Huntington under the 1934 Act and the
1933 Act, and the rules and regulations promulgated by the SEC thereunder. None
of such documents or reports, as of their respective dates and as amended
through the date hereof, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in view of the circumstances under which they were
made, not misleading.
3.10 MATERIAL FACTS. Neither this Agreement, the Merger Agreement, nor
any list, schedule, or certificate furnished to Winter Park by or on behalf of
Huntington or Huntington Bank contains any untrue statement of a material
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fact or omits a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances in which made.
None of the information supplied or to be supplied by Huntington or Huntington
Bank for inclusion in the Registration Statement, application for approval, or
any other document to be filed with the SEC, OCC, the Florida Department of
Banking and Finance, or any other federal or state regulatory authority in
connection with the transactions contemplated herein or in the Merger Agreement
is or will be false or misleading with respect to any material fact, or omits or
will omit any material fact necessary in order to make the statements therein
not misleading.
SECTION 4. COVENANTS OF WINTER PARK BANK
Winter Park Bank covenants and agrees as follows:
4.01 APPLICATIONS FOR REGULATORY APPROVALS. Winter Park Bank will
cooperate, and will cause its Affiliates, employees, agents, and advisers to
cooperate, to the extent reasonably necessary, with Huntington and its advisers
in connection with the preparation of the applications for regulatory approvals
described in Section 6.02 hereof.
4.02 SHAREHOLDERS' MEETING. As soon as practicable, Winter Park Bank
will call and mail to its shareholders a notice of a special meeting of its
shareholders for the purpose of adopting the Merger Agreement and this
Agreement, which meeting shall be held not more than 45 days from the date the
notice is mailed, and the Board of Directors of Winter Park Bank will recommend
to the shareholders that they vote their shares in favor of the Merger.
4.03 CONDUCT OF BUSINESS. From the date of this Agreement until the
Effective Time, except as provided herein or as consented to by Huntington in
writing, Winter Park Bank will conduct its operations only, and shall not take
any action except, in the ordinary and usual course of business, and Winter Park
Bank will use its best efforts to preserve intact its business organizations,
assets, prospects, and business relationships, to keep available the services of
its officers and employees, and to maintain existing relationships with other
entities. Without limiting the generality of the foregoing, subject to the
exceptions stated above, during such period, Winter Park Bank will not (a) enter
into any Contract of the character referred to in Section 2.18(a) hereof; or (b)
take or permit to be taken any action of a character which is listed in Section
2.10 hereof.
4.04 ACCESS TO INFORMATION. Winter Park Bank shall give representatives
of Huntington full access, during normal business hours and upon reasonable
notice, to all assets, properties, books, records, agreements, and commitments
of Winter Park Bank, provided that such access shall not unreasonably interfere
with the operations of Winter Park Bank, and shall furnish to representatives of
Huntington all such information concerning its affairs as Huntington may
reasonably request.
4.05 PRESS RELEASES. Winter Park Bank shall consult in advance with
Huntington as to the form and substance of any press release, written
communication with its shareholders, or other public disclosure of matters
related to the Merger Agreement, this Agreement, or the Merger, and shall not
issue any such press release, written communication, or public disclosure
without the prior written consent of Huntington; provided, however, that nothing
contained herein shall prohibit Winter Park Bank from making any disclosure
(after consultation with Huntington with respect thereto) which its counsel
deems necessary under applicable law.
4.06 BEST EFFORTS. Winter Park Bank shall use its best efforts to take
or cause to be taken all actions necessary, proper, or advisable to consummate
the Merger, including such actions as Huntington may reasonably request in
writing.
4.07 ACQUISITION PROPOSALS. Unless and until this Agreement shall have
been terminated by either party pursuant to Section 11 hereof, Winter Park Bank
shall not (i) directly or indirectly, through any of its Affiliates, employees,
or agents, solicit, encourage, initiate, or, except to the extent necessary to
comply with the fiduciary duty of its board of directors as advised by counsel,
entertain, consider, or participate in any negotiations or discussions with
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respect to any Acquisition Proposal, or (ii) except to the extent necessary to
comply with the fiduciary duty of its board of directors as advised by counsel,
disclose any information not customarily disclosed to any person or entity or
provide access to its properties, books, or records or otherwise assist or
encourage any person or entity in connection with any Acquisition Proposal.
4.08 ADVICE OF CHANGES. Between the date hereof and the Effective Date,
Winter Park Bank shall advise Huntington promptly, in writing, of any fact
which, if existing or known on the date hereof, would have been required to be
set forth or disclosed in or pursuant to this Agreement and any fact which, if
existing or known on the date hereof, would have made any of the representations
contained herein untrue. Prior to the Effective Date, Winter Park Bank shall
deliver to Huntington a supplement to the Disclosure Memorandum, which shall
contain a description of any and all such matters.
4.09 TITLE INSURANCE. For each parcel of the Real Property described in
the Disclosure Memorandum as being owned by Winter Park Bank and for each lease
for any parcel of the Real Property described in the Disclosure Memorandum as
being leased by Winter Park Bank as to which Huntington may specifically
request, Winter Park Bank shall deliver to Huntington Bank, at Winter Park
Bank's expense, no later than 60 days after the date of this Agreement, a title
insurance commitment (ALTA 1966 form or its equivalent) for a fee owner's title
insurance policy or leasehold owner's title insurance policy, as appropriate,
each in an amount equal to the carrying cost of the premises or leasehold
interest to be insured (including all improvements thereon), on the books of
Winter Park Bank as of December 31, 1996. Each title insurance commitment shall
show that marketable fee simple title to the owned premises or that valid
leasehold title to the leased premises, as appropriate, is in the name of Winter
Park Bank, and that the owned premises are free and clear of any Liens and
encumbrances except taxes and assessments not delinquent and utility and other
easements that do not interfere with the use of the property for the business
being conducted thereon. Each such commitment shall provide that such fee owners
policy committed for therein shall be an ALTA 1970 form, revised in 1984, and
each leasehold owner's policy shall be an ALTA 1975 form, or other form
acceptable to Huntington and Huntington Bank.
4.10 SURVEY. Within 60 days after the date of this Agreement, Winter
Park Bank shall provide to Huntington and Huntington Bank, at Winter Park Bank's
expense, current land surveys of those parcels of the Real Property specifically
designated by Huntington. Each survey shall be conducted and prepared by a duly
licensed land surveyor approved by Huntington and Huntington Bank and, unless
otherwise agreed by Huntington and Huntington Bank in writing, shall be a duly
certified ALTA/ACSM field survey, which shall comply with the requirements set
forth in Huntington's Standard Survey Requirements, a copy of which has been
furnished to Winter Park Bank prior to the execution of this Agreement, and
shall confirm that the Real Property is not subject to any easements,
restrictions, set backs, encroachments, or other limitations except utility and
other easements that do not interfere with the use of the Real Property for the
business then being conducted thereon, and that the Real Property is not located
in any flood hazard area.
4.11 ENVIRONMENTAL ASSESSMENT. Winter Park Bank shall obtain and
deliver to Huntington, at Winter Park Bank's expense, on or before the date
which is 60 days after the date of this Agreement, a Phase I Environmental Site
Assessment (the "Phase I Assessment") for each tract of the Real Property from a
consultant acceptable to Huntington. The Phase I Assessment shall be performed
in accordance with the requirements of The Huntington National Bank Phase I
(ESA) Checklist - Minimum Requirements, a copy of which has been furnished to
Winter Park Bank prior to the execution of this Agreement. Each Phase I
Assessment shall reveal no facts that establish a reason to believe that any
Hazardous Substances have been treated, stored, managed, or disposed of on the
Real Property.
4.12 CONFIDENTIALITY. From and after the date of this Agreement, Winter
Park Bank shall, and shall cause its respective Affiliates, employees, and
agents to, treat all Confidential Information of Huntington and Huntington Bank,
as confidential, and Winter Park Bank shall, and shall cause its Affiliates,
employees, and agents to, not use any such Confidential Information for any
purpose except in furtherance of the transactions contemplated hereby. In the
event this Agreement is terminated pursuant to Section 11 hereof, Winter Park
Bank shall, and shall cause its Affiliates, employees, and agents to, promptly
return to Huntington all documents and work papers, and all copies thereof,
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containing any such Confidential Information of Huntington or Huntington Bank.
The covenants of Winter Park Bank contained in this Section 4.12 are of the
essence and shall survive any termination of this Agreement and the closing of
the transactions contemplated hereby.
4.13 TAX REPRESENTATIONS. Winter Park Bank will furnish a letter to
Porter, Wright, Morris & Arthur, as counsel for Huntington and Huntington Bank,
in such form as may be reasonably requested by such counsel, containing, to the
extent the same are true, such representations regarding factual matters as may
be reasonably required in order to enable such counsel to render the tax
opinions referred to in Section 6.04 hereof.
SECTION 5. COVENANTS OF HUNTINGTON AND HUNTINGTON BANK.
Huntington and Huntington Bank covenant and agree as follows:
5.01 PAYMENT OF CONSIDERATION. At the Effective Time, Huntington shall
(i) issue all of the shares of Huntington Common into which shares of Winter
Park Common are to be converted in the Merger and will deliver the certificates
for such shares, or cause the same to be delivered, to the Exchange Agent; and
(ii) deliver to the Exchange Agent the amount of cash to be paid in lieu of
issuing fractional shares of Huntington Common in accordance with Article 4.2 of
the Merger Agreement. The provisions of this Section 5.01 shall survive the
Effective Time and the Closing Date.
5.02 APPLICATIONS FOR REGULATORY APPROVALS. As soon as reasonably
practicable after the date of this Agreement, Huntington shall file such
applications or notices with the OCC, the Florida Department of Banking and
Finance, and any other regulatory authorities having jurisdiction as may be
required to secure all necessary regulatory approvals of the Merger and shall
use its best efforts to secure such approvals. Huntington shall deliver a draft
or drafts of such regulatory applications to Winter Park Bank and provide Winter
Park Bank a reasonable opportunity to review such draft or drafts prior to
filing the same.
5.03 REGISTRATION STATEMENT. As soon as reasonably practicable after
the date hereof, Huntington shall prepare and file the Registration Statement
with the SEC, shall use its best efforts to cause the Registration Statement to
become effective, and shall take such action as may be required to register or
qualify for exemption such shares under the securities laws of the states where
registration or an exemption from registration may be required. Huntington shall
deliver a draft or drafts of the Registration Statement to Winter Park and
provide Winter Park a reasonable opportunity to review such draft or drafts
prior to filing the same.
5.04 CONFIDENTIALITY. From and after the date of this Agreement,
Huntington and Huntington Bank shall, and shall cause their respective
Affiliates, employees, and agents to, treat all Confidential Information of
Winter Park Bank as confidential, and Huntington and Huntington Bank shall, and
shall cause their respective Affiliates, employees, and agents to, not use any
such Confidential Information for any purpose except in furtherance of the
transactions contemplated hereby. In the event this Agreement is terminated
pursuant to Section 11 hereof, Huntington and Huntington Bank shall, and shall
cause their respective Affiliates, employees, and agents to, promptly return to
Winter Park Bank all documents and work papers, and all copies thereof,
containing any such Confidential Information of Winter Park Bank. The covenants
of Huntington and Huntington Bank contained in this Section 5.04 are of the
essence and shall survive any termination of this Agreement, but shall terminate
as of the consummation of the transactions contemplated hereby.
5.05 EMPLOYEE BENEFIT PLANS. Following the Effective Time, Huntington
and Huntington Bank shall (i) provide to employees of Winter Park Bank who
become employees of any Huntington Company after the Effective Time employee
benefits under Huntington Employee Benefit Plans, on terms and conditions which
when taken as a whole are substantially similar to those currently provided
generally by Huntington Bank to its similarly situated employees, (ii) provide
to any person who is employed by Winter Park Bank at the Effective Time and who
is subsequently terminated with benefits pursuant to, but only to the extent
provided by, Huntington's Transition Pay Plan
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as in effect on the date of their termination, and (iii) give credit for
purposes of eligibility, vesting, and such other purposes (other than for the
purpose of benefit accrual under any plans maintained by Huntington) for which
such service is taken into account or recognized, to the extent feasible and
permissible under all applicable laws, rules, and regulations and the applicable
terms of Huntington's Employee Benefit Plans for all service with Winter Park
Bank prior to the Effective Time. The provisions of this Section 5.05 shall
survive the Effective Time and the Closing Date.
5.06 INDEMNIFICATION. For a period of four years after the Effective
Time, Huntington and Huntington Bank shall, to the extent permitted by law,
indemnify, defend, and hold harmless the present and former directors, officers,
employees, and agents of Winter Park Bank (each, an "Indemnified Party") against
all liabilities arising out of actions or omissions arising out of such
Indemnified Party's service or services as a director, officer, employee, or
agent of Winter Park Bank, or, at Winter Park Bank's request, of another
corporation, partnership, joint venture, trust, or other enterprise occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement) to the full extent permitted under federal and/or Florida law, or by
Winter Park Bank's Articles of Incorporation and Bylaws consistent with Florida
law as in effect on the date hereof, whether or not Huntington or Huntington
Bank is insured against such matter, including provisions relating to advances
of expenses incurred in the defense of any litigation, with respect to any
liability, claim, demand, action, or litigation asserted or made prior to or at
any time after the Effective Time. All such rights to indemnification with
respect to any such liability, claim, demand, or action shall continue until the
final disposition of such litigation, claims, liability, demands, and actions
regardless of when such claim, demand, action, litigation, and/or liability was
made or asserted; provided, however, that nothing contained herein shall
increase or lengthen the duration of obligations with respect to such
indemnification by Huntington or Huntington Bank over that to which Winter Park
Bank would have been subject had the Merger not been consummated. The provisions
of this Section 5.06 shall survive the Effective Time and the Closing Date.
Without limiting the foregoing, in any case in which approval by the Surviving
Association is required to effectuate any indemnification, Huntington shall
cause the Surviving Association to direct, at the election of the Indemnified
Party, that the determination of any such approval shall be made by independent
counsel mutually agreed upon between Huntington and the Indemnified Party.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES
The obligations of each of the parties hereto to consummate the Merger
are subject to the fulfillment, on or before the Effective Time, of the
following conditions precedent:
6.01 SHAREHOLDER APPROVAL. The Merger shall have been approved by the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of Winter Park Common.
6.02 REGULATORY APPROVALS. The Merger shall have been approved by the
OCC, the Florida Department of Banking and Finance, and any other governmental
authority having jurisdiction, and any applicable waiting periods shall have
expired, with no such approval or authorization containing any provision which
would be materially adverse to the business of Huntington or Huntington Bank.
6.03 LITIGATION. No suit, action, investigation by any governmental
body, or legal or administrative proceeding shall have been brought or
threatened which materially questions the validity or legality of the
transactions contemplated hereunder or under the Merger Agreement.
6.04 TAX OPINION. Huntington, Huntington Bank, and Winter Park Bank
shall have received an opinion of Porter, Wright, Morris & Arthur substantially
to the effect that no gain or loss will be recognized by Huntington Bank or
Winter Park Bank as a result of the Merger. Porter, Wright, Morris & Arthur's
opinion may be subject to receipt of a favorable Internal Revenue Service
private letter ruling with respect to certain federal income tax consequences of
the Merger and to receipt of any additional representations required to obtain
such ruling.
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6.05 FAIRNESS OPINION. Winter Park Bank shall have received a fairness
opinion from Carson Medlin dated as of the date of the proxy statement to be
delivered to the shareholders of Winter Park Bank in connection with the Merger
and also as of the Effective Date stating that the terms of the Merger are fair
to the shareholders of Winter Park Bank from a financial point of view.
6.06 EFFECTIVENESS OF THE REGISTRATION STATEMENT; NASD LISTING. The
Registration Statement shall have become effective by an Order of the SEC, the
Huntington Common to be exchanged in the Merger shall have been qualified or
exempt under all applicable state securities laws, and there shall be no stop
order issued or threatened by the SEC that suspends or would suspend the
effectiveness of the Registration Statement, and no proceeding shall have been
commenced or overtly threatened for such purpose. The shares of Huntington
Common to be issued to Winter Park shareholders pursuant to the Merger Agreement
shall have been authorized for listing on the Nasdaq National Market upon
official notice of issuance.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF WINTER PARK BANK
The obligations of Winter Park Bank to consummate the Merger are
subject to the fulfillment on or before the Effective Date of the following
additional conditions precedent:
7.01 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties made by Huntington and Huntington Bank herein
shall be true and correct in all material respects on the Effective Date with
the same force and effect as though such representations and warranties had been
made on and as of such date; Huntington and Huntington Bank shall have performed
in all material respects their obligations hereunder and under the Merger
Agreement to be performed on or before the Effective Date; and an executive
officer of Huntington shall have executed and delivered to Winter Park Bank a
certificate or certificates, dated as of the Effective Date, in respect of the
foregoing matters and in respect of such other matters as Winter Park Bank shall
reasonably request.
7.02 OPINION OF COUNSEL. Winter Park Bank shall have received a
favorable opinion, dated as of the Effective Date, from Porter, Wright, Morris &
Arthur, counsel for Huntington, to the effect that:
(a) Huntington and Huntington Bank are duly organized, validly
existing, and in good standing under the laws of the State of Maryland and the
United States, respectively; each of Huntington and Huntington Bank has the
corporate power and authority to own all of its properties and assets and to
carry on its business as presently conducted in all jurisdictions in which such
ownership exists or such business is conducted;
(b) the execution and delivery of this Agreement and the
Merger Agreement did not, and the consummation of the Merger will not, conflict
with any provision of the charter, articles of incorporation or association,
regulations, bylaws, or other charter documents of Huntington or Huntington
Bank; and
(c) the execution and delivery of this Agreement and the
Merger Agreement and the consummation of the Merger have been authorized by all
necessary corporate action of each of Huntington and Huntington Bank; and this
Agreement is a valid and binding agreement of Huntington and Huntington Bank,
and the Merger Agreement is a valid and binding agreement of Huntington Bank, in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, or other similar laws affecting enforcement of creditors' rights
generally and except that the enforceability of the obligations of Huntington
and Huntington Bank is subject to general principles of equity.
Such opinion may be governed by the Accord. In giving such opinion,
such counsel may rely as to matters of fact, without independent investigation,
to the extent such counsel deems such reliance to be customary, reasonable, and
appropriate, on certificates of federal, state, or local government officials
and on certificates of officers and directors of Huntington and Huntington Bank.
Such counsel may expressly exclude any opinions as to choice of law matters and
antitrust matters and may add such other qualifications and explanations of the
basis of its opinions as are consistent with the Accord.
