[REPUBLIC SECURITY FINANCIAL CORPORATION LOGO]
REPUBLIC SECURITY FINANCIAL CORPORATION
4400 CONGRESS AVENUE
WEST PALM BEACH, FLORIDA 33407
September 25, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting (the "Special
Meeting") of Shareholders of Republic Security Financial Corporation ("RSFC"),
which will be held on Tuesday, October 27, 1998 at 10:00 a.m. local time, at
the Palm Beach Airport Hilton, 150 Australian Avenue, West Palm Beach, Florida
33406.
As described in the enclosed Joint Proxy Statement/Prospectus, at the
Special Meeting, shareholders will be asked to act upon the following
proposals:
1. Approval of the Agreement and Plan of Merger, dated as of May 27, 1998,
as amended (the "Merger Agreement"), by and between RSFC and First Palm
Beach Bancorp, Inc. ("FPBB"), providing for the merger of FPBB with and
into RSFC (the "Merger").
2. Approval of an amendment to RSFC's Articles of Incorporation (the
"Amendment to the Articles") increasing the authorized shares of its
common stock, par value $0.01 per share (the "RSFC Common Stock"), from
100,000,000 to 500,000,000, increasing the authorized shares of Series B
Junior Participating Preferred Stock from 1,000,000 to 5,000,000 and
deleting the 7% Cumulative Convertible Preferred Stock, Series C,
therefrom.
3. Approval of an amendment to the Republic Security Financial Corporation
1997 Performance Incentive Plan (the "Plan") increasing the number of
shares of RSFC Common Stock issuable under the Plan from 2,000,000 shares
to 5,000,000 shares (the "Amendment to the Plan").
Pursuant to the Merger Agreement, upon consummation of the Merger each
share of common stock of FPBB, par value $.01 per share (the "FPBB Common
Stock") will be converted into 4.194 shares of RSFC Common Stock (the "Exchange
Ratio"), and cash in lieu of fractional shares. On September 24, 1998, the
closing price of the RSFC Common Stock was $8.50. If the Merger had been
consummated on that date, each share of FPBB Common Stock would have been
converted into shares of RSFC Common Stock with an equivalent market value of
$35.65 and the aggregate dollar value of all RSFC shares to be issued in the
Merger would have been $183.7 million. The actual market value of the RSFC
Common Stock to be issued in the Merger may be different due to changes in the
market value of the RSFC Common Stock.
The Amendment to the Articles will provide a sufficient number of
authorized and unissued shares of RSFC Common Stock for RSFC to issue in any
future stock dividends, public offerings or acquisitions and for other
corporate purposes. Although RSFC has no present plans for any such stock
dividend, acquisition or offering, RSFC expects to continue to review
acquisition opportunities as they become available.
The Amendment to the Plan will provide additional RSFC shares available
for future grants under the Plan. Without the approval of the Amendment to the
Plan, the Plan may lack a sufficient number of shares available for future
grants.
Consummation of the Merger is subject to certain conditions, including,
but not limited to, approval of the Merger by the requisite vote of the
shareholders of each of FPBB and RSFC.
<PAGE>
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF RSFC AND ITS SHAREHOLDERS. IN ADDITION, THE BOARD OF DIRECTORS HAS
RECEIVED THE OPINION OF ITS FINANCIAL ADVISER, SANDLER O'NEILL & PARTNERS,
L.P., AS OF SEPTEMBER 25, 1998, TO THE EFFECT THAT THE EXCHANGE RATIO IS FAIR
FROM A FINANCIAL POINT OF VIEW TO RSFC. ACCORDINGLY, THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE AT THE SPECIAL
MEETING IN FAVOR OF THE MERGER AGREEMENT.
Only holders of RSFC Common Stock of record at the close of business on
September 18, 1998 (the "Record Date"), are entitled to notice of and to vote
at the Special Meeting or any adjournments or postponements thereof.
Approval of the Merger Agreement requires the affirmative vote of a
majority of the shares of RSFC Common Stock issued and outstanding as of the
Record Date. Failure to return a properly executed proxy card or to vote at the
Special Meeting will have the same effect as a vote against the Merger
Agreement. Abstentions and broker non-votes will be included for purposes of
determining the presence of a quorum at the Special Meeting, but are the
equivalent of "against" votes for purposes of approval of the Merger Agreement.