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7.03 MATERIAL ADVERSE CHANGE. Since December 31, 1996, there shall not
have occurred any material adverse change in the consolidated results of
operations, financial condition, properties, or business of Huntington other
than any such change attributable to or resulting from (i) changes in law,
regulation, or generally accepted accounting principles of general application
to the banking or thrift industries, (ii) changes in economic conditions that
affect the banking and thrift industries generally, including changes in the
general level of interest rates, or (iii) any matter or matters relating to
acquisitions announced by Huntington prior to the date of this Agreement.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF HUNTINGTON AND HUNTINGTON BANK
The obligations of Huntington and Huntington Bank to consummate the
Merger are subject to the fulfillment on or before the Effective Date of the
following additional conditions precedent:
8.01 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties made by Winter Park Bank herein shall be true and
correct in all material respects on the Effective Date with the same force and
effect as though such representations and warranties had been made on and as of
such date; Winter Park Bank shall have performed in all material respects its
obligations hereunder and under the Merger Agreement to be performed on or
before the Effective Date; and the Chief Executive Officer and Chief Financial
Officer of Winter Park Bank shall have executed and delivered to Huntington
certificates, dated as of the Effective Date, in respect of the foregoing
matters and in respect of such other matters as Huntington shall reasonably
request.
8.02 OPINION OF COUNSEL. Huntington and Huntington Bank shall have
received a favorable opinion, dated as of the Effective Date, from Shutts &
Bowen, as counsel for Winter Park Bank, reasonably acceptable to Huntington and
Huntington Bank, to the effect that:
(a) Winter Park Bank is a state-chartered bank, duly
organized, validly existing, and in good standing under the laws of the State of
Florida; all eligible accounts of deposit in Winter Park Bank are insured by the
FDIC to the fullest extent permitted by law; all corporate action required to be
taken by the directors and shareholders of Winter Park Bank to authorize the
transactions contemplated by this Agreement and the Merger Agreement have been
taken; and Winter Park Bank has the corporate power to effect the Merger in
accordance with the terms of this Agreement and the Merger Agreement;
(b) the execution and delivery of this Agreement and the
Merger Agreement did not, and the consummation of the Merger will not, conflict
with any provision of the articles of incorporation, bylaws, or other charter
documents of Winter Park Bank;
(c) the execution and delivery of this Agreement and the
Merger Agreement and the consummation of the Merger have been authorized by all
necessary corporate action of Winter Park Bank; and this Agreement and the
Merger Agreement are valid and binding agreements of Winter Park Bank in
accordance with their terms, except as may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting enforcement of creditors' rights
generally and except that the enforceability of the obligations of Winter Park
Bank may be subject to general principles of equity;
(d) Winter Park Bank has the corporate power and authority to
own all of its properties and assets and to carry on its businesses as presently
conducted in all jurisdictions in which such ownership exists or such business
is conducted; Winter Park Bank is not required to be qualified to do business in
any jurisdiction other than Florida; and
(e) such counsel knows of no pending or threatened litigation,
proceeding, or investigation which might result in any material adverse change
in the business, properties, or financial condition of Winter Park Bank.
Such opinion may be governed by the Accord. In giving such opinion,
such counsel may rely as to matters of fact, without independent investigation,
to the extent such counsel deems such reliance to be customary, reasonable, and
appropriate, on certificates of federal, state, or local government officials
and on certificates of officers and directors
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of Winter Park Bank. Such counsel may expressly exclude any opinions as to
choice of law matters and antitrust matters and may add such other
qualifications and explanations of the basis of its opinions as are consistent
with the Accord.
8.03 ACCOUNTANTS' LETTERS. Huntington shall have received from Winter
Park's independent Certified Public Accountants letters dated (i) not more than
three days prior to the date of mailing of the proxy statement to Winter Park
Bank's shareholders for the meeting of shareholders to approve the Merger and
(ii) as of the Effective Date, with respect to certain financial information
regarding Winter Park Bank, in such form and substance as is customary in
transactions of the nature contemplated in this Agreement, and generally in
accordance with SAS 72.
8.04 DISSENTING SHAREHOLDERS. The total number of Dissenting Shares, if
any, as to which the right to dissent has been properly asserted under the
Dissenters' Rights Law shall not exceed five percent of the total number of
outstanding shares of Winter Park Common.
8.05 MATERIAL ADVERSE CHANGE. Since December 31, 1996, there shall not
have occurred any material adverse change in the consolidated results of
operations, financial condition, properties, or business of Winter Park Bank,
other than any such change attributable to or resulting from (i) changes in law,
regulation, or generally accepted accounting principles of general application
to the banking or thrift industries, (ii) changes in economic conditions that
affect the banking and thrift industries generally, including changes in the
general level of interest rates, or (iii) any matter or matters relating to
Winter Park Bank which have been disclosed in the Disclosure Memorandum.
8.06 TITLE TO REAL PROPERTY. Winter Park Bank shall have delivered to
Huntington copies of all fee owner's and leasehold owner's title insurance
commitments for policies in accordance with the requirements of Section 4.09
hereof, together with such updating endorsements and other endorsements as
Huntington or Huntington Bank may reasonably require. All updating endorsements
shall show no change in the record title since the preceding effective dates of
the respective commitments.
8..07 SURVEY. Winter Park Bank shall have delivered to Huntington the
surveys in accordance with the requirements of Section 4.10 hereof.
8.08 ENVIRONMENTAL ASSESSMENTS. Winter Park Bank shall have complied in
all material respects with its obligations under Section 4.11 hereof.
8.09 CONSENTS. Winter Park Bank shall have obtained any and all
Consents that may be required under the terms of (i) any Contract, including,
but not limited to, the types described in Section 2.18 hereof, to which Winter
Park Bank is a party or by which Winter Park Bank, or any of its property or
assets is bound, or (ii) any Permit of Winter Park Bank, in order to avoid the
occurrence of any Default which may result from the consummation of the Merger
and which, if not obtained, is reasonably likely to have, individually or in the
aggregate, a material adverse effect on Winter Park Bank, Huntington, or
Huntington Bank.
8.10 AGREEMENT TO VOTE. Huntington shall have received from each of ten
persons to be selected by Huntington from among Winter Park Bank's directors and
executive officers, an agreement, substantially in the form of the Huntington's
standard form of Shareholders' Agreement, a copy of which has been furnished to
Winter Park Bank prior to the execution of this Agreement, to vote all shares of
Winter Park Common owned by them or over which they have the power to vote in
favor of the approval of the Merger Agreement and this Agreement.
8.11 AGREEMENTS OF AFFILIATES. Each director, officer, and other person
who is an "affiliate" of Winter Park, and their "affiliates," for purposes of
Rule 145 under the 1933 Act, shall deliver to Huntington prior to the Effective
Date a written agreement, in form satisfactory to counsel for Huntington,
providing that such person will not sell, pledge, transfer, or otherwise dispose
of the shares of Huntington Common to be received by such person in the Merger
unless such sales are pursuant to an effective registration statement under the
1933 Act or pursuant to Rule 145 of the SEC or another exemption from the
registration requirements under the 1933 Act.
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8.12 SHAREHOLDERS' EQUITY. The total shareholders' equity of Winter
Park Bank as of the end of the most recent calendar quarter preceding the
Effective Date and as of the Effective Date shall be not less than the total
shareholders' equity of Winter Park Bank as of December 31, 1996, provided,
however, that for the purposes of this Section 8.12, any reduction in the total
shareholders' equity of Winter Park Bank resulting from (i) a decline in the
market value of Winter Park Bank's investment securities; (ii) changes in
generally accepted accounting principles or regulatory accounting requirements;
(iii) expenses related to the transaction contemplated by this Agreement; or (i)
other expenses incurred at the request of Huntington or Huntington Bank, shall
be disregarded.
8.13 WARRANT. Winter Park Bank shall have executed and delivered to
Huntington a Warrant Purchase Agreement substantially in the form attached
hereto as Exhibit A and a Warrant substantially in the form attached as
Attachment 1 to such Warrant Purchase Agreement.
SECTION 9. CLOSING
Unless the parties otherwise agree, the closing of the transactions
contemplated by this Agreement and the Merger Agreement shall be held at 11:00
a.m. at the offices of Porter, Wright, Morris & Arthur in Columbus, Ohio, on the
Closing Date.
SECTION 10. AMENDMENTS
At any time prior to the Effective Date, the parties may modify, amend,
or supplement this Agreement by mutual agreement evidenced by an instrument in
writing executed and delivered by the parties hereto, whether before or after
the shareholders of Winter Park Bank have adopted this Agreement.
SECTION 11. TERMINATION
11.01 TERMINATION. Notwithstanding any other provision of this
Agreement and the Merger Agreement, and notwithstanding the approval of this
Agreement and the Merger Agreement by the shareholders of Winter Park Bank, this
Agreement and the Merger Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time:
(a) By mutual consent of Huntington, Huntington Bank, and
Winter Park Bank;
(b) By any party (provided that the terminating party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty contained in this Agreement of the other party which
cannot be or has not been cured within 30 days after the giving of written
notice to such party of such inaccuracy and which inaccuracy would provide the
other party the ability to refuse to consummate the Merger under the applicable
standard set forth in Section 7.01 of this Agreement in the case of any
termination by Huntington or Huntington Bank and Section 8.01 of this Agreement
in the case of any termination by Winter Park Bank; or
(c) By any party (provided that the terminating party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by the
other party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach; or
(d) By any party (provided that the terminating party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
regulatory authority required for consummation of the Merger and the other
transactions contemplated hereby shall have
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been denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for appeal, or
(ii) the shareholders of Winter Park Bank fail to vote their approval of this
Agreement and the transactions contemplated hereby as required by the National
Bank Act of the Shareholders' Meeting where the transactions were presented to
such shareholders for approval and voted upon; or
(e) By any party in the event that the Merger shall not have
been consummated by February 15, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the party electing to terminate pursuant to this
Section 11.01(e); or
(f) By any party (provided that the terminating party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such party to consummate the Merger cannot be
satisfied or fulfilled by the date specified in Section 11.01(e) of this
Agreement.
11.02 SURVIVAL OF CERTAIN PROVISIONS UPON TERMINATION. Upon a
termination of this Agreement as provided herein, this Agreement and the Merger
Agreement shall become void and there shall be no further obligation or
liability on the part of any party hereto (except for any liability of any party
then in breach in respect of said breach; provided, however, that if this
Agreement is terminated pursuant to Section 11.01 (b) due to a material breach
of a representation or a warranty, such termination shall be the exclusive
remedy of the terminating party so long as the beach was not intentional) or
their respective shareholders, directors, or officers, except pursuant to this
Section 11.02, and Sections 4.12, 5.04, 11.03, and 12 hereof, which shall
survive a termination of this Agreement in accordance with the express terms of
such Sections.
11.03 TERMINATION FEE. If:
(a) prior to the termination of this Agreement, an Acquisition
Proposal is submitted to the shareholders of Winter Park Bank and, prior to May
31, 1999, such Acquisition Proposal is approved by the shareholders of Winter
Park Bank; or
(b) (i) an Acquisition Proposal is received by Winter Park
Bank or is made directly to the shareholders of Winter Park Bank at any time
prior to the holding of the meeting of the shareholders of Winter Park Bank to
be called pursuant to Section 4.02 hereof, (ii) the board of directors of Winter
Park Bank (A) fails to recommend to the shareholders of Winter Park Bank that
they vote their shares of Winter Park Common in favor of the approval of the
Merger Agreement and this Agreement, (B) withdraws such recommendation
previously made, or (C) fails to solicit proxies of shareholders of Winter Park
Bank to approve the Merger Agreement and this Agreement, and (iii) the Merger is
not consummated by May 31, 1999;
then, in either such event, Winter Park Bank shall pay to Huntington, within
five business days after a termination of the Merger Agreement and this
Agreement following such an event, a termination fee in the amount of $442,000
as liquidated damages, and not as a penalty, and, upon the payment in full
thereof, Winter Park Bank shall have no further liability or obligations under
this Agreement or the Merger Agreement other than as stated in Section 11.02
hereof or pursuant to the Warrant Purchase Agreement and the Warrant. The
obligations of Winter Park Bank under this Section 11.03 shall survive a
termination of this Agreement.
SECTION 12. EXPENSES
Except as otherwise expressly provided herein, all expenses incurred by
or on behalf of the parties hereto in connection with the authorization,
preparation, execution, and consummation of this Agreement and the Merger
Agreement, including, without limitation, all fees and expenses of agents,
representatives, printers, and counsel employed by the parties hereto, and
taxes, if any, shall be borne solely by the party which has or shall have
incurred the
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same. The covenants of the parties contained in this Section 12 shall survive a
termination of this Agreement for any reason.
SECTION 13. NOTICES
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by facsimile and confirmed by first-class, certified mail,
postage prepaid, addressed as indicated below, or at such other address as such
party may designate in writing to the other parties:
(a) If to Winter Park Bank, to:
Robert S. Harrell, Chairman
The Bank of Winter Park
2006 Aloma Avenue
Winter Park, Florida 32792
Facsimile number: (407) 629-5937
with a copy to:
Rod Jones, Esq.
Shutts & Bowen
20 North Orange Avenue
Suite 1000
Orlando, Florida 32801
Facsimile number: (407) 425-8316
(b) If to Huntington or Huntington Bank, to:
Zuheir Sofia
President
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Facsimile number: (614) 480-5485
with copies to:
Ralph K. Frasier, Esq.
General Counsel and Secretary
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Facsimile number: (614) 480-5485
and:
Michael T. Radcliffe, Esq.
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
Facsimile number: (614) 227-2100
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SECTION 14. GENERAL PROVISIONS
14.01 ENTIRE AGREEMENT. This Agreement, together with the Merger
Agreement and the documents referred to or incorporated herein or therein,
reflects the entire agreement among the parties with respect to the subject
matter thereof and supersede all prior agreements and understandings, oral or
written, among the parties with respect to such subject matter, and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, or covenants except as specifically set forth
herein or therein.
14.02 WAIVER. At any time on or prior to the Effective Date, any party
hereto may (i) waive any inaccuracies in the representations and warranties of
the other parties contained in this Agreement and the Merger Agreement or in any
document delivered pursuant hereto or thereto, or (ii) waive compliance by the
other parties with any of the conditions, covenants, and agreements contained in
this Agreement or the Merger Agreement.
14.03 ASSIGNMENT. Neither this Agreement nor any rights, interests, or
obligations hereunder shall be assigned or transferred by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other party.
14.04 BENEFIT. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their successors in interest any rights or remedies under or by reason of this
Agreement.
14.05 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, but
such counterparts taken together shall constitute one and the same instrument.
14.06 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio without regard to its conflicts of
laws principles, except to the extent that federal law may apply.
14.07 INCORPORATION BY REFERENCE. The Merger Agreement, the Disclosure
Memorandum, and all Exhibits attached hereto are hereby incorporated by
reference herein.
14.08 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
14.09 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HUNTINGTON BANCSHARES INCORPORATED
By: /s/Zuheir Sofia
------------------------------------------
Zuheir Sofia, President
THE HUNTINGTON NATIONAL BANK
By: /s/Peter E. Geier
-------------------------------------------
Peter E. Geier, President
THE BANK OF WINTER PARK
By: /s/Robert S. Harrell
------------------------------------------
Robert S. Harrell, Chairman
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EXHIBIT A TO SUPPLEMENTAL AGREEMENT
-----------------------------------
WARRANT PURCHASE AGREEMENT
--------------------------
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of May 5,
1997, between HUNTINGTON BANCSHARES INCORPORATED, a Maryland corporation
("Huntington"), and THE BANK OF WINTER PARK, a Florida banking corporation
("Winter Park Bank").
RECITALS
A. Concurrently herewith, The Huntington National Bank, a national
banking association that is a wholly owned subsidiary of Huntington ("Huntington
Bank"), and Winter Park Bank have entered into a certain Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), and Huntington,
Huntington Bank, and Winter Park Bank have entered into a Supplemental
Agreement, dated as of the date hereof (the "Supplemental Agreement"), which
provide for the merger of Winter Park Bank into Huntington Bank (the "Merger").
The Merger Agreement and the Supplemental Agreement are sometimes hereinafter
collectively referred to as the "Merger Documents." All capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them
in the Merger Documents.
B. As a condition to Huntington's and Huntington Bank's entering into
the Merger Documents and in consideration therefor, Winter Park Bank has agreed
to issue to Huntington a warrant or warrants entitling Huntington to purchase up
to a total of 102,856 shares of Winter Park Common, on the terms and conditions
set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. ISSUANCE, DELIVERY, AND EXERCISE OF THE WARRANT.
Concurrently with the execution of the Merger Documents and this Agreement,
Winter Park Bank shall execute a warrant in favor of Huntington in the form
attached as Attachment 1 hereto (the "Warrant") to purchase up to a total of
102,853 shares of Winter Park Common at a purchase price equal to $30.00 per
share (the "Exercise Price"), subject to adjustments as provided in the Warrant.
The holder of the Warrant from time to time is hereinafter referred to as the
"Holder." The Warrant shall be exercisable in accordance with the terms and
conditions set forth therein. Promptly after the date hereof, the parties shall
apply to the Florida Department of Banking and Finance (the "Florida Banking
Department") for approval of the issuance of the Warrant and the parties agree
to use their best efforts to obtain such approval. Upon its execution thereof,
Winter Park Bank shall deliver the Warrant to Shutts & Bowen, acting as escrow
agent for the parties, to be held by Shutts & Bowen in escrow until such time as
the Florida Banking Department shall have approved the Warrant, whereupon Shutts
& Bowen shall promptly deliver the Warrant to Huntington. If the Warrant is
disapproved by the Florida Banking Department or is not approved by the Florida
Banking Department prior to the termination of the Warrant in accordance with
its terms, Shutts & Bowen shall thereupon return the Warrant to Winter Park
Bank. The parties hereby agree that Shutts & Bowen shall have no liability to
any party in connection with the performance of its responsibilities as escrow
agent hereunder except for gross negligence or willful misconduct in the
performance of such obligations.
SECTION 2. REGISTRATION RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, Winter Park Bank shall receive
a written request therefor from the Holder, Winter Park Bank shall
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prepare and file a registration statement under 12 C.F.R. Part 335 (the
"Registration Provisions") if necessary in the opinion of counsel for the Holder
in order to permit the sale or other disposition of any or all shares of Winter
Park Common that have been acquired by the Holder pursuant to an exercise of the
Warrant in accordance with the intended method of sale or other disposition
stated by the Holder in such request. The registration statement shall cover at
least such number of shares of Winter Park Common as the Holder shall specify in
the request and shall use its best efforts to cause such registration statement
to become effective; provided, however, that the Holder shall only have the
right to request three such registrations. Without the written consent of the
Holder, neither Winter Park Bank nor any other holder of securities of Winter
Park Bank may include securities in such registration.
SECTION 3. "PIGGYBACK" RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, Winter Park Bank shall
determine to proceed with the preparation and filing of a registration statement
under the Registration Provisions in connection with the proposed offer and sale
for money of any of its securities (other than in connection with a dividend
reinvestment, employee stock purchase, stock option, or similar plan or in
connection with an acquisition where Winter Park is the surviving corporation
and uses Winter Park Common shares as consideration) by it or any of its
security holders, Winter Park Bank shall give written notice thereof to the
Holder. Upon the written request of the Holder given within ten days after
receipt of any such notice from Winter Park Bank, Winter Park Bank shall, except
as herein provided, cause all shares of Winter Park Common which the Holder
shall request be included in such registration statement to be so included;
provided, however, that nothing herein shall prevent Winter Park Bank from
abandoning or delaying any registration at any time; and provided, further, that
if Winter Park Bank decides not to proceed with a registration after the
registration statement has been filed with the appropriate regulatory agency and
Winter Park Bank's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by Winter Park
Bank, Winter Park Bank shall promptly complete the registration for the benefit
of the Holder if the Holder agrees to bear all additional and incremental
expenses incurred by Winter Park Bank as the result of such registration after
Winter Park Bank has decided not to proceed. If any registration pursuant to
this Section shall be underwritten in whole or in part, the Holder may require
that any shares of Winter Park Common requested for inclusion pursuant to this
Section be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that the
shares of Winter Park Common requested for inclusion pursuant to this Section
would constitute more than 25 percent of the total number of shares to be
included in a proposed underwritten public offering, and if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
all of such shares would interfere with the successful marketing of the shares
of being offered by Winter Park Bank, the number of shares otherwise to be
included in the underwritten public offering hereunder may be reduced; provided,
however, that after any such required reduction, the shares of Winter Park
Common to be included in such offering for the account of the Holder shall
constitute at least 25 percent of the total number of shares to be included in
such offering.
SECTION 4. OBLIGATIONS OF WINTER PARK BANK IN CONNECTION WITH A
REGISTRATION. If and whenever Winter Park Bank is required by the provisions of
Sections 2 or 3 hereof to effect the registration of any shares of Winter Park
Common under the Registration Provisions, Winter Park Bank shall:
(a) prepare and file with the appropriate regulatory agency a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such securities, not
to exceed nine months;
(b) prepare and file with the appropriate regulatory agency
such amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the sale of
such securities, not to exceed nine months;
(c) furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the registration
statement, amendments thereto, preliminary prospectus, final prospectus, and
such other documents as the Holder or such underwriters may reasonably request
in order to facilitate the public offering of such securities;
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(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as the Holder or such underwriters may reasonably
request; provided that Winter Park Bank shall not be required by virtue hereof
to submit to the general jurisdiction of any state;
(e) notify the Holder, promptly after Winter Park Bank shall
receive notice thereof, of the time when such registration statement or any
post-effective amendment thereof has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify the Holder promptly of any request by the
appropriate regulatory agency for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) prepare and file with the appropriate regulatory agency,
promptly upon the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for the
Holder (and concurred in by counsel for Winter Park Bank), is required under the
Regulatory Provisions or the rules and regulations promulgated thereunder in
connection with the distribution of the shares of Winter Park Common by the
Holder;
(h) prepare and promptly file with the appropriate regulatory
agency such amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the time when
a prospectus is required to be delivered under the Regulatory Provisions, any
event shall have occurred as the result of which such prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
appropriate regulatory agency suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(j) at the request of the Holder, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion or opinions of the
counsel representing Winter Park Bank for the purposes of such registration,
addressed to the underwriters and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request and as are customarily
covered by issuer's counsel at that time; and (ii) a letter or letters from the
independent certified public accountants of Winter Park Bank, addressed to the
underwriters and to the Holder, covering such matters as such underwriters or
the Holder may reasonably request, in which letters such accountants shall state
(without limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the Registration Provisions
and that, in the opinion of such accountants, the financial statements and other
financial data of Winter Park Bank included in the registration statement or any
amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Registration Provisions.
SECTION 5. EXPENSES OF REGISTRATION. With respect to a registration
requested pursuant to Section 2 hereof and with respect to each inclusion of
shares of Winter Park Common in a registration statement pursuant to Section 3
hereof, Winter Park Bank shall bear the following fees, costs, and expenses: all
registration, stock exchange listing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for Winter Park Bank, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if Winter Park Bank and/or the Holder are required to bear such fees and
disbursements), and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the Holder, underwriting discounts
and commissions, and transfer taxes relating to the Winter Park Common being
sold for the Holder, and any other expenses incurred by the Holder not expressly
included above shall be borne by the Holder.
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SECTION 6. INDEMNIFICATION.
(a) Winter Park Bank shall indemnify and hold harmless the
Holder, any underwriter (as defined in the Registration Provisions) for the
Holder, and each person, if any, who controls the Holder or such underwriter
within the meaning of the Registration Provisions, from and against any and all
loss, damage, liability, cost, and expense to which the Holder or any such
underwriter or controlling person may become subject under the Registration
Provisions or otherwise, insofar as such losses, damages, liabilities, costs, or
expenses are caused by any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed pursuant to Section
4 hereof, any prospectus or preliminary prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading; provided, however, that
Winter Park Bank will not be liable in any such case to the extent that any such
loss, damage, liability, cost, or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Holder, such underwriter,
or such controlling persons in writing specifically for use in the preparation
thereof and Winter Park Bank and each officer, director, and controlling person
of Winter Park Bank shall be indemnified by Holder or by such underwriter, as
the case may be, for all such losses, damages, liabilities, costs, or expenses
caused by any untrue or alleged untrue statement that was included by Winter
Park Bank in any such registration statement or any prospectus or preliminary
prospectus contained therein, or any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing to Winter
Park Bank by Holder or such underwriter, as the case may be, expressly for such
use.
(b) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) of this Section 6 of notice of the commencement
of any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party shall, if a claim thereof is to be made
against Winter Park Bank pursuant to the provision of such paragraph (a),
promptly notify Winter Park Bank of the commencement thereof; but the omission
to so notify Winter Park Bank will not relieve it from any liability which it
may have to any indemnified party otherwise hereunder. In case such action is
brought against any indemnified party and such indemnified party notifies Winter
Park Bank of the commencement thereof, Winter Park Bank shall have the right to
participate in and, to the extent that it may wish to do so, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any action include both the indemnified party and
Winter Park Bank and there is a conflict of interest which would prevent counsel
for Winter Park Bank from also representing the indemnified party, the
indemnified party or parties shall have the right to select one separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from Winter Park Bank to such indemnified party of its
election so to assume the defense of any such action, the indemnified party
shall have the right to participate in such action and to retain its own
counsel, but Winter Park Bank shall not be required to indemnify and hold
harmless the indemnified party pursuant to the provisions of such paragraph (a)
for any legal fees or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed separate
counsel in accordance with the provisions of the preceding sentence of this
paragraph (b), (ii) Winter Park Bank shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action, or (iii)
Winter Park Bank has authorized the employment of counsel for the indemnified
party at the expense of Winter Park Bank.
(c) If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that contribution
is not permitted under the Registration Provisions. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances.
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SECTION 7. REPURCHASE RIGHTS.
(a) At any time after the Warrant becomes exercisable and
prior to the expiration of the Warrant, in accordance with the terms thereof:
(i) Winter Park Bank may, and upon the written request of the
Holder, Winter Park Bank shall, repurchase the Warrant from the Holder at a
price (the "Warrant Repurchase Price") equal to the difference between the
"Market/Offer Price" (as defined in paragraph (b) below) and the Exercise Price,
multiplied by the number of shares for which the Warrant may then be exercised,
in the aggregate, but only if the Market/Offer Price is greater than the
Exercise Price; and
(ii) Winter Park Bank may, and upon the written request of the
owner (the "Owner") of any shares of Winter Park Common purchased pursuant to an
exercise of the Warrant ("Warrant Stock"), Winter Park Bank shall, repurchase
all of the shares of Warrant Stock held by such Owner at a price (the "Warrant
Stock Repurchase Price") equal to the number of shares to be repurchased
hereunder multiplied by the greater of the Exercise Price and the Market/Offer
Price.
(b) For purposes of paragraph (a) of this Section 7, the
"Market/Offer Price" shall mean the highest of (i) the price per share at which
a tender offer or exchange offer for shares of Winter Park Common has been made,
(ii) the price per share of Winter Park Common to be paid by any third party
pursuant to an agreement with Winter Park Bank, and (iii) the highest closing
price for shares of Winter Park Common within the 4-month period immediately
preceding the date the Holder gives notice of the required repurchase of the
Warrant or the Owner gives notice of the required repurchase of Warrant Stock,
as appropriate. In the event that an exchange offer is made or an agreement is
entered into for a merger or consolidation involving consideration other than
cash, the value of the securities or other property issuable or deliverable in
exchange for Winter Park Common shall be determined by a nationally recognized
investment banking firm mutually acceptable to the parties hereto.
(c) The Holder and the Owner may exercise their respective
rights to require Winter Park Bank to repurchase the Warrant or the Warrant
Stock pursuant to this Section 7 by surrendering for such purpose to Winter Park
Bank, at its principal office, the Warrant or certificates for shares of Warrant
Stock, as the case may be, free and clear of any liens, claims, encumbrances, or
rights of third parties of any kind, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, requests Winter Park
Bank to repurchase such Warrant or Warrant Stock in accordance with the
provisions of this Section 7. Subject to the last proviso of paragraph 7(d)
below, as promptly as practicable, and in any event within five business days
after the surrender of the Warrant or certificates representing shares of
Warrant Stock and the receipt of such notice or notices relating thereto, Winter
Park Bank shall deliver or cause to be delivered to the Holder or Owner the
Warrant Repurchase Price or the Warrant Stock Repurchase Price therefor, as
applicable, or the portion thereof which Winter Park Bank is not then prohibited
under applicable law and regulation from so delivering.
(d) To the extent that Winter Park Bank is prohibited under
applicable law or regulation, or as a result of administrative or judicial
action, from repurchasing the Warrant and/or the Warrant Stock in full at any
time that it may be required to do so hereunder, Winter Park Bank shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Warrant Repurchase Price and the Warrant Stock
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which Winter Park Bank
is no longer so prohibited. Upon receipt of such notice from Winter Park Bank
and for a period of 15 days thereafter, the Holder and/or Owner may revoke its
notice of repurchase of the Warrant and/or Warrant Stock by written notice to
Winter Park Bank at its principal office stating that the Holder and/or the
Owner elects to revoke its election to exercise its right to require Winter Park
Bank to repurchase the Warrant and/or Warrant Stock, whereupon Winter Park Bank
will promptly deliver to the Holder and/or Owner the Warrant and/or certificates
representing shares of Warrant Stock surrendered to Winter Park Bank for
purposes of such repurchase. Whether or not such election is revoked, Winter
Park Bank hereby agrees
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to use its best efforts to obtain all required legal and regulatory approvals
necessary to permit Winter Park Bank to repurchase the Warrant and/or the
Warrant Stock as promptly as practicable.
SECTION 8. ASSIGNMENT; ASSUMPTION OF OBLIGATIONS UNDER THIS AGREEMENT.
Neither this Agreement nor any of the rights, interests, or obligations
hereunder or under the Warrant shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, except that Holder may assign its rights hereunder (A) in whole
but not in part to any affiliate of Holder included in its consolidated group at
any time and (B) in whole or in part after the occurrence of any event described
in paragraph 1(a) of the Warrant as a result of which the Warrant shall be
exercisable. Winter Park Bank will not enter into any transaction described in
paragraph 5(a) of the Warrant unless the "Acquiring Corporation" (as that term
is defined in the Warrant) assumes in writing all the obligations of Winter Park
Bank hereunder.
SECTION 9. REMEDIES. Without limiting the foregoing or any remedies
available to the Holder, Winter Park Bank specifically acknowledges that neither
Huntington nor any successor holder of the Warrant would have an adequate remedy
at law for any breach of this Warrant Purchase Agreement and Winter Park Bank
hereby agrees that Huntington and any successor holder of the Warrant shall be
entitled to specific performance of the obligations of Winter Park Bank
hereunder and injunctive relief against actual or threatened violations of the
provisions hereof.
SECTION 10. TERMINATION. This Agreement will terminate upon a
termination of the Warrant in accordance with Section 9 thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first above written.
HUNTINGTON BANCSHARES INCORPORATED
By:__________________________________
Zuheir Sofia, President
THE BANK OF WINTER PARK
By:__________________________________
Robert S. Harrell, Chairman
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ATTACHMENT 1 TO WARRANT PURCHASE AGREEMENT
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT BEING SO REGISTERED OR QUALIFIED UNLESS AN EXEMPTION OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE.
WARRANT
-------
TO PURCHASE 102,856 SHARES OF THE COMMON STOCK
OF
THE BANK OF WINTER PARK
This is to certify that, for value received, HUNTINGTON BANCSHARES
INCORPORATED, a Maryland corporation ("Huntington"), is entitled to purchase
from THE BANK OF WINTER PARK, a Florida banking corporation ("Winter Park
Bank"), at any time on or after the date hereof, an aggregate of up to 102,856
shares of the common stock, $5.00 par value per share, of Winter Park Bank
("Winter Park Common"), at a price of $30.00 per share (the "Exercise Price"),
subject to the terms and conditions of this Warrant and a certain Warrant
Purchase Agreement, of even date herewith, between Huntington and Winter Park
Bank (the "Warrant Purchase Agreement"). The number of shares of Winter Park
Common which may be received upon the exercise of this Warrant and the Exercise
Price are subject to adjustment from time to time as hereinafter set forth. The
terms and conditions set forth in this Warrant and the Warrant Purchase
Agreement shall be binding upon the respective successors and assigns of both of
the parties hereto.
This Warrant is issued in connection with a certain Agreement and Plan
of Merger, dated as of the date hereof, between The Huntington National Bank, a
national banking association which is a wholly owned subsidiary of Huntington
("Huntington Bank"), and Winter Park Bank (the "Merger Agreement"), and a
certain Supplemental Agreement, dated as of the date hereof, among Huntington,
Huntington Bank, and Winter Park Bank (the "Supplemental Agreement"), which
provide for the merger of Winter Park Bank into Huntington Bank (the "Merger").
The Merger Agreement and the Supplemental Agreement are sometimes hereinafter
collectively referred to as the "Merger Documents." All capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them
in the Merger Documents. The term "Holder" shall mean and refer to Huntington or
any successor holder of this Warrant.
SECTION 1. EXERCISE OF THE WARRANT.
(a) The Holder will not exercise this Warrant unless it has
obtained all required approvals, if any, of appropriate regulatory authorities
having jurisdiction pursuant to all applicable laws and regulations. Further,
subject to the terms and conditions set forth in this Warrant and in the Warrant
Purchase Agreement and the provisions of applicable law, the Holder will not
exercise this Warrant without the written consent of Winter Park Bank, except
upon the occurrence of any of the following events (the events described in each
of the subparagraphs enumerated below shall together constitute a single event
for the purposes hereof):
(i) any material breach of the Merger Documents by Winter
Park Bank which would permit Huntington to terminate the Merger Documents;
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(ii) prior to the meeting of the Winter Park Bank shareholders
duly called and held for the purpose of approving the Merger in accordance with
the terms of the Merger Documents (the "Shareholders' Meeting"), any person or
group of persons (an "Offeror") submits a proposal to Winter Park Bank relating
to (A) the possible sale or other disposition of more than 25 percent of the
shares of the capital stock or any other class of voting securities of Winter
Park Bank, including, but not limited to, an exchange or tender offer therefor,
(B) the possible sale or other disposition of 15% or more of the assets of
Winter Park Bank, or (C) a merger or consolidation involving Winter Park Bank,
other than a transaction pursuant to which Winter Park Bank will be the
surviving corporation and the current shareholders of Winter Park Bank will be
the owners of a majority of the stock of the surviving corporation following the
transaction (any such proposal being referred to herein as an "Acquisition
Proposal") and, within 18 months after the date hereof, Winter Park Bank enters
into an agreement pursuant to such Acquisition Proposal with the Offeror and
such transaction is consummated within such 18-month period;
(iii) prior to the Shareholders' Meeting, any person or group
of persons commences a tender or exchange offer to acquire equity securities of
Winter Park Bank if, after giving effect to such offer, such person or group
would own or have the right to acquire a majority equity interest in Winter Park
Bank (a "Tender Offer"), and such equity interest is acquired pursuant to such
Tender Offer within 18 months after the date hereof; or
(iv) Winter Park Bank enters into an agreement with respect to
an Acquisition Proposal after the date hereof and such transaction is
consummated within 18 months after the date hereof.
(b) As used in this Section 1, "person" or "group of persons"
shall have the meanings assigned to such terms by Section 13(d) of the 1934 Act.
For purposes of this Section 1, a Tender Offer which is contingent upon the
expiration of the Warrant is deemed to commence when it is announced.
(c) This Warrant shall be exercised by presentation and
surrender hereof to Winter Park Bank at its principal office accompanied by (i)
a written notice of exercise for a specified number of shares of Winter Park
Common, (ii) payment to Winter Park Bank, for the account of Winter Park Bank,
of the Exercise Price for the number of shares specified in such notice, and
(iii) a certificate of the Holder stating the event or events that have occurred
which entitle the Holder to exercise this Warrant. The Exercise Price for the
number of shares of Winter Park Common specified in the notice shall be payable
in immediately available funds.
(d) Upon such presentation and surrender, Winter Park Bank
shall issue promptly (and within one business day if requested by the Holder) to
the Holder, or any assignee, transferee, or designee permitted by subparagraph
(f) of this Section 1, the shares to which the Holder is entitled hereunder.
(e) If this Warrant should be exercised in part only, Winter
Park Bank shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder. Upon receipt by Winter Park
Bank of this Warrant, in proper form for exercise, the Holder shall be deemed to
be the holder of record of the shares of Winter Park Common issuable upon such
exercise, notwithstanding that the stock transfer books of Winter Park Bank
shall then be closed or that certificates representing such shares of Winter
Park Common shall not then be actually delivered to the Holder. Winter Park Bank
shall pay all expenses, and any and all federal, state, and local taxes and
other charges that may be payable in connection with the preparation, issue, and
delivery of stock certificates under this Section 1 in the name of the Holder or
of any assignee, transferee, or designee permitted by subparagraph (f) of this
Section 1.