Approval of the Amendment to the Articles and the Amendment to the Plan require
that the number of votes cast in favor exceed the number of votes cast against.
You are urged to read the enclosed Joint Proxy Statement/Prospectus, which
provides you with a description of the Amendment to the Articles, the Amendment
to the Plan and the Merger Agreement to be voted upon at the Special Meeting.
Because of the significance of the proposed Merger to RSFC, your
participation in this meeting, in person or by proxy, is especially important.
It is very important that your shares be represented at the Special Meeting.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, date, sign and return the proxy card in the enclosed postage-paid
envelope. Your shares will be voted at the Special Meeting in accordance with
your instructions. You can revoke the proxy at any time prior to voting and the
delivery of a proxy will not affect your right to vote in the event you attend
the Special Meeting in person.
Thank you and I look forward to seeing you at the Special Meeting.
Sincerely,
Rudy E. Schupp
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
[FIRST PALM BEACH BANCORP, INC. LOGO]
FIRST PALM BEACH BANCORP, INC.
450 SOUTH AUSTRALIAN AVENUE
WEST PALM BEACH, FLORIDA 33401
September 25, 1998
Dear Stockholder:
You are cordially invited to attend the Special Meeting (the "Special
Meeting") of Stockholders of First Palm Beach Bancorp, Inc. ("FPBB"), which
will be held on Tuesday, October 27, 1998 at 1:00 p.m. local time, at the First
Bank of Florida Corporate Headquarters, the Florida Room--4th Floor, 450 S.
Australian Avenue, West Palm Beach, Florida 33401.
At the Special Meeting, stockholders will be asked to consider a proposal
to approve and adopt the Agreement and Plan of Merger, dated as of May 27,
1998, as amended (the "Merger Agreement"), by and between Republic Security
Financial Corporation ("RSFC") and FPBB, providing for the merger of FPBB with
and into RSFC (the "Merger").
Pursuant to the Merger Agreement, upon consummation of the Merger each
share of common stock of FPBB, par value $.01 per share (the "FPBB Common
Stock") will be converted into 4.194 (the "Exchange Ratio") shares of common
stock of RSFC ("RSFC Common Stock"), and cash in lieu of fractional shares. On
September 24, 1998, the closing price of RSFC Common Stock was $8.50. If the
Merger had been consummated on that date, each share of FPBB Common Stock would
have been converted into shares of RSFC Common Stock with an aggregate market
value of $35.65 and the aggregate dollar value of all RSFC shares to be issued
in the Merger would have been approximately $183.7 million. The actual market
value of the RSFC Common Stock to be received in the Merger may be different
due to changes in the market value of the RSFC Common Stock.
Consummation of the Merger is subject to certain conditions, including,
but not limited to, approval of the Merger by the requisite vote of the
stockholders of each of FPBB and RSFC.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF FPBB AND ITS STOCKHOLDERS. IN ADDITION, THE BOARD OF DIRECTORS HAS
RECEIVED THE OPINION OF ITS FINANCIAL ADVISOR, KEEFE, BRUYETTE & WOODS, INC.,
DATED AS OF THE DATE OF THE JOINT PROXY STATEMENT/PROSPECTUS, THAT THE EXCHANGE
RATIO IS FAIR TO FPBB'S STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW.
ACCORDINGLY, THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE AT THE SPECIAL MEETING IN FAVOR OF THE MERGER
AGREEMENT.
Only holders of FPBB Common Stock of record at the close of business on
September 18, 1998 (the "Record Date") are entitled to notice of and to vote at
the Special Meeting or any adjournments or postponements thereof. Approval of
the Merger Agreement requires the affirmative vote of holders of a majority of
the shares of FPBB Common Stock issued and outstanding as of the Record Date.
It is very important that your shares are represented at the Special Meeting,
whether or not you plan to attend in person. Failure to return a properly
executed proxy card or to vote at the Special Meeting will have the same effect
as a vote against the Merger.