(f) This Warrant, once exercisable, or any warrant shares
acquired by the Holder by its exercise, may be sold or transferred in whole or
in part to any person, subject to the receipt by such person of approvals of
appropriate regulatory authorities having jurisdiction pursuant to all
applicable laws and regulations, to the extent required.
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SECTION 2. CERTAIN COVENANTS AND REPRESENTATIONS OF WINTER PARK BANK.
(a) Winter Park Bank shall at all times maintain sufficient
authorized but unissued shares of Winter Park Common so that this Warrant may be
exercised without additional authorization of the holders of Winter Park Common,
after giving effect to all other options, warrants, convertible securities, and
other rights to purchase Winter Park Common.
(b) Winter Park Bank represents and warrants to the Holder
that, to the extent that the issuance and exercise of this Warrant is permitted
under Florida law and, if the approval of the Florida Department of Banking and
Finance is required in order to issue either the Warrant or the shares of Winter
Park Common to be issued upon an exercise of the Warrant, to the extent that the
issuance of such Warrant or such shares has been approved by the Florida
Department of Banking and Finance, the shares of Winter Park Common issued upon
an exercise of this Warrant will be duly authorized, fully paid, non-assessable,
and subject to no preemptive rights.
(c) Winter Park Bank agrees (i) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution, or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations, or conditions to be
observed or performed hereunder by Winter Park Bank; (ii) promptly to take all
action as may from time to time be required, including, without limitation (A)
complying with all pre-merger notification, reporting, and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (B) in the event, under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), or the Change in Bank Control Act of
1978, or other statute, the prior approval of the Federal Reserve Board or other
regulatory agency (collectively, the "Agencies"), is necessary before the
Warrant may be exercised or transferred, cooperating fully with the Holder in
preparing such applications and providing such information to the Agencies as
the Agencies may require in order to permit the Holder to exercise or transfer
this Warrant and Winter Park Bank duly and effectively to issue shares pursuant
to the exercise hereof; and (iii) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
SECTION 3. FRACTIONAL SHARES. Winter Park Bank shall not be required to
issue fractional shares of Winter Park Common upon an exercise of this Warrant
but shall pay for such fraction of a share in cash or by certified or official
bank check at the Exercise Price.
SECTION 4. EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof at the principal office of Winter Park Bank for other Warrants of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of Winter Park Common purchasable hereunder.
The term "Warrant" as used herein includes any warrants for which this Warrant
may be exchanged. Upon receipt by Winter Park Bank of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Warrant, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, Winter Park Bank will execute and deliver a new Warrant
of like tenor and date.
SECTION 5. CERTAIN TRANSACTIONS.
(a) In case Winter Park Bank shall (i) consolidate with or
merge into any Person, other than Huntington or one of its Affiliates, and shall
not be the continuing or surviving corporation of such consolidation or merger,
(ii) permit any Person, other than Huntington or one of its Affiliates, to merge
into Winter Park Bank and Winter Park Bank shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
Winter Park Common shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (iii) sell or
otherwise transfer all or substantially all of its assets to any Person, other
than Huntington or one of its Affiliates, then, and in any such case, the
agreement governing such transaction shall make proper provision so that this
Warrant shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, a warrant,
at the option of the Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any company which controls the Acquiring Corporation,
or (C) in the case of a merger described in clause (a)(ii) above, Winter Park
Bank, in which case such warrant shall be a newly issued warrant (in any such
case, the "Substitute Warrant").
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(b) For purposes of this Section 5, the following terms have
the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Winter Park Bank (if
other than Winter Park Bank), (B) the corporation merging into Winter Park Bank
in a merger in which Winter Park Bank is the continuing or surviving person and
in connection with which the then outstanding shares of Winter Park Common are
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (C) the transferee of all or substantially all of
Winter Park Bank's assets;
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Warrant;
(iii) "Assigned Value" shall mean the Market/Offer Price as
determined pursuant to paragraph 7(b) of the Warrant Purchase Agreement;
provided, however, that in the event of a sale of all or substantially all of
Winter Park Bank's assets, the Assigned Value shall be the sum of the price paid
in such sale for such assets and the current market value of the remaining
assets of Winter Park Bank as determined by a recognized investment banking firm
selected by the Holder, divided by the number of shares of Winter Park Common
outstanding at the time of such sale;
(iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger, or sale; provided that if Winter Park Bank is the issuer
of the Substitute Warrant, the Average Price shall be computed with respect to a
share of the common stock issued by the Person merging into Winter Park Bank or
by any company which controls such Person, as the Holder may elect;
(v) A "Person" shall mean any individual, firm, corporation
or other entity and include as well any syndicate or group deemed to be a
"person" by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended;
and
(vi) "Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(c) The Substitute Warrant shall have the same terms as this
Warrant provided that if the terms of the Substitute Warrant cannot, for legal
reasons, be the same as this Warrant, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Warrant shall also enter into an agreement with the then Holder of the
Substitute Warrant in substantially the same form as the Warrant Purchase
Agreement, which shall be applicable to the Substitute Warrant.
(d) The Substitute Warrant shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Winter Park Common for which this Warrant
is then exercisable, divided by the Average Price. The exercise price of the
Substitute Warrant per share of Substitute Common Stock shall be equal to the
Exercise Price multiplied by a fraction in which the numerator is the number of
shares of Winter Park Common for which this Warrant is then exercisable and the
denominator is the number of shares of Substitute Common Stock for which the
Substitute Warrant is exercisable.
SECTION 6. RIGHTS OF THE HOLDER; REMEDIES.
(a) The Holder shall not, by virtue hereof, be entitled to any
rights of a holder of Winter Park Common.
(b) Without limiting the foregoing or any remedies available
to the Holder, Winter Park Bank specifically acknowledges that neither
Huntington nor any successor Holder of this Warrant would have an adequate
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remedy at law for any breach of this Warrant and Winter Park Bank hereby agrees
that Huntington and any successor Holder shall be entitled to specific
performance of the obligations of Winter Park Bank hereunder and injunctive
relief against actual or threatened violations of the provisions hereof.
SECTION 7. ANTIDILUTION PROVISIONS. The number of shares of Winter
Park Common purchasable upon the exercise hereof shall be subject to adjustment
from time to time as provided in this Section 7.
(a) In the event that Winter Park Bank issues any additional
shares of Winter Park Common at any time after the date hereof (including
pursuant to stock option plans), the number of shares of Winter Park Common
which can be purchased pursuant to this Warrant shall be increased by an amount
equal to 19.9 percent of the additional shares so issued. Notwithstanding the
above, so long as the total number of shares of Winter Park Common outstanding
and subject to outstanding options does not exceed 491,259 during the term of
this Warrant, the provisions of this Section 7 will be limited in event Winter
Park Bank issues shares of Winter Park Common pursuant to the exercise of
options outstanding on the date hereof so that the maximum number of shares of
Winter Park Common which can be purchased pursuant to this Warrant will be
108,741.
(b) (i) In the event that, after the date hereof, Winter Park Bank pays
or makes a dividend or other distribution of any class of capital stock of
Winter Park Bank in Winter Park Common, the number of shares of Winter Park
Common purchasable upon exercise hereof shall be increased by multiplying such
number of shares by a fraction, of which the denominator shall be the number of
shares of Winter Park Common outstanding at the close of business on the day
immediately preceding the date of such distribution and the numerator shall be
the sum of such number of shares and the total number of shares constituting
such dividend or other distribution, such increase to become effective
immediately after the opening of business on the day following such
distribution.
(ii) In the event that, after the date hereof, outstanding
shares of Winter Park Common are subdivided into a greater number of shares of
Winter Park Common, the number of shares of Winter Park Common purchasable upon
exercise hereof at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately increased,
and, conversely, in the event that, after the date hereof, outstanding shares of
Winter Park Common are combined into a smaller number of shares of Winter Park
Common, the number of shares of Winter Park Common purchasable upon exercise
hereof at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately decreased, such increase
or decrease, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(iii) The reclassification (including any reclassification
upon a merger in which Winter Park Bank is the continuing corporation) of Winter
Park Common into securities including other than Winter Park Common shall be
deemed to involve a subdivision or combination, as the case may be, of the
number of shares of Winter Park Common outstanding immediately prior to such
reclassification into the number of shares of Winter Park Common outstanding
immediately thereafter and the effective date of such reclassification shall be
deemed to be the day upon which such subdivision or combination becomes
effective, as the case may be, within the meaning of clause (ii) above.
(iv) Winter Park Bank may make such increases in the number of
shares of Winter Park Common purchasable upon exercise hereof, in addition to
those required by this paragraph (b), as shall be determined by its Board of
Directors to be advisable in order to avoid taxation so far as practicable of
any dividend of stock or stock rights or any event treated as such for Federal
income tax purposes to the recipients.
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(c) Whenever the number of shares of Winter Park Common
purchasable upon exercise hereof is adjusted pursuant to paragraph (b) above,
the Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction the numerator of which is equal to the number of shares of Winter Park
Common purchasable prior to the adjustment and the denominator of which is equal
to the number of shares of Winter Park Common purchasable after the adjustment.
(d) For the purpose of this Section 7, the term "Winter Park
Common" shall include any shares of Winter Park Bank of any class or series
which has no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution, or winding up of Winter Park Bank and which is not subject to
redemption by Winter Park Bank.
SECTION 8. NOTICE.
(a) Whenever the number of shares of Winter Park Common for
which this Warrant is exercisable is adjusted as provided in Section 7 hereof,
Winter Park Bank shall promptly compute such adjustment and mail to the Holder a
certificate, signed by a principal financial officer of Winter Park Bank,
setting forth the number of shares of Winter Park Common for which this Warrant
is exercisable and the adjusted Exercise Price as a result of such adjustment, a
brief statement of the facts requiring such adjustment, the computation thereof,
and when such adjustment will become effective.
(b) Upon the occurrence of an event which results in this
Warrant and/or the "Warrant Stock" (as such term is defined in the Warrant
Purchase Agreement) becoming repurchasable as provided in Section 7 of the
Warrant Purchase Agreement, Winter Park Bank shall (i) promptly notify the
Holder and/or the "Owner" (as that term is defined in the Warrant Purchase
Agreement) of such event, (ii) promptly compute the "Warrant Repurchase Price"
and the "Warrant Stock Repurchase Price" (as such terms are defined in the
Warrant Purchase Agreement), and (iii) furnish to the Holder and/or the Owner a
certificate, signed by the chief financial officer of Winter Park Bank, setting
forth the Warrant Repurchase Price and/or the Warrant Stock Repurchase Price and
the basis and computation thereof.
(c) Upon the occurrence of an event which results in this
Warrant becoming convertible into, or exchangeable for, the Substitute Warrant,
as provided in Section 5 hereof, Winter Park Bank and the Acquiring Corporation
shall promptly notify the Holder of such event; and, upon receipt from the
Holder of its choice as to the issuer of the Substitute Warrant, the Acquiring
Corporation shall promptly compute the number of shares of Substitute Common
Stock for which the Substitute Warrant is exercisable and furnish to the Holder
a certificate, signed by a principal financial officer of the Acquiring
Corporation, setting forth the number of shares of Substitute Common Stock for
which the Substitute Warrant is exercisable, the Substitute Warrant exercise
price, a computation thereof, and when such adjustment will become effective.
SECTION 9. TERMINATION. This Warrant and the rights conferred hereby
shall terminate upon the earliest of (i) six months after the occurrence of the
first to occur of any of the events described in paragraph 1(a) of this Warrant,
(ii) the Effective Date of the Merger, or (iii) upon termination of the Merger
Documents pursuant to the terms thereof, unless such termination is the result
of any material breach of the Merger Documents by Winter Park which would permit
Huntington to terminate the Merger Document.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
this 5th day of May, 1997.
ATTEST: THE BANK OF WINTER PARK
By: By:
------------------------------- -----------------------------
Robert S. Harrell, Chairman
Title:
----------------------------
B-37
<PAGE> 178
EXHIBIT C
FORM OF
OPINION OF CARSON MEDLIN
Board of Directors
The Bank of Winter Park
2006 Aloma Avenue
Winter Park, FL 32792
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of The Bank of Winter Park ("Winter Park") of the
terms of a certain Agreement and Plan of Merger dated May 22, 1997 (the
"Agreement") pursuant to which Winter Park will be merged into The Huntington
National Bank ("Huntington Bank") (the"Merger"). Huntington Bank is a wholly
owned subsidiary of Huntington Bancshares Incorporated ("Huntington"). Under the
terms of the Agreement, each of the outstanding shares of Winter Park common
stock shall be converted into the right to receive consideration of $30.00 per
share in Huntington common stock. The foregoing summary of the Merger is
qualified in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers, Inc.
(NASD) member investment banking firm which specializes in the securities of
southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Florida and the major commercial banks operating
in that market. We have been retained by Winter Park in a financial advisory
capacity to render our opinion hereunder, for which we will receive
compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of Huntington and Winter Park. We have reviewed:
(i) the Agreement; (ii) the annual reports to shareholders of Huntington,
including audited financial statements for the five years ended December 31,
1996; (iii) audited financial statements of Winter Park for the five years ended
December 31, 1996; (iv) the unaudited interim financial statements of Huntington
for the six months ended June 30, 1997; (v) the unaudited interim financial
statements of Winter Park for the six months ended June 30, 1997; (vi) certain
financial and operation information with respect to the business, operations and
prospects of Huntington and Winter Park; and (vii) this Proxy
Statement/Prospectus. We also: (i) held discussions with members of the senior
management of Huntington and Winter Park regarding historical and current
business operations, financial condition and future prospects of their
respective companies; (ii) reviewed the historical market prices and trading
activity for the common stocks of Huntington and Winter Park and compared them
with those of certain publicly traded companies which we deemed to be relevant;
(iii) compared the results of operations of Huntington and Winter Park with
those of certain banking companies which we deemed to be relevant; (iv) compared
the proposed financial terms of the Merger with the financial terms, to the
extent publicly available, of certain other recent business combinations of
commercial banking organizations; (v) analyzed the pro forma financial impact of
the Merger on Huntington; and (vi) conducted such other studies, analyses,
inquiries and examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of all information provided to us. We have not performed or
considered any independent appraisal or evaluation of the assets of Winter Park
or Huntington. The opinion we express herein is necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.
Based upon the foregoing, it is our opinion that the terms provided for in the
Agreement are fair, from a financial point of view, to the unaffiliated
shareholders of The Bank of Winter Park.
Very truly yours,
<PAGE> 179
EXHIBIT D
RIGHTS OF DISSENTING SHAREHOLDERS
---------------------------------
TITLE 12, SECTION 215A, PARAGRAPHS (B)-(D), OF THE UNITED STATES CODE:
----------------------------------------------------------------------
SECTION 215A MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
. . . .
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF
SHARES; STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertising public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
<PAGE> 180
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation, as amended, provide that it
shall indemnify its directors to the full extent of the general laws of the
State of Maryland now or hereafter in force, including the advance of expenses
to directors subject to procedures provided by such laws; its officers to the
same extent it shall indemnify its directors; and its officers who are not
directors to such further extent as shall be authorized by the Board of
Directors and be consistent with law.
Section 2-418 of the Maryland general corporation law provides, in
substance, that a corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, unless it is proved that the act or omission of
the director was material to the cause of action adjudicated in the proceeding
and was committed in bad faith or was the result of active and deliberate
dishonesty; or the director actually received an improper personal benefit in
money, property, or services; or, in the case of any criminal proceeding, the
director had reasonable cause to believe that the act or omission was unlawful.
Notwithstanding the above, a director may not be indemnified in respect of any
proceeding, by or in the right of the corporation, in which such director shall
have been adjudged liable to the corporation or in respect of any proceeding
charging improper receipt of a personal benefit.
Termination of any proceeding by judgment, order, or settlement does
not create a presumption that the director did not meet the requisite standard
of conduct. Termination of any proceeding by conviction, plea of nolo contendere
or its equivalent, or entry of an order of probation prior to judgment, creates
a rebuttable presumption that the director did not meet the requisite standard
of conduct. Indemnification is not permitted unless authorized for a specific
proceeding, after a determination that indemnification is permissible because
the requisite standard of conduct has been met (1) by a majority of a quorum of
directors not at the time parties to the proceeding (or a majority of a
committee of two or more such directors designated by the full board); (2) by
special legal counsel selected by the board of directors; or (3) by the
stockholders.
The reasonable expenses incurred by a director who is a party to a
proceeding may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding upon receipt by the corporation of both a written
affirmation by the director of his good faith belief that the standard of
conduct necessary for indemnification by the corporation has been met, and a
written undertaking by or on behalf of the director to repay the amount if it
shall be ultimately determined that the standard of conduct has not been met.
The indemnification and advancement of expenses provided or authorized
by Section 2-418 are not exclusive of any other rights to which a director may
be entitled both as to action in his official capacity and as to action in
another capacity while holding such office.
Pursuant to Section 2-418, a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or who, while serving in such capacity, is or was
at the request of the corporation serving as a director, officer, partner,
trustee, employee, or agent of another corporation or legal entity or of an
employee benefit plan, against liability asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the corporation would have the power to indemnify against liability under
Section 2-418. A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, which is not inconsistent with Section
2-418. A subsidiary or an affiliate of the corporation may provide the insurance
or similar protection.
Subject to certain exceptions, the directors and officers of the
Registrant and its affiliates are insured to the extent of 100% of loss up to a
maximum of $35,000,000 (subject to certain deductibles) in each policy year
because of any claim or claims made against them by reason of their wrongful
acts while acting in their capacities as such directors or officers and up to a
maximum of $10,000,000 (subject to certain deductibles) in each policy year
because
<PAGE> 181
of any claim or claims made against them by reason of their wrongful acts while
acting in their capacities as fiduciaries in the administration of certain of
the Registrant's employee benefit programs. The Registrant is insured, subject
to certain retentions and exceptions, to the extent it shall have indemnified
the directors and officers for such loss.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
2(a) Agreement and Plan of Merger, dated May 22, 1997,
between The Huntington National Bank, and The Bank of
Winter Park -- attached as Exhibit A-1 to the
Prospectus filed herewith).
2(b) Supplemental Agreement, dated May 22, 1997, among
Huntington Bancshares Incorporated, The Huntington
National Bank, and The Bank of Winter Park --
attached as Exhibit B-1 to the Prospectus filed
herewith).
2(c) * Warrant Purchase Agreement, dated May 22, 1997,
between Huntington Bancshares Incorporated and The
Bank of Winter Park.
2(d) * Warrant to Purchase 102,856 shares of The Bank of
Winter Park common stock, dated May 22, 1997.
2(e) * Form of Shareholder Agreement, between Huntington
Bancshares Incorporated and certain shareholders of
The Bank of Winter Park.
2(f) * Schedule identifying material details of Shareholder
Agreements substantially identical to Exhibit 2(e)
above.
2(g) Agreement and Plan of Merger, dated May 5, 1997,
between Huntington Bancshares Incorporated and First
Michigan Bank Corporation -- previously filed as
Exhibit A to the Joint Proxy Statement/Prospectus,
dated July 11, 1997, filed with the Securities and
Exchange Commission pursuant to 424(b)(3), and
incorporated herein by reference.
2(h) Supplemental Agreement, dated May 5, 1997, between
Huntington Bancshares Incorporated and First Michigan
Bank Corporation -- previously filed as Exhibit B to
the Joint Proxy Statement/Prospectus, dated July 11,
1997, filed with the Securities and Exchange
Commission pursuant to 424(b)(3), and incorporated
herein by reference.
2(i) Warrant Purchase Agreement, dated May 5, 1997,
between Huntington Bancshares Incorporated and First
Michigan Bank Corporation -- previously filed as
Exhibit 2(c) to Current Report on Form 8-K, filed
with the Securities and Exchange Commission on May 7,
1997.
2(j) Warrant to Purchase 5,268,716 shares of First
Michigan Bank Corporation common stock, dated May 5,
1997 -- previously filed as Exhibit 2(d) to Current
Report on Form 8-K, filed with the Securities and
Exchange Commission on May 7, 1997.
2(k) Agreement Not to Exercise Share Appreciation Rights,
dated May 5, 1997, executed by certain executives of
First Michigan Bank Corporation -- previously filed
as Exhibit 2(e) to
II-2
<PAGE> 182
Registration Statement on Form S-4 (Reg. No.
333-30313), and incorporated herein by reference.
3(i)(a) Articles of Restatement of Charter, Articles of
Amendment to Articles of Restatement of Charter, and
Articles Supplementary -- previously filed as Exhibit
3(i) to Annual Report on Form 10-K for the year ended
December 31, 1993, and incorporated herein by
reference.
3(ii)(b) Amendment to Articles of Restatement of Charter --
previously filed as Exhibit 3(i)(b) to Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1996, and incorporated herein by reference.
3(ii) Bylaws -- previously filed as Exhibit 3(b) to Annual
Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference.
4(a) Instruments defining the Rights of Security Holders
-- reference is made to Articles V, VIII, and X of
Articles of Restatement of Charter, as amended and
supplemented. Instruments defining the rights of
holders of long-term debt will be furnished to the
Securities and Exchange Commission upon request.
4(b) Rights Plan, dated February 22, 1990, between
Huntington Bancshares Incorporated and The Huntington
Trust Company, National Association, -- previously
filed as Exhibit 1 to Registration Statement on Form
8-A, filed with the Securities and Exchange
Commission on February 22, 1990, and incorporated
herein by reference.
4(c) Amendment No. 1 To Rights Plan, dated August 16,
1995, between Huntington Bancshares Incorporated and
The Huntington Trust Company, National Association --
previously filed as Exhibit 4(b) to Current Report on
Form 8-K, filed with the Securities and Exchange
Commission on August 28, 1995, and incorporated
herein by reference.
5 * Opinion of Porter, Wright, Morris & Arthur regarding
legality.
8 * Opinion of Porter, Wright, Morris & Arthur regarding
tax matters.
10(a) Memorandum of Understanding concerning certain
executives of First Michigan Bank Corporation, dated
May 4, 1997, between Huntington Bancshares
Incorporated and First Michigan Bank Corporation --
previously filed as Exhibit 10(a) to Registration
Statement on Form S-4 (Reg. No. 333-30313), and
incorporated herein by reference.
10(b) Employment Agreement, dated April 25, 1996, between
Huntington Bancshares Incorporated and Frank Wobst --
previously filed as Exhibit 10(a) to Quarterly Report
on Form 10-Q for the quarterly period ended June 30,
1996, and incorporated herein by reference.
10(c) Employment Agreement, dated September 16, 1991,
between Huntington Bancshares Incorporated and Zuheir
Sofia -- previously filed as Exhibit 10(b) to Annual
Report on Form 10-K for the year ended December 31,
1991, and incorporated herein by reference.
10(d)(1) Employment Agreement, dated September 16, 1991,
between Huntington Bancshares Incorporated and W. Lee
Hoskins -- previously filed as Exhibit 10(c) to
Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by
reference.
10(d)(2) Notice of Non-Renewal and Amendment of September 16,
1991, Employment Agreement between Huntington
Bancshares Incorporated and W. Lee Hoskins --
previously filed as
II-3
<PAGE> 183
Exhibit 10(c)(1) to Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated
herein by reference.
10(e) Executive Agreement, dated January 22, 1997, between
Huntington Bancshares Incorporated and Frank Wobst --
previously filed as Exhibit 10(d) to Annual Report on
Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10(f) Executive Agreement, dated January 22, 1997, between
Huntington Bancshares Incorporated and Zuheir Sofia
-- previously filed as Exhibit 10(e) to Annual Report
on Form 10-K for the year ended December 31, 1996,
and incorporated herein by reference.
10(g) Executive Agreement, dated September 16, 1991,
between Huntington Bancshares Incorporated and W. Lee
Hoskins -- previously filed as Exhibit 10(f) to
Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by
reference.
10(h) Form of Executive Agreement for certain executive
officers -- previously filed as Exhibit 10(g) to
Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by
reference.
10(i) Schedule identifying material details of Executive
Agreements, substantially similar to Exhibit 10(h) --
previously filed as Exhibit 10(h) to Annual Report on
Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10(j) Huntington Bancshares Incorporated Incentive
Compensation Plan -- previously filed as Exhibit
10(i) to Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1995, and
incorporated herein by reference.
10(k) Huntington Bancshares Incorporated Long-Term
Incentive Compensation Plan, as amended and effective
for performance cycles beginning on or after January
1, 1992 -- previously filed as Exhibit 10(j) to
Annual Report on Form 10-K for the year ended
December 31, 1993, and incorporated herein by
reference.
10(l) Huntington Bancshares Incorporated Long-Term
Incentive Compensation Plan, as amended and effective
for performance cycles beginning on or after January
1, 1996 -- previously filed as Exhibit 10(j)(2) to
Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by
reference.
10(m) Huntington Bancshares Incorporated Supplemental
Executive Retirement Plan -- previously filed as
Exhibit 10(g) to Annual Report on Form 10-K for the
year ended December 31, 1987, and incorporated herein
by reference.
10(n) Huntington Bancshares Incorporated Deferred
Compensation Plan and Trust for Directors --
reference is made to Exhibit 4(a) of Post-Effective
Amendment No. 2 to Registration Statement on Form
S-8, Registration No. 33-10546, filed with the
Securities and Exchange Commission on January 28,
1991, and incorporated herein by reference.
10(o)(1) Huntington Bancshares Incorporated 1983 Stock Option
Plan -- reference is made to Exhibit 4A of
Registration Statement on Form S-8, Registration No.
2-89672, filed with the Securities and Exchange
Commission on February 27, 1984, and incorporated
herein by reference.
10(o)(2) Huntington Bancshares Incorporated 1983 Stock Option
Plan -- Second Amendment -- previously filed as
Exhibit 10(j)(2) to Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated
herein by reference.
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<PAGE> 184
10(o)(3) Huntington Bancshares Incorporated 1983 Stock Option
Plan -- Third Amendment -- previously filed as
Exhibit 10(j)(3) to Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated
herein by reference.
10(o)(4) Huntington Bancshares Incorporated 1983 Stock Option
Plan -- Fourth Amendment -- previously filed as
Exhibit 10(m)(4) to Annual Report on Form 10-K for
the year ended December 31, 1993, and incorporated
herein by reference.
10(o)(5) Huntington Bancshares Incorporated 1983 Stock Option
Plan -- Fifth Amendment -- previously filed as
Exhibit 10(m)(5) to Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated
herein by reference.
10(p)(1) Huntington Bancshares Incorporated 1990 Stock Option
Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No.
33-37373, filed with the Securities and Exchange
Commission on October 18, 1990, and incorporated
herein by reference.
10(p)(2) First Amendment to the Huntington Bancshares
Incorporated 1990 Stock Option Plan -- previously
filed as Exhibit 10(q)(2) to Annual Report on Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference.
10(p)(3) Second Amendment to the Huntington Bancshares
Incorporated 1990 Stock Option Plan -- previously
filed as Exhibit 10(n)(3) to Annual Report on Form
10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10(q) The Huntington Supplemental Stock Purchase and Tax
Savings Plan and Trust (as amended and restated as of
February 9, 1990) -- previously filed as Exhibit 4(a)
to Registration Statement on Form S-8, Registration
No. 33-44208, filed with the Securities and Exchange
Commission on November 26, 1991, and incorporated
herein by reference.
10(r) Huntington Bancshares Incorporated Deferred
Compensation Plan and Trust for Huntington Bancshares
Incorporated Directors -- reference is made to
Exhibit 4(a) of Registration Statement on Form S-8,
Registration No. 33-41774, filed with the Securities
and Exchange Commission on July 19, 1991, and
incorporated herein by reference.
10(s) Huntington Bancshares Incorporated Retirement Plan
For Outside Directors -- previously filed as Exhibit
10(t) to Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference.
10(t) Huntington Supplemental Retirement Income Plan --
previously filed as Exhibit 10(s) to Annual Report on
Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10(u) Huntington Bancshares Incorporated Amended and
Restated 1994 Stock Option Plan -- reference is made
to Exhibit 10(r) to Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated
herein by reference.
21 Subsidiaries of the Registrant -- previously filed as
Exhibit 99(b) to Current Report on Form 8-K, filed
with the Securities and Exchange Commission on July
30, 1997, and incorporated herein by reference.
23(a) Consent of Porter, Wright, Morris & Arthur (included
in Exhibits 5 and 8 filed herewith).
II-5
<PAGE> 185
23(b) * Consent of Ernst & Young LLP regarding the report on
financial statements of Huntington Bancshares
Incorporated.
23(c) * Consent of Rex Meighen & Company regarding the report
on financial statements of The Bank of Winter Park.
23(d) * Consent of KPMG Peat Marwick LLP regarding the report
on financial statements of The Bank of Winter Park
23(e) * Consent of The Carson Medlin Company.
24 * Powers of Attorney.
99(a) * Form of Proxy for Special Meeting of Shareholders of
The Bank of Winter Park
- ---------------------
* Filed herewith
(B) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of the Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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
Securities Act of 1933 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
II-6
<PAGE> 186
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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Registration Statement, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE> 187
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Columbus,
State of Ohio, on September 15, 1997.
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Ralph K. Frasier
-----------------------------
Ralph K. Frasier
Secretary and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*Frank Wobst Chairman and Chief Executive Officer )
- ------------------------------ (principal executive officer )
Frank Wobst )
)
)
)
*Zuheir Sofia President, Chief Operating Officer )
- ------------------------------ Treasurer, and Director )
Zuheir Sofia )
)
)
)
*Gerald R. Williams Executive Vice President and )
- ------------------------------ Chief Financial Officer )
Gerald R. Williams (principal financial officer and )
accounting officer )
)
)
)
*Don M. Casto, III Director )
- ------------------------------ )
Don M. Casto, Iii )
)
)
)
*Don Conrad Director ) September 15, 1997
- ------------------------------ )
Don Conrad )
)
)
*Patricia T. Hayot Director )
- ------------------------------ )
Patricia T. Hayot )
)
)
)
*Wm. J. Lhota Director )
- ------------------------------ )
Wm. J. Lhota )
)
)
)
*Robert H. Schottenstein Director )
- ------------------------------ )
Robert H. Schottenstein )
)
)
)
</TABLE>
II-8
<PAGE> 188
<TABLE>
<S> <C> <C>
*George A. Skestos Director )
- ------------------------------ )
George A. Skestos )
)
)
)
*Lewis R. Smoot, Sr. Director )
- ------------------------------ )
Lewis R. Smoot, Sr. )
)
) September 15, 1997
)
)
*Timothy P. Smucker Director )
- ------------------------------ )
Timothy P. Smucker )
)
)
)
*William J. Williams Director )
- ------------------------------ )
William J. Williams )
)
*By: /s/ Ralph K. Frasier )
- ------------------------------ )
Ralph K. Frasier, attorney-in-fact
for each of the persons indicated
</TABLE>
II-9
<PAGE> 1
EXHIBIT 2(c)
WARRANT PURCHASE AGREEMENT
--------------------------
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of May
22, 1997, between HUNTINGTON BANCSHARES INCORPORATED, a Maryland corporation
("Huntington"), and THE BANK OF WINTER PARK, a Florida banking corporation
("Winter Park Bank").
RECITALS
A. Concurrently herewith, The Huntington National Bank, a national
banking association that is a wholly owned subsidiary of Huntington ("Huntington
Bank"), and Winter Park Bank have entered into a certain Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), and Huntington,
Huntington Bank, and Winter Park Bank have entered into a Supplemental
Agreement, dated as of the date hereof (the "Supplemental Agreement"), which
provide for the merger of Winter Park Bank into Huntington Bank (the "Merger").
The Merger Agreement and the Supplemental Agreement are sometimes hereinafter
collectively referred to as the "Merger Documents." All capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them
in the Merger Documents.
B. As a condition to Huntington's and Huntington Bank's entering into
the Merger Documents and in consideration therefor, Winter Park Bank has agreed
to issue to Huntington a warrant or warrants entitling Huntington to purchase up
to a total of 102,856 shares of Winter Park Common, on the terms and conditions
set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. ISSUANCE, DELIVERY, AND EXERCISE OF THE WARRANT.
Concurrently with the execution of the Merger Documents and this Agreement,
Winter Park Bank shall execute a warrant in favor of Huntington in the form
attached as Attachment 1 hereto (the "Warrant") to purchase up to a total of
102,853 shares of Winter Park Common at a purchase price equal to $30.00 per
share (the "Exercise Price"), subject to adjustments as provided in the Warrant.
The holder of the Warrant from time to time is hereinafter referred to as the
"Holder." The Warrant shall be exercisable in accordance with the terms and
conditions set forth therein. Promptly after the date hereof, the parties shall
apply to the Florida Department of Banking and Finance (the "Florida Banking
Department") for approval of the issuance of the Warrant and the parties agree
to use their best efforts to obtain such approval. Upon its execution thereof,
Winter Park Bank shall deliver the Warrant to Shutts & Bowen, acting as escrow
agent for the parties, to be held by Shutts & Bowen in escrow until such time as
the Florida Banking Department shall have approved the Warrant, whereupon Shutts
& Bowen shall promptly deliver the Warrant to Huntington. If the Warrant is
disapproved by the Florida Banking Department or is not approved by the Florida
Banking Department prior to the termination of the Warrant in accordance with
its terms, Shutts & Bowen shall thereupon return the Warrant to Winter Park
Bank. The parties hereby agree that Shutts & Bowen shall have no liability to
any party in connection with the performance of its responsibilities as escrow
agent hereunder except for gross negligence or willful misconduct in the
performance of such obligations.
SECTION 2. REGISTRATION RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, Winter Park Bank shall receive
a written request therefor from the Holder, Winter Park Bank shall prepare and
file a registration statement under 12 C.F.R. Part 335 (the "Registration
Provisions") if necessary in the opinion of counsel for the Holder in order to
permit the sale or other disposition of any or all shares of Winter Park Common
that have been acquired by the Holder pursuant to an exercise of the Warrant in
accordance with the intended method of sale or other disposition stated by the
Holder in such request. The registration statement shall cover at least such
number of shares of Winter Park Common as the Holder shall specify in the
request and shall use its best efforts
<PAGE> 2
to cause such registration statement to become effective; provided, however,
that the Holder shall only have the right to request three such registrations.
Without the written consent of the Holder, neither Winter Park Bank nor any
other holder of securities of Winter Park Bank may include securities in such
registration.
SECTION 3. "PIGGYBACK" RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, Winter Park Bank shall
determine to proceed with the preparation and filing of a registration statement
under the Registration Provisions in connection with the proposed offer and sale
for money of any of its securities (other than in connection with a dividend
reinvestment, employee stock purchase, stock option, or similar plan or in
connection with an acquisition where Winter Park is the surviving corporation
and uses Winter Park Common shares as consideration) by it or any of its
security holders, Winter Park Bank shall give written notice thereof to the
Holder. Upon the written request of the Holder given within ten days after
receipt of any such notice from Winter Park Bank, Winter Park Bank shall, except
as herein provided, cause all shares of Winter Park Common which the Holder
shall request be included in such registration statement to be so included;
provided, however, that nothing herein shall prevent Winter Park Bank from
abandoning or delaying any registration at any time; and provided, further, that
if Winter Park Bank decides not to proceed with a registration after the
registration statement has been filed with the appropriate regulatory agency and
Winter Park Bank's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by Winter Park
Bank, Winter Park Bank shall promptly complete the registration for the benefit
of the Holder if the Holder agrees to bear all additional and incremental
expenses incurred by Winter Park Bank as the result of such registration after
Winter Park Bank has decided not to proceed. If any registration pursuant to
this Section shall be underwritten in whole or in part, the Holder may require
that any shares of Winter Park Common requested for inclusion pursuant to this
Section be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that the
shares of Winter Park Common requested for inclusion pursuant to this Section
would constitute more than 25 percent of the total number of shares to be
included in a proposed underwritten public offering, and if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
all of such shares would interfere with the successful marketing of the shares
of being offered by Winter Park Bank, the number of shares otherwise to be
included in the underwritten public offering hereunder may be reduced; provided,
however, that after any such required reduction, the shares of Winter Park
Common to be included in such offering for the account of the Holder shall
constitute at least 25 percent of the total number of shares to be included in
such offering.
SECTION 4. OBLIGATIONS OF WINTER PARK BANK IN CONNECTION WITH A
REGISTRATION. If and whenever Winter Park Bank is required by the provisions of
Sections 2 or 3 hereof to effect the registration of any shares of Winter Park
Common under the Registration Provisions, Winter Park Bank shall:
(a) prepare and file with the appropriate regulatory agency a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such securities, not
to exceed nine months;
(b) prepare and file with the appropriate regulatory agency
such amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the sale of
such securities, not to exceed nine months;
(c) furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the registration
statement, amendments thereto, preliminary prospectus, final prospectus, and
such other documents as the Holder or such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as the Holder or such underwriters may reasonably
request; provided that Winter Park Bank shall not be required by virtue hereof
to submit to the general jurisdiction of any state;
2
<PAGE> 3
(e) notify the Holder, promptly after Winter Park Bank shall
receive notice thereof, of the time when such registration statement or any
post-effective amendment thereof has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify the Holder promptly of any request by the
appropriate regulatory agency for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) prepare and file with the appropriate regulatory agency,
promptly upon the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for the
Holder (and concurred in by counsel for Winter Park Bank), is required under the
Regulatory Provisions or the rules and regulations promulgated thereunder in
connection with the distribution of the shares of Winter Park Common by the
Holder;
(h) prepare and promptly file with the appropriate regulatory
agency such amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the time when
a prospectus is required to be delivered under the Regulatory Provisions, any
event shall have occurred as the result of which such prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
appropriate regulatory agency suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(j) at the request of the Holder, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion or opinions of the
counsel representing Winter Park Bank for the purposes of such registration,
addressed to the underwriters and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request and as are customarily
covered by issuer's counsel at that time; and (ii) a letter or letters from the
independent certified public accountants of Winter Park Bank, addressed to the
underwriters and to the Holder, covering such matters as such underwriters or
the Holder may reasonably request, in which letters such accountants shall state
(without limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the Registration Provisions
and that, in the opinion of such accountants, the financial statements and other
financial data of Winter Park Bank included in the registration statement or any
amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Registration Provisions.
SECTION 5. EXPENSES OF REGISTRATION. With respect to a registration
requested pursuant to Section 2 hereof and with respect to each inclusion of
shares of Winter Park Common in a registration statement pursuant to Section 3
hereof, Winter Park Bank shall bear the following fees, costs, and expenses: all
registration, stock exchange listing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for Winter Park Bank, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if Winter Park Bank and/or the Holder are required to bear such fees and
disbursements), and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the Holder, underwriting discounts
and commissions, and transfer taxes relating to the Winter Park Common being
sold for the Holder, and any other expenses incurred by the Holder not expressly
included above shall be borne by the Holder.
SECTION 6. INDEMNIFICATION.
(a) Winter Park Bank shall indemnify and hold harmless the
Holder, any underwriter (as defined in the Registration Provisions) for the
Holder, and each person, if any, who controls the Holder or such underwriter
within the meaning of the Registration Provisions, from and against any and all
loss, damage, liability, cost, and expense to which the Holder or any such
underwriter or controlling person may become subject under the Registration
Provisions or otherwise, insofar as such losses, damages, liabilities, costs, or
expenses are caused by any untrue statement or alleged
3
<PAGE> 4
untrue statement of any material fact contained in any registration statement
filed pursuant to Section 4 hereof, any prospectus or preliminary prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading; provided,
however, that Winter Park Bank will not be liable in any such case to the extent
that any such loss, damage, liability, cost, or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the Holder,
such underwriter, or such controlling persons in writing specifically for use in
the preparation thereof and Winter Park Bank and each officer, director, and
controlling person of Winter Park Bank shall be indemnified by Holder or by such
underwriter, as the case may be, for all such losses, damages, liabilities,
costs, or expenses caused by any untrue or alleged untrue statement that was
included by Winter Park Bank in any such registration statement or any
prospectus or preliminary prospectus contained therein, or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing to Winter Park Bank by Holder or such underwriter, as the
case may be, expressly for such use.
(b) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) of this Section 6 of notice of the commencement
of any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party shall, if a claim thereof is to be made
against Winter Park Bank pursuant to the provision of such paragraph (a),
promptly notify Winter Park Bank of the commencement thereof; but the omission
to so notify Winter Park Bank will not relieve it from any liability which it
may have to any indemnified party otherwise hereunder. In case such action is
brought against any indemnified party and such indemnified party notifies Winter
Park Bank of the commencement thereof, Winter Park Bank shall have the right to
participate in and, to the extent that it may wish to do so, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any action include both the indemnified party and
Winter Park Bank and there is a conflict of interest which would prevent counsel
for Winter Park Bank from also representing the indemnified party, the
indemnified party or parties shall have the right to select one separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from Winter Park Bank to such indemnified party of its
election so to assume the defense of any such action, the indemnified party
shall have the right to participate in such action and to retain its own
counsel, but Winter Park Bank shall not be required to indemnify and hold
harmless the indemnified party pursuant to the provisions of such paragraph (a)
for any legal fees or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed separate
counsel in accordance with the provisions of the preceding sentence of this
paragraph (b), (ii) Winter Park Bank shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action, or (iii)
Winter Park Bank has authorized the employment of counsel for the indemnified
party at the expense of Winter Park Bank.
(c) If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that contribution
is not permitted under the Registration Provisions. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances.
SECTION 7. REPURCHASE RIGHTS.
(a) At any time after the Warrant becomes exercisable and
prior to the expiration of the Warrant, in accordance with the terms thereof:
(i) Winter Park Bank may, and upon the written request of the
Holder, Winter Park Bank shall, repurchase the Warrant from the Holder
at a price (the "Warrant Repurchase Price") equal to the difference
between the "Market/Offer Price" (as defined in paragraph (b) below)
and the Exercise Price, multiplied by the number of shares for which
the Warrant may then be exercised, in the aggregate, but only if the
Market/Offer Price is greater than the Exercise Price; and
4
<PAGE> 5
(ii) Winter Park Bank may, and upon the written request of the
owner (the "Owner") of any shares of Winter Park Common purchased
pursuant to an exercise of the Warrant ("Warrant Stock"), Winter Park
Bank shall, repurchase all of the shares of Warrant Stock held by such
Owner at a price (the "Warrant Stock Repurchase Price") equal to the
number of shares to be repurchased hereunder multiplied by the greater
of the Exercise Price and the Market/Offer Price.
(b) For purposes of paragraph (a) of this Section 7, the
"Market/Offer Price" shall mean the highest of (i) the price per share at which
a tender offer or exchange offer for shares of Winter Park Common has been made,
(ii) the price per share of Winter Park Common to be paid by any third party
pursuant to an agreement with Winter Park Bank, and (iii) the highest closing
price for shares of Winter Park Common within the 4-month period immediately
preceding the date the Holder gives notice of the required repurchase of the
Warrant or the Owner gives notice of the required repurchase of Warrant Stock,
as appropriate. In the event that an exchange offer is made or an agreement is
entered into for a merger or consolidation involving consideration other than
cash, the value of the securities or other property issuable or deliverable in
exchange for Winter Park Common shall be determined by a nationally recognized
investment banking firm mutually acceptable to the parties hereto.
(c) The Holder and the Owner may exercise their respective
rights to require Winter Park Bank to repurchase the Warrant or the Warrant
Stock pursuant to this Section 7 by surrendering for such purpose to Winter Park
Bank, at its principal office, the Warrant or certificates for shares of Warrant
Stock, as the case may be, free and clear of any liens, claims, encumbrances, or
rights of third parties of any kind, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, requests Winter Park
Bank to repurchase such Warrant or Warrant Stock in accordance with the
provisions of this Section 7. Subject to the last proviso of paragraph 7(d)
below, as promptly as practicable, and in any event within five business days
after the surrender of the Warrant or certificates representing shares of
Warrant Stock and the receipt of such notice or notices relating thereto, Winter
Park Bank shall deliver or cause to be delivered to the Holder or Owner the
Warrant Repurchase Price or the Warrant Stock Repurchase Price therefor, as
applicable, or the portion thereof which Winter Park Bank is not then prohibited
under applicable law and regulation from so delivering.
(d) To the extent that Winter Park Bank is prohibited under
applicable law or regulation, or as a result of administrative or judicial
action, from repurchasing the Warrant and/or the Warrant Stock in full at any
time that it may be required to do so hereunder, Winter Park Bank shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Warrant Repurchase Price and the Warrant Stock
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which Winter Park Bank
is no longer so prohibited. Upon receipt of such notice from Winter Park Bank
and for a period of 15 days thereafter, the Holder and/or Owner may revoke its
notice of repurchase of the Warrant and/or Warrant Stock by written notice to
Winter Park Bank at its principal office stating that the Holder and/or the
Owner elects to revoke its election to exercise its right to require Winter Park
Bank to repurchase the Warrant and/or Warrant Stock, whereupon Winter Park Bank
will promptly deliver to the Holder and/or Owner the Warrant and/or certificates
representing shares of Warrant Stock surrendered to Winter Park Bank for
purposes of such repurchase. Whether or not such election is revoked, Winter
Park Bank hereby agrees to use its best efforts to obtain all required legal and
regulatory approvals necessary to permit Winter Park Bank to repurchase the
Warrant and/or the Warrant Stock as promptly as practicable.
SECTION 8. ASSIGNMENT; ASSUMPTION OF OBLIGATIONS UNDER THIS AGREEMENT.
Neither this Agreement nor any of the rights, interests, or obligations
hereunder or under the Warrant shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, except that Holder may assign its rights hereunder (A) in whole
but not in part to any affiliate of Holder included in its consolidated group at
any time and (B) in whole or in part after the occurrence of any event described
in paragraph 1(a) of the Warrant as a result of which the Warrant shall be
exercisable. Winter Park Bank will not enter into any transaction described in
paragraph 5(a) of the Warrant unless the "Acquiring Corporation" (as that term
is defined in the Warrant) assumes in writing all the obligations of Winter Park
Bank hereunder.
SECTION 9. REMEDIES. Without limiting the foregoing or any remedies
available to the Holder, Winter Park Bank specifically acknowledges that neither
Huntington nor any successor holder of the Warrant would have an
5
<PAGE> 6
adequate remedy at law for any breach of this Warrant Purchase Agreement and
Winter Park Bank hereby agrees that Huntington and any successor holder of the
Warrant shall be entitled to specific performance of the obligations of Winter
Park Bank hereunder and injunctive relief against actual or threatened
violations of the provisions hereof.
SECTION 10. TERMINATION. This Agreement will terminate upon a
termination of the Warrant in accordance with Section 9 thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first above written.
HUNTINGTON BANCSHARES INCORPORATED
By: /s/Zuheir Sofia
---------------------------------
Zuheir Sofia, President
THE BANK OF WINTER PARK
By: /s/ Robert S. Harrell
---------------------------------
Robert S. Harrell, Chairman
6
<PAGE> 1
EXHIBIT 2(d)
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT BEING SO REGISTERED OR QUALIFIED UNLESS AN EXEMPTION OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE.
WARRANT
-------
TO PURCHASE 102,856 SHARES OF THE COMMON STOCK
OF
THE BANK OF WINTER PARK
This is to certify that, for value received, HUNTINGTON BANCSHARES
INCORPORATED, a Maryland corporation ("Huntington"), is entitled to purchase
from THE BANK OF WINTER PARK, a Florida banking corporation ("Winter Park
Bank"), at any time on or after the date hereof, an aggregate of up to 102,856
shares of the common stock, $5.00 par value per share, of Winter Park Bank
("Winter Park Common"), at a price of $30.00 per share (the "Exercise Price"),
subject to the terms and conditions of this Warrant and a certain Warrant
Purchase Agreement, of even date herewith, between Huntington and Winter Park
Bank (the "Warrant Purchase Agreement"). The number of shares of Winter Park
Common which may be received upon the exercise of this Warrant and the Exercise
Price are subject to adjustment from time to time as hereinafter set forth. The
terms and conditions set forth in this Warrant and the Warrant Purchase
Agreement shall be binding upon the respective successors and assigns of both of
the parties hereto.
This Warrant is issued in connection with a certain Agreement and Plan
of Merger, dated as of the date hereof, between The Huntington National Bank, a
national banking association which is a wholly owned subsidiary of Huntington
("Huntington Bank"), and Winter Park Bank (the "Merger Agreement"), and a
certain Supplemental Agreement, dated as of the date hereof, among Huntington,
Huntington Bank, and Winter Park Bank (the "Supplemental Agreement"), which
provide for the merger of Winter Park Bank into Huntington Bank (the "Merger").
The Merger Agreement and the Supplemental Agreement are sometimes hereinafter
collectively referred to as the "Merger Documents." All capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them
in the Merger Documents. The term "Holder" shall mean and refer to Huntington or
any successor holder of this Warrant.
SECTION 1. EXERCISE OF THE WARRANT.
(a) The Holder will not exercise this Warrant unless it has
obtained all required approvals, if any, of appropriate regulatory authorities
having jurisdiction pursuant to all applicable laws and regulations. Further,
subject to the terms and conditions set forth in this Warrant and in the Warrant
Purchase Agreement and the provisions of applicable law, the Holder will not
exercise this Warrant without the written consent of Winter Park Bank, except
upon the occurrence of any of the following events (the events described in each
of the subparagraphs enumerated below shall together constitute a single event
for the purposes hereof):
(i) any material breach of the Merger Documents by
Winter Park Bank which would permit Huntington to terminate the Merger
Documents;
1
<PAGE> 2
(ii) prior to the meeting of the Winter Park Bank shareholders
duly called and held for the purpose of approving the Merger in
accordance with the terms of the Merger Documents (the "Shareholders'
Meeting"), any person or group of persons (an "Offeror") submits a
proposal to Winter Park Bank relating to (A) the possible sale or
other disposition of more than 25 percent of the shares of the capital
stock or any other class of voting securities of Winter Park Bank,
including, but not limited to, an exchange or tender offer therefor,
(B) the possible sale or other disposition of 15% or more of the
assets of Winter Park Bank, or (C) a merger or consolidation involving
Winter Park Bank, other than a transaction pursuant to which Winter
Park Bank will be the surviving corporation and the current
shareholders of Winter Park Bank will be the owners of a majority of
the stock of the surviving corporation following the transaction (any
such proposal being referred to herein as an "Acquisition Proposal")
and, within 18 months after the date hereof, Winter Park Bank enters
into an agreement pursuant to such Acquisition Proposal with the
Offeror and such transaction is consummated within such 18-month
period;
(iii) prior to the Shareholders' Meeting, any person or group
of persons commences a tender or exchange offer to acquire equity
securities of Winter Park Bank if, after giving effect to such offer,
such person or group would own or have the right to acquire a majority
equity interest in Winter Park Bank (a "Tender Offer"), and such
equity interest is acquired pursuant to such Tender Offer within 18
months after the date hereof; or
(iv) Winter Park Bank enters into an agreement with respect to
an Acquisition Proposal after the date hereof and such transaction is
consummated within 18 months after the date hereof.
(b) As used in this Section 1, "person" or "group of persons"
shall have the meanings assigned to such terms by Section 13(d) of the 1934 Act.
For purposes of this Section 1, a Tender Offer which is contingent upon the
expiration of the Warrant is deemed to commence when it is announced.
(c) This Warrant shall be exercised by presentation and
surrender hereof to Winter Park Bank at its principal office accompanied by (i)
a written notice of exercise for a specified number of shares of Winter Park
Common, (ii) payment to Winter Park Bank, for the account of Winter Park Bank,
of the Exercise Price for the number of shares specified in such notice, and
(iii) a certificate of the Holder stating the event or events that have occurred
which entitle the Holder to exercise this Warrant. The Exercise Price for the
number of shares of Winter Park Common specified in the notice shall be payable
in immediately available funds.
(d) Upon such presentation and surrender, Winter Park Bank
shall issue promptly (and within one business day if requested by the Holder) to
the Holder, or any assignee, transferee, or designee permitted by subparagraph
(f) of this Section 1, the shares to which the Holder is entitled hereunder.
(e) If this Warrant should be exercised in part only, Winter
Park Bank shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder. Upon receipt by Winter Park
Bank of this Warrant, in proper form for exercise, the Holder shall be deemed to
be the holder of record of the shares of Winter Park Common issuable upon such
exercise, notwithstanding that the stock transfer books of Winter Park Bank
shall then be closed or that certificates representing such shares of Winter
Park Common shall not then be actually delivered to the Holder. Winter Park Bank
shall pay all expenses, and any and all federal, state, and local taxes and
other charges that may be payable in connection with the preparation, issue, and
delivery of stock certificates under this Section 1 in the name of the Holder or
of any assignee, transferee, or designee permitted by subparagraph (f) of this
Section 1.
(f) This Warrant, once exercisable, or any warrant shares
acquired by the Holder by its exercise, may be sold or transferred in whole or
in part to any person, subject to the receipt by such person of approvals of
appropriate regulatory authorities having jurisdiction pursuant to all
applicable laws and regulations, to the extent required.
2
<PAGE> 3
SECTION 2. CERTAIN COVENANTS AND REPRESENTATIONS OF WINTER PARK BANK.
(a) Winter Park Bank shall at all times maintain sufficient
authorized but unissued shares of Winter Park Common so that this Warrant may be
exercised without additional authorization of the holders of Winter Park Common,
after giving effect to all other options, warrants, convertible securities, and
other rights to purchase Winter Park Common.
(b) Winter Park Bank represents and warrants to the Holder
that, to the extent that the issuance and exercise of this Warrant is permitted
under Florida law and, if the approval of the Florida Department of Banking and
Finance is required in order to issue either the Warrant or the shares of Winter
Park Common to be issued upon an exercise of the Warrant, to the extent that the
issuance of such Warrant or such shares has been approved by the Florida
Department of Banking and Finance, the shares of Winter Park Common issued upon
an exercise of this Warrant will be duly authorized, fully paid, non-assessable,
and subject to no preemptive rights.
(c) Winter Park Bank agrees (i) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution, or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations, or conditions to be
observed or performed hereunder by Winter Park Bank; (ii) promptly to take all
action as may from time to time be required, including, without limitation (A)
complying with all pre-merger notification, reporting, and waiting period
requirements specified in 15 U.S.C. ss.18a and regulations promulgated
thereunder, and (B) in the event, under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), or the Change in Bank Control Act of
1978, or other statute, the prior approval of the Federal Reserve Board or other
regulatory agency (collectively, the "Agencies"), is necessary before the
Warrant may be exercised or transferred, cooperating fully with the Holder in
preparing such applications and providing such information to the Agencies as
the Agencies may require in order to permit the Holder to exercise or transfer
this Warrant and Winter Park Bank duly and effectively to issue shares pursuant
to the exercise hereof; and (iii) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
SECTION 3. FRACTIONAL SHARES. Winter Park Bank shall not be required to
issue fractional shares of Winter Park Common upon an exercise of this Warrant
but shall pay for such fraction of a share in cash or by certified or official
bank check at the Exercise Price.
SECTION 4. EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof at the principal office of Winter Park Bank for other Warrants of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of Winter Park Common purchasable hereunder.
The term "Warrant" as used herein includes any warrants for which this Warrant
may be exchanged. Upon receipt by Winter Park Bank of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Warrant, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, Winter Park Bank will execute and deliver a new Warrant
of like tenor and date.
SECTION 5. CERTAIN TRANSACTIONS.
(a) In case Winter Park Bank shall (i) consolidate with or
merge into any Person, other than Huntington or one of its Affiliates, and shall
not be the continuing or surviving corporation of such consolidation or merger,
(ii) permit any Person, other than Huntington or one of its Affiliates, to merge
into Winter Park Bank and Winter Park Bank shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
Winter Park Common shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (iii) sell or
otherwise transfer all or substantially all of its assets to any Person, other
than Huntington or one of its Affiliates, then, and in any such case, the
agreement governing such transaction shall make proper provision so that this
Warrant shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, a warrant,
at the option of the Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any company which controls the Acquiring Corporation,
or (C) in the case of a merger described in clause (a)(ii) above, Winter Park
Bank, in which case such warrant shall be a newly issued warrant (in any such
case, the "Substitute Warrant").
3
<PAGE> 4
(b) For purposes of this Section 5, the following terms have
the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Winter Park
Bank (if other than Winter Park Bank), (B) the corporation merging
into Winter Park Bank in a merger in which Winter Park Bank is the
continuing or surviving person and in connection with which the then
outstanding shares of Winter Park Common are changed into or exchanged
for stock or other securities of any other Person or cash or any other
property, or (C) the transferee of all or substantially all of Winter
Park Bank's assets;
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Warrant;
(iii) "Assigned Value" shall mean the Market/Offer Price as
determined pursuant to paragraph 7(b) of the Warrant Purchase
Agreement; provided, however, that in the event of a sale of all or
substantially all of Winter Park Bank's assets, the Assigned Value
shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Winter Park Bank
as determined by a recognized investment banking firm selected by the
Holder, divided by the number of shares of Winter Park Common
outstanding at the time of such sale;
(iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately
preceding the consolidation, merger, or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger, or sale;
provided that if Winter Park Bank is the issuer of the Substitute
Warrant, the Average Price shall be computed with respect to a share
of the common stock issued by the Person merging into Winter Park Bank
or by any company which controls such Person, as the Holder may elect;
(v) A "Person" shall mean any individual, firm, corporation or
other entity and include as well any syndicate or group deemed to be a
"person" by Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended; and
(vi) "Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(c) The Substitute Warrant shall have the same terms as this
Warrant provided that if the terms of the Substitute Warrant cannot, for legal
reasons, be the same as this Warrant, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Warrant shall also enter into an agreement with the then Holder of the
Substitute Warrant in substantially the same form as the Warrant Purchase
Agreement, which shall be applicable to the Substitute Warrant.
(d) The Substitute Warrant shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Winter Park Common for which this Warrant
is then exercisable, divided by the Average Price. The exercise price of the
Substitute Warrant per share of Substitute Common Stock shall be equal to the
Exercise Price multiplied by a fraction in which the numerator is the number of
shares of Winter Park Common for which this Warrant is then exercisable and the
denominator is the number of shares of Substitute Common Stock for which the
Substitute Warrant is exercisable.
SECTION 6. RIGHTS OF THE HOLDER; REMEDIES.
(a) The Holder shall not, by virtue hereof, be entitled to any
rights of a holder of Winter Park Common.
(b) Without limiting the foregoing or any remedies available
to the Holder, Winter Park Bank specifically acknowledges that neither
Huntington nor any successor Holder of this Warrant would have an adequate
4
<PAGE> 5
remedy at law for any breach of this Warrant and Winter Park Bank hereby agrees
that Huntington and any successor Holder shall be entitled to specific
performance of the obligations of Winter Park Bank hereunder and injunctive
relief against actual or threatened violations of the provisions hereof.
SECTION 7. ANTIDILUTION PROVISIONS. The number of shares of
Winter Park Common purchasable upon the exercise hereof shall be subject to
adjustment from time to time as provided in this Section 7.
(a) In the event that Winter Park Bank issues any additional
shares of Winter Park Common at any time after the date hereof (including
pursuant to stock option plans), the number of shares of Winter Park Common
which can be purchased pursuant to this Warrant shall be increased by an amount
equal to 19.9 percent of the additional shares so issued. Notwithstanding the
above, so long as the total number of shares of Winter Park Common outstanding
and subject to outstanding options does not exceed 491,259 during the term of
this Warrant, the provisions of this Section 7 will be limited in event Winter
Park Bank issues shares of Winter Park Common pursuant to the exercise of
options outstanding on the date hereof so that the maximum number of shares of
Winter Park Common which can be purchased pursuant to this Warrant will be
108,741.
(b) (i) In the event that, after the date hereof, Winter Park
Bank pays or makes a dividend or other distribution of any class of
capital stock of Winter Park Bank in Winter Park Common, the number of
shares of Winter Park Common purchasable upon exercise hereof shall be
increased by multiplying such number of shares by a fraction, of which
the denominator shall be the number of shares of Winter Park Common
outstanding at the close of business on the day immediately preceding
the date of such distribution and the numerator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution, such increase to become effective
immediately after the opening of business on the day following such
distribution.
(ii) In the event that, after the date hereof, outstanding
shares of Winter Park Common are subdivided into a greater number of
shares of Winter Park Common, the number of shares of Winter Park
Common purchasable upon exercise hereof at the opening of business on
the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, in the
event that, after the date hereof, outstanding shares of Winter Park
Common are combined into a smaller number of shares of Winter Park
Common, the number of shares of Winter Park Common purchasable upon
exercise hereof at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately decreased, such increase or decrease, as the case may
be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination
becomes effective.
(iii) The reclassification (including any reclassification
upon a merger in which Winter Park Bank is the continuing
corporation) of Winter Park Common into securities including other
than Winter Park Common shall be deemed to involve a subdivision or
combination, as the case may be, of the number of shares of Winter
Park Common outstanding immediately prior to such reclassification
into the number of shares of Winter Park Common outstanding
immediately thereafter and the effective date of such reclassification
shall be deemed to be the day upon which such subdivision or
combination becomes effective, as the case may be, within the meaning
of clause (ii) above.
(iv) Winter Park Bank may make such increases in the
number of shares of Winter Park Common purchasable upon exercise
hereof, in addition to those required by this paragraph (b), as shall
be determined by its Board of Directors to be advisable in order to
avoid taxation so far as practicable of any dividend of stock or stock
rights or any event treated as such for Federal income tax purposes to
the recipients.
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<PAGE> 6
(c) Whenever the number of shares of Winter Park Common
purchasable upon exercise hereof is adjusted pursuant to paragraph (b) above,
the Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction the numerator of which is equal to the number of shares of Winter Park
Common purchasable prior to the adjustment and the denominator of which is equal
to the number of shares of Winter Park Common purchasable after the adjustment.
(d) For the purpose of this Section 7, the term "Winter Park
Common" shall include any shares of Winter Park Bank of any class or series
which has no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution, or winding up of Winter Park Bank and which is not subject to
redemption by Winter Park Bank.
SECTION 8. NOTICE.
(a) Whenever the number of shares of Winter Park Common for
which this Warrant is exercisable is adjusted as provided in Section 7 hereof,
Winter Park Bank shall promptly compute such adjustment and mail to the Holder a
certificate, signed by a principal financial officer of Winter Park Bank,
setting forth the number of shares of Winter Park Common for which this Warrant
is exercisable and the adjusted Exercise Price as a result of such adjustment, a
brief statement of the facts requiring such adjustment, the computation thereof,
and when such adjustment will become effective.
(b) Upon the occurrence of an event which results in this
Warrant and/or the "Warrant Stock" (as such term is defined in the Warrant
Purchase Agreement) becoming repurchasable as provided in Section 7 of the
Warrant Purchase Agreement, Winter Park Bank shall (i) promptly notify the
Holder and/or the "Owner" (as that term is defined in the Warrant Purchase
Agreement) of such event, (ii) promptly compute the "Warrant Repurchase Price"
and the "Warrant Stock Repurchase Price" (as such terms are defined in the
Warrant Purchase Agreement), and (iii) furnish to the Holder and/or the Owner a
certificate, signed by the chief financial officer of Winter Park Bank, setting
forth the Warrant Repurchase Price and/or the Warrant Stock Repurchase Price and
the basis and computation thereof.
(c) Upon the occurrence of an event which results in this
Warrant becoming convertible into, or exchangeable for, the Substitute Warrant,
as provided in Section 5 hereof, Winter Park Bank and the Acquiring Corporation
shall promptly notify the Holder of such event; and, upon receipt from the
Holder of its choice as to the issuer of the Substitute Warrant, the Acquiring
Corporation shall promptly compute the number of shares of Substitute Common
Stock for which the Substitute Warrant is exercisable and furnish to the Holder
a certificate, signed by a principal financial officer of the Acquiring
Corporation, setting forth the number of shares of Substitute Common Stock for
which the Substitute Warrant is exercisable, the Substitute Warrant exercise
price, a computation thereof, and when such adjustment will become effective.
SECTION 9. TERMINATION. This Warrant and the rights conferred hereby
shall terminate upon the earliest of (i) six months after the occurrence of the
first to occur of any of the events described in paragraph 1(a) of this Warrant,
(ii) the Effective Date of the Merger, or (iii) upon termination of the Merger
Documents pursuant to the terms thereof, unless such termination is the result
of any material breach of the Merger Documents by Winter Park which would permit
Huntington to terminate the Merger Document.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
this 22nd day of May, 1997.
ATTEST: THE BANK OF WINTER PARK
By: /s/ John W. Martin By: /s/ Robert S. Harrell
--------------------------- ----------------------------
Robert S. Harrell, Chairman
Title: Senior Vice President,
Chief Financial Officer
and Secretary
-----------------------
6
<PAGE> 1
EXHIBIT 2(e)
SHAREHOLDER AGREEMENT
THIS AGREEMENT is made between HUNTINGTON BANCSHARES INCORPORATED, a
Maryland corporation ("Huntington"), and the undersigned shareholder of THE BANK
OF WINTER PARK, a bank organized under the laws of the State of Florida ("Winter
Park Bank") (the "Shareholder"), to be effective as of the date it is signed by
the Shareholder, as indicated below.
RECITALS
A. The Shareholder owns or has the power to vote, either exclusive or
shared, _______________ shares of the common stock, $5.00 par value per share,
of Winter Park Bank (together with all shares of such stock which the
Shareholder subsequently acquires or obtains the power to vote, the "Shares").
B. Winter Park Bank has entered into (i) a certain Agreement and Plan
of Merger with The Huntington National Bank ("Huntington Bank"), dated May 22,
1997 (the "Merger Agreement"), and (ii) a certain Supplemental Agreement with
Huntington and Huntington Bank, dated May 22, 1997 (the "Supplemental
Agreement"), pursuant to which Winter Park Bank is to merged with and into
Huntington Bank (the "Merger"), and the shareholders of Winter Park Bank will be
entitled to receive shares of Huntington common stock, without par value, and
cash for their shares of Winter Park common stock. The Merger Agreement and the
Supplemental Agreement are sometimes hereinafter collectively referred to as the
"Merger Documents."
C. Under the terms of the Merger Documents, Winter Park Bank has agreed
to call a meeting of its shareholders for the purpose of voting upon the
approval of the Merger and the Merger Documents (together with any adjournments
thereof, the "Shareholders' Meeting").
D. It is a condition to the obligations of Huntington and Huntington
Bank under the Merger Documents that certain shareholders of Winter Park Bank,
including the Shareholder, shall have agreed to vote their shares of Winter Park
Bank common stock in favor of the Merger.
AGREEMENT
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AGREEMENT TO VOTE. The Shareholder agrees to vote the
Shares as follows:
(a) in favor of the authorization of the Merger and the
approval of the Merger Documents at the Shareholders' Meeting;
(b) against the approval of any proposal relating to a
competing merger or business combination involving an acquisition of Winter Park
Bank or the purchase of all or a substantial portion of the assets of Winter
Park Bank by any person or entity other than Huntington, Huntington Bank, or
another affiliate of Huntington; and
(c) against any other transaction which is inconsistent with
the obligation of Winter Park Bank to consummate the Merger in accordance with
the Merger Documents.
SECTION 2. LIMITATION ON VOTING POWER. It is expressly understood and
acknowledged that nothing contained herein is intended to restrict the
Shareholder from voting on any matter, or otherwise from acting, in the
Shareholder's capacity as a director or officer of Winter Park Bank with respect
to any matter, including but not limited to, the management or operation of
Winter Park Bank.
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<PAGE> 2
SECTION 3. TERMINATION. This Agreement shall terminate on the earlier
of (a) the first anniversary of this Agreement, (b) the date on which the Merger
Documents are terminated in accordance with Section 11 of the Supplemental
Agreement, (c) the date on which the Merger is consummated, or (d) the death of
the Shareholder.
SECTION 4. REPRESENTATIONS, WARRANTIES, AND ADDITIONAL COVENANTS OF THE
SHAREHOLDER. The Shareholder hereby represents and warrants to Huntington that
the Shareholder has the capacity and all necessary power and authority to vote
the Shares and that this Agreement constitutes a legal, valid, and binding
obligation of the Shareholder, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally. The Shareholder further agrees that,
during the term of this Agreement, the Shareholder will not sell or otherwise
voluntarily dispose of any of the Shares which are owned by the Shareholder or
take any other voluntary action which would have the effect of removing the
Shareholder's power to vote the Shares or which would be inconsistent with this
Agreement.
SECTION 5. SPECIFIC PERFORMANCE. The Shareholder hereby acknowledges
that damages would be an inadequate remedy for any breach of the provisions of
this Agreement and agrees that the obligations of the Shareholder hereunder
shall be specifically enforceable and that Huntington shall be entitled to
injunctive or other equitable relief upon such a breach by the Shareholder. The
Shareholder further agrees to waive any bond in connection with the obtaining of
any such injunctive or equitable relief. This provision is without prejudice to
any other rights that Huntington may have against the Shareholder for any
failure to perform his obligations under this Agreement.
SECTION 7. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Ohio, without regard to its
conflicts of laws principles.
IN WITNESS WHEREOF, the undersigned have executed this Shareholder
Agreement as of the date set forth in the Acknowledgment below.
---------------------------------
Signature
---------------------------------
Print Name
ACKNOWLEDGMENT
--------------
STATE OF FLORIDA
COUNTY OF
-------------
The foregoing instrument was acknowledged before me this day of
, 1997, by _________________.
---------------------------------
Notary Public
My Commission expires ___________.
2
<PAGE> 1
EXHIBIT 2(f)
The following is a list of shareholders of The Bank of Winter Park who
are also directors and/or officers and who have signed Shareholder Agreements
substantially in the form of Exhibit 2(e) of this Registration Statement, the
date of each such Shareholder Agreement, and the number of shares beneficially
owned (possessing the power to vote and/or dispose) by the named
director/officer of The Bank of Winter Park.
SHARES OF WINTER
NAME OF DATE OF SHAREHOLDER PARK COMMON STOCK
DIRECTOR/OFFICER AGREEMENT BENEFICIALLY OWNED
Percy B. Bell May 21, 1997 27,316
Robert S. Harrell May 22, 1997 38,467
Gerald Hardage May 21, 1997 10,000
Benjamin F. LePore May 21, 1997 20,000
Gregory J. Mainguth May 30, 1997 850
George J. Norman May 20, 1997 23,918
James G. Norman May 20, 1997 12,362
Eugene A. Polino May 20, 1997 11,242
Ralph Singleton May 20, 1997 46,050
Arnold Wurst May 20, 1997 1,100
-------------------
191,305
<PAGE> 1
EXHIBIT 5
PORTER, WRIGHT, MORRIS & ARTHUR
ATTORNEYS AND COUNSELORS AT LAW
41 SOUTH HIGH STREET
COLUMBUS, OHIO 43215-6194
Telephone: 614-227-2000
Fax: 614-227-2100
September 15, 1997
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Re: Acquisition of The Bank of Winter Park
Ladies and Gentlemen:
With respect to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Huntington Bancshares Incorporated
("Huntington") with the Securities and Exchange Commission relating to the
registration of 550,000 shares of Huntington's common stock, without par value
(the "Stock"), to be issued in connection with the proposed merger (the
"Merger") of The Bank of Winter Park, a Florida banking corporation ("Winter
Park"), with and into The Huntington National Bank, a wholly owned subsidiary of
Huntington ("HNB"), we advise you as follows:
We are counsel for Huntington and HNB and have participated in the
preparation of the Registration Statement. We have reviewed the Agreement and
Plan of Merger, dated May 22, 1997, between HNB and Winter Park, and the related
Supplemental Agreement, dated May 22, 1997, among Huntington, HNB, and Winter
Park (collectively, the "Merger Documents"), Huntington's Articles of
Restatement of Charter, Huntington's Bylaws, the corporate action taken to date
in connection with the Registration Statement and the issuance and sale of the
Stock, and such other documents and authorities as we deem relevant for the
purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
(a) upon the proper approval of the Merger Documents by the
shareholders of Winter Park;
(b) upon the approval of the Merger by the Office of the Comptroller of
the Currency and the expiration of all applicable waiting periods;
(c) upon compliance with the Securities Act of 1933, as amended, and
with the securities or "blue sky" laws of the states in which the Stock is to be
offered for sale; and
(d) upon the "Effective Time," as defined in the Merger Documents;
the Stock, when issued and delivered as provided in the Merger Documents in
accordance with the resolutions adopted by the Board of Directors of Huntington,
will be legally issued, fully paid, and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ PORTER, WRIGHT, MORRIS & ARTHUR
PORTER, WRIGHT, MORRIS & ARTHUR
<PAGE> 1
EXHIBIT 8
PORTER, WRIGHT, MORRIS & ARTHUR
ATTORNEYS AND COUNSELORS AT LAW
41 SOUTH HIGH STREET
COLUMBUS, OHIO 43215-6194
Telephone: 614-227-2000
Fax: 614-227-2100
September 15, 1997
Huntington Bancshares Incorporated
The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
The Bank of Winter Park
2006 Aloma Avenue
Winter Park, Florida 32792
Gentlemen:
We are counsel for Huntington Bancshares Incorporated, a Maryland
corporation ("Huntington"), and The Huntington National Bank, a wholly owned
subsidiary of Huntington ("Huntington Bank"), in connection with the proposed
merger (the "Merger") of The Bank of Winter Park, a banking corporation
organized under the laws of Florida ("Winter Park"), with and into Huntington
Bank pursuant to which the shareholders of Winter Park will receive whole shares
of common stock, without par value, of Huntington ("Huntington Common Stock"),
as set forth in the Agreement and Plan of Merger, between Huntington Bank and
Winter Park, dated as of May 22, 1997 (the "Merger Agreement"), in exchange for
their shares of common stock, $5.00 par value, of Winter Park ("Winter Park
Common Stock"). Following the Merger, the separate existence and corporate
organization of Winter Park will cease. At your request, and pursuant to Section
6.04 of the Supplemental Agreement among Huntington, Huntington Bank, and Winter
Park, dated as of May 22, 1997 (the "Supplemental Agreement"), we are rendering
our opinion concerning certain federal income tax consequences of the Merger.
In that connection, we have examined and relied upon originals, or
copies certified or otherwise identified to our satisfaction, of such records,
documents and other instruments, and such other matters of fact and law, as we
have considered necessary or appropriate for the purposes of this opinion,
including an examination of: (i) the Merger Agreement, the Supplemental
Agreement, and the other documents and agreements referred to therein (the
"Merger Documents"); and (ii) the Proxy Statement/Prospectus (the "Prospectus")
relating to the Merger and included in the Registration Statement of Huntington
on Form S-4 filed by Huntington with the Securities and Exchange Commission. 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 the original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
For purposes of the opinion set forth below, we are relying, with the
consent of Huntington and Winter Park, upon the accuracy and completeness of
certain statements and representations (which statements and representations we
have neither investigated nor verified) that will be contained, respectively, in
certificates of the officers of Huntington and Winter Park and certain
shareholders of Winter Park and we have assumed that such certificates will be
complete and accurate as of the Effective Time. We have also assumed that the
transactions contemplated by the Merger Documents will be consummated in
accordance with the Merger Documents and that the Merger will constitute a
merger pursuant to the applicable provisions of the laws of the United States
and the laws of the State of Florida.
<PAGE> 2
Huntington Bancshares Incorporated
The Huntington National Bank
The Bank of Winter Park
September 15, 1997
Page 2
Unless otherwise specified, the section numbers cited herein refer to
sections in the Internal Revenue Code of 1986, as amended (the "Code"). All
capitalized terms not otherwise defined herein shall have the meanings assigned
to them in the Merger Agreement. For the purposes of the rendering of this
opinion, we have assumed that the officers of Huntington and Winter Park will
have made the following representations by the Effective Date and upon which we
are relying in rendering this opinion:
a. The fair market value of the Huntington Common Stock and
other consideration received by each Winter Park shareholder
will be approximately equal to the fair market value of the
Winter Park Common Stock surrendered in the Merger.
b. To the best of the knowledge of the management of Winter
Park, there is no plan or intention on the part of the
shareholders of Winter Park to sell, exchange, or otherwise
dispose of a number of shares of Huntington Common Stock to
be received in the Merger that would reduce the Winter Park
shareholders' ownership of Huntington Common Stock to a
number of shares having a value on the Effective Time of
less than 50 percent of the value of all of the formerly
outstanding Winter Park Common Stock as of the same date.
For purposes of this representation, shares of Winter Park
Common Stock exchanged for cash pursuant to the exercise of
appraisal rights or exchanged for cash in lieu of fractional
shares of Huntington Common Stock will be treated as
outstanding Winter Park Common on the Effective Time.
Moreover, shares of Winter Park Common Stock and shares of
Huntington Common Stock held by Winter Park shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent
to the Merger have been considered in making this
representation.
c. Huntington Bank will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of
the fair market value of the gross assets held by Winter
Park immediately prior to the Merger. For purposes of this
representation, amounts paid by Winter Park to shareholders
who receive cash pursuant to the exercise of appraisal
rights or in lieu of the issuance of fractional shares of
Huntington Common Stock, Winter Park assets used to pay its
reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by
Winter Park immediately preceding the transfer, will be
included as assets of Winter Park held immediately prior to
the Merger.
d. Prior to the transaction, Huntington will be in control of
Huntington Bank within the meaning of Section 368(c) of the
Code.
e. Following the transaction, Huntington Bank will not issue
additional shares of its stock that would result in
Huntington losing control of Huntington Bank within the
meaning of Section 368(c) of the Code.
f. Huntington has no plan or intention to liquidate Huntington
Bank; to merge Huntington Bank with and into another
corporation; to sell or otherwise dispose of the stock of
Huntington Bank; or to cause Huntington Bank to sell or
otherwise dispose of any of the assets of Winter Park
acquired in the Merger, except for dispositions made in the
ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code.
g. The liabilities of Winter Park assumed by Huntington Bank
and the liabilities to which the transferred assets of
Winter Park are subject were incurred by Winter Park in the
ordinary course of its businesses.
<PAGE> 3
Huntington Bancshares Incorporated
The Huntington National Bank
The Bank of Winter Park
September 15, 1997
Page 3
h. Huntington has no plan or intention to redeem or otherwise
reacquire any Huntington Common Stock issued in connection
with the Merger, other than through stock purchases in the
open market of Huntington's widely held stock, which
Huntington will acquire pursuant to the ordinary operation
of a stock repurchase program entered into for good business
purposes seperate and distinct from the Merger. There is no
plan or intention that the aggregate amount of stock so
purchased will equal or exceed 20 percent of the outstanding
Huntington Common Stock. In no event will Huntington redeem
or otherwise reacquire any Huntington Common Stock issued in
the transaction that would reduce the former Winter Park
shareholders' ownership of Huntington Common Stock to a
number of shares having a value on the Effective Date of the
Merger of less than 50% of the value of the formally
outstanding Winter Park Common Stock on the same date.
i. Following the Merger, Huntington Bank will continue the
historic business of Winter Park or use a significant
portion of Winter Park's business assets in its business.
j. Huntington, Huntington Bank, Winter Park, and the
shareholders of Winter Park will each pay their respective
expenses, if any, incurred in connection with the Merger.
k. There is no intercorporate indebtedness existing between
Huntington and Winter Park or between Huntington Bank and
Winter Park that was issued, acquired, or will be settled at
a discount.
l. No party to the transaction is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
m. The fair market value of the assets of Winter Park
transferred to Huntington Bank in the Merger will equal or
exceed the sum of the liabilities assumed by Huntington
Bank, plus the amount of liabilities, if any, to which the
transferred assets are subject.
n. Neither Huntington, Huntington Bank, nor Winter Park is
under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
o. No stock of Huntington Bank will be issued in the
transaction.
p. None of the compensation received by any
shareholder-employee of Winter Park will be separate
consideration for, or allocable to, any of his or her shares
of Winter Park Common Stock; none of the shares of
Huntington Common Stock received by any shareholder-employee
of Winter Park will be separate consideration for, or
allocable to, any employment agreement; and the compensation
paid to any shareholder-employee of Winter Park will be for
services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for
similar services.
q. Neither Huntington nor Huntington Bank owned any shares of
Winter Park Common Stock prior to the Merger.
r. No material dividends or distributions have been or will be
made with respect to the Winter Park Common Stock in
contemplation of the Merger, except for dividends normal and
customary in amount.
<PAGE> 4
Huntington Bancshares Incorporated
The Huntington National Bank
The Bank of Winter Park
September 15, 1997
Page 4
s. The payment of cash in lieu of fractional shares of
Huntington Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Huntington of
issuing fractional shares and does not represent separately
bargained for consideration. The total cash consideration
that will be paid in the Merger to Winter Park shareholders
instead of issuing fractional shares of Huntington Common
Stock will not exceed one percent of the total consideration
that will be issued in the Merger to Winter Park
shareholders for their shares of Winter Park Common Stock.
The fractional share interests of each Winter Park
shareholder will be aggregated, and no Winter Park
shareholder will receive cash in an amount greater than the
value of one full share of Huntington Common Stock with
respect to any cash payment in lieu of a fractional share.
t. The Merger will be consummated solely in compliance with the
material terms and conditions of the Merger Agreement and
the Merger Agreement represents the entire understanding of
the Parties with respect to the Merger.
In reliance on the assumptions and the representations set forth
above, and assuming that the shareholders of Winter Park do not sell, exchange,
transfer by gift, or otherwise dispose of a number of shares of Huntington
Common Stock received in the Merger that would reduce the ownership of
Huntington Common Stock by the former shareholders of Winter Park to a number of
shares having a value, as of the date of the Merger, of less than 50 percent of
the total value of all of the formerly outstanding Winter Park Common Stock as
of the same date, and conditioned upon the receipt or confirmation of the
representations in connection with the Merger set forth above upon the Closing,
we are of the opinion that:
(a) No gain or loss will be recognized by a Winter Park
shareholder who receives solely shares of Huntington Common
Stock in exchange for such shareholder's shares of Winter
Park Common Stock, except to the extent that such
shareholder receives any cash in lieu of the issuance of a
fractional share of Huntington Common Stock.
(b) Where solely cash is received by a Winter Park shareholder
in exchange for such shareholder's shares of Winter Park
Common Stock pursuant to the exercise of appraisal rights,
the cash will be treated as having been received by such
shareholder as a distribution in redemption of his or her
Winter Park Common Stock, subject to the provisions and
limitations of Section 302 of the Code.
(c) The payment of cash in lieu of fractional share interests of
Huntington Common Stock will be treated for federal income
tax purposes as if the fractional shares were distributed as
part of the exchange and then were redeemed by Huntington.
These cash payments will be treated as having been received
as distributions in full payment in exchange for the
Huntington Common Stock redeemed subject to the conditions
and limitations of Section 302 of the Code.
(d) The tax basis of the shares of Huntington Common Stock to be
received by a Winter Park shareholder will be the same as
the basis of the Winter Park Common Stock surrendered in
exchange for such Huntington Common Stock, reduced by any
amount allocated to a fractional share of Huntington Common
Stock with respect to which cash is received.
(e) The holding period of the shares of Huntington Common Stock
to be received by a particular Winter Park shareholder will
include the holding period of the shares of Winter Park
Common Stock
<PAGE> 5
Huntington Bancshares Incorporated
The Huntington National Bank
The Bank of Winter Park
September 15, 1997
Page 5
surrendered in exchange, provided that such shares of Winter
Park Common Stock were held as a capital asset in the hands
of the Winter Park shareholder on the Effective Date.
(f) No gain or loss will be recognized by Huntington or
Huntington Bank (except for the inclusion in income of
amounts resulting from any required changes in accounting
methods or similar items) upon the consummation of the
Merger.
(g) No gain or loss will be recognized by Winter Park (except
for the inclusion in income of amounts resulting from any
required changes in accounting methods or similar items)
upon the consummation of the Merger.
We have given this opinion pursuant to Section 6.04 of the
Supplemental Agreement in connection with the transactions contemplated thereby
and such opinion is not to be relied upon for any other purpose. This opinion
may not be applicable to (i) Winter Park shareholders whose Winter Park Common
Stock is not held as a capital asset; (ii) certain particular classes of
shareholders, such as non-United States citizens, broker-dealers, certain
retirement plans, financial institutions, or insurance companies; or (iii)
Winter Park shareholders who acquired their Winter Park Common Stock through the
exercise of an employee stock option or otherwise as compensation. No opinion is
expressed about the tax treatment of the transaction under other provisions of
the Code and the Treasury Regulations issued thereunder or about the tax
treatment of any conditions existing at the time of, or effects resulting from,
the transaction that are not specifically addressed by the foregoing opinion. No
opinion is expressed as to the effect of state, local, and foreign tax laws.
You should be aware that this opinion represents our conclusions as
to the application of existing law and is based on the representations given as
of the date hereof. The statutory provisions, regulations, interpretations, and
other authorities upon which our opinion is based are subject to change, and
such changes could apply retroactively. In addition, no advance ruling has been
obtained from the Internal Revenue Service and there can be no assurance that
positions contrary to those stated in our opinion will not be taken by the
Internal Revenue Service. No person other than the addressees named herein may
rely on this opinion for any purpose.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. By giving this consent, however, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Commission thereunder.
Very truly yours,
/s/PORTER, WRIGHT, MORRIS & ARTHUR
PORTER, WRIGHT, MORRIS & ARTHUR
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Prospectus of Huntington
Bancshares Incorporated for the registration of 550,000 shares of its common
stock and to the incorporation by reference therein of our report dated January
15, 1997, with respect to the consolidated financial statements of Huntington
Bancshares Incorporated incorporated by reference in the Annual Report on Form
10-K for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Columbus, Ohio
September 15, 1997
<PAGE> 1
EXHIBIT 23(c)
REX MEIGHEN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
509 S. HYDE PARK AVENUE
POST OFFICE BOX 1790, TAMPA, FL 33601-1790
(813) 251-1010 - FAX (813) 251-9253
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of Huntington
Bancshares Incorporated on Form S-4 of our report dated March 11, 1997, relating
to the consolidated balance sheet of The Bank of Winter Park and subsidiary as
of December 31, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended, and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ Rex Meighen & Company
Rex Meighen & Company
Certified Public Accountants
Tampa, Florida
September 15, 1997
<PAGE> 1
EXHIBIT 23(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Proxy Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
September 12, 1997
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF THE CARSON MEDLIN COMPANY
We hereby consent to the inclusion as Appendix C to the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form S-4
of Huntington Bancshares Incorporated of our letter to the Board of Directors of
The Bank of Winter Park and to the references made to such letter and to the
firm in such Proxy Statement/Prospectus. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ THE CARSON MEDLIN COMPANY
THE CARSON MEDLIN COMPANY
Tampa, Florida
September 12, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
(Re: Acquisition of The Bank of Winter Park)
Each of the undersigned officers and directors of HUNTINGTON BANCSHARES
INCORPORATED (the "Corporation") hereby appoints RALPH K. FRASIER, ZUHEIR SOFIA,
and GERALD R. WILLIAMS as his or her attorneys, and any of them, with power to
act without the others, as his or her attorney, to sign, in his or her name and
on his or her behalf, and in any and all capacities stated below, and to cause
to be filed with the Securities and Exchange Commission (the "Commission"), the
Corporation's Registration Statement on Form S-4 (the "Registration Statement")
for the purpose of registering under the Securities Act of 1933, as amended, a
maximum of 550,000 authorized and unissued shares of the common stock, without
par value, of the Corporation (as such number of shares may be adjusted from
time to time for stock dividends, stock splits, or similar transactions
affecting the common stock of the Corporation generally), in connection with the
proposed merger of The Bank of Winter Park into The Huntington National Bank,
and any and all amendments, including post-effective amendments, to the
Registration Statement, hereby granting to such attorneys, and to each of them,
individually, full power and authority to do and perform in the name and on
behalf of each of the undersigned, and in any and all such capacities, every act
and thing whatsoever necessary to be done in and about the premises as fully as
any of the undersigned could or might do in person, hereby granting to each such
attorney-in-fact full power of substitution and revocation and hereby ratifying
all that any such attorney-in-fact or his substitute may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have signed these presents as of
the dates indicated next to their respective signatures below.
<TABLE>
<S> <C> <C>
/s/ Frank Wobst Chairman, Chief Executive Officer, September 15, 1997
- ------------------------------------------- and Director
Frank Wobst (principal executive officer)
/s/ Zuheir Sofia President, Chief Operating Officer, September 15, 1997
- ------------------------------------------- Treasurer, and Director
Zuheir Sofia
/s/ Gerald R. Williams Executive Vice President and Chief September 15, 1997
- ------------------------------------------- Financial Officer
Gerald R. Williams (principal financial officer and
principal accounting officer)
/s/ Don Conrad Director September 15, 1997
- -------------------------------------------
Don Conrad
/s/ Don M. Casto III Director September 15, 1997
- -------------------------------------------
Don M. Casto III
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
/S/ Patricia T. Hayot
- -------------------------------------------
Patricia T. Hayot Director September 15, 1997
/s/ Wm. J. Lhota Director September 15, 1997
- -------------------------------------------
Wm. J. Lhota
/s/ Robert H. Schottenstein Director September 15, 1997
- -------------------------------------------
Robert H. Schottenstein
/s/ George A. Skestos Director September 15, 1997
- -------------------------------------------
George A. Skestos
/s/ Lewis R. Smoot, Sr. Director September 15, 1997
- -------------------------------------------
Lewis R. Smoot, Sr.
/s/ Timothy P. Smucker Director September 15, 1997
- -------------------------------------------
Timothy P. Smucker
/s/ William J. Williams Director September 15, 1997
- -------------------------------------------
William J. Williams
</TABLE>
<PAGE> 1
EXHIBIT 99(a)
THE BANK OF WINTER PARK
PROXY
The undersigned hereby constitutes and appoints ____________,
_______________, and _____________, or any of them, as proxies, each with full
power of substitution, to vote the number of shares of common stock of The
Bank of Winter Park ("Winter Park") which the undersigned would be entitled to
vote if personally present at the Special Meeting of Shareholders of Winter
Park to be held at the main office of Winter Park which is located at 2006
Aloma Avenue, Winter Park, Florida, on ________________, 1997, at 7:00 p.m.,
local time, and at any adjournments or postponements thereof (the "Special
Meeting"), upon the proposals described in the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus") and the Notice of Special Meeting of
Shareholders, both dated __________, 1997, the receipt of which is hereby
acknowledged by the undersigned, in the manner specified below.
1. To approve the Agreement and Plan of Merger, dated May 22, 1997,
between The Huntington National Bank ("Huntington Bank") and Winter
Park, and the related Supplemental Agreement, dated May 22, 1997, among
Huntington Bancshares Incorporated ("Huntington"), Huntington Bank, and
Winter Park (collectively, the "Merger Documents"), and the
transactions contemplated therein, including (i) the merger of Winter
Park with and into Huntington Bank, and (ii) the conversion of each
share of issued and outstanding Winter Park common stock into the right
to receive whole shares of Huntington common stock (cash will be paid
for any fractional shares), all as more fully described in the
accompanying Proxy Statement/Prospectus.
FOR / / AGAINST / / ABSTAIN / /
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as your name appears below and return this Proxy in the
enclosed postage-paid envelope. When shares are held jointly, each shareholder
should sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by an authorized person. In addition, please
date this Proxy.
--------------------------------
Signature
--------------------------------
Signature of other Shareholder
(if held jointly)
DATED: _________________, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
THE BANK OF WINTER PARK AND MAY BE REVOKED AT ANY
TIME PRIOR TO ITS EXERCISE.