A Notice of the Special Meeting and a Joint Proxy Statement/Prospectus
containing detailed information concerning the proposed Merger is attached.
Please read this material carefully.
Your participation in the Special Meeting, in person or by proxy, is
important. Whether or not you plan to attend the Special Meeting, you are urged
to complete, date, sign and return the proxy card in the enclosed postage paid
envelope.
Thank you and I look forward to seeing you at the Special Meeting.
Sincerely,
/s/ LOUIS O. DAVIS, JR.
Louis O. Davis, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION
4400 CONGRESS AVENUE
WEST PALM BEACH, FLORIDA 33407
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 27, 1998
A Special Meeting (the "Special Meeting") of Shareholders of Republic
Security Financial Corporation ("RSFC") will be held on Tuesday, October 27,
1998 at 10:00 a.m. local time, at the Palm Beach Airport Hilton, 150 Australian
Avenue, West Palm Beach, Florida 33401, to consider the following matters:
1. Approval of the Agreement and Plan of Merger, dated as of May 27, 1998,
as amended, by and between RSFC and First Palm Beach Bancorp, Inc.
("FPBB"), providing for the merger of FPBB with and into RSFC.
2. Approval of an amendment to RSFC's Articles of Incorporation increasing
the authorized shares of its common stock (the "RSFC Common Stock") from
100,000,000 to 500,000,000, increasing the authorized shares of Series B
Junior Participating Preferred Stock from 1,000,000 to 5,000,000 and
deleting the 7% Cumulative Convertible Preferred Stock, Series C,
therefrom.
3. Approval of an amendment to the Republic Security Financial Corporation
1997 Performance Incentive Plan (the "Plan") increasing the number of
shares of RSFC Common Stock issuable under the Plan from 2,000,000 shares
to 5,000,000 shares.
4. Such other business as may properly be brought before the Special
Meeting.
The Board of Directors has fixed the close of business on September 18,
1998, as the record date for determining shareholders of RSFC entitled to
notice of and to vote at the Special Meeting and at any adjournments or
postponements thereof. A list of shareholders entitled to notice of the meeting
shall be available for inspection by any shareholder, during regular business
hours, for a period of ten days prior to the meeting at the principal executive
offices of RSFC and at the Special Meeting.
You are cordially invited to attend the Special Meeting. Whether or not
you plan to attend the Special Meeting, you are urged to complete, date, sign
and return at your earliest convenience, in the postage-paid envelope provided,
the enclosed proxy card which is being solicited on behalf of RSFC's Board of
Directors. The proxy card shows the form in which your shares of RSFC Common
Stock are registered. Your signature must be in the same form. Your shares will
be voted at the Special Meeting in accordance with your instructions. You can
revoke the proxy at any time prior to voting, and the delivery of a proxy will
not affect your right to vote in the event you attend the Special Meeting in
person. We look forward to seeing you.
By Order of the Board of Directors,
H. Gearl Gore
SECRETARY
West Palm Beach, Florida
September 25, 1998
<PAGE>
FIRST PALM BEACH BANCORP, INC.
450 SOUTH AUSTRALIAN AVENUE
WEST PALM BEACH, FLORIDA 33401
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 27, 1998
A Special Meeting (the "Special Meeting") of Stockholders of First Palm
Beach Bancorp, Inc. ("FPBB") will be held on Tuesday, October 27, 1998 at 1:00
p.m. local time, at the First Bank of Florida Corporate Headquarters, the
Florida Room--4th Floor, 450 S. Australian Avenue, West Palm Beach, Florida
33401, to consider and vote upon the following proposals:
1. Approval and adoption of the Agreement and Plan of Merger, dated as of
May 27, 1998, as amended, by and between Republic Security Financial
Corporation ("RSFC") and FPBB, providing for the merger of FPBB with and
into RSFC. A copy of the Merger Agreement is attached as Annex A to this
Joint Proxy Statement/Prospectus.
2. Such other business as may properly be brought before the Special
Meeting.
The Board of Directors has fixed the close of business on September 18,
1998, as the record date for determining stockholders of FPBB entitled to
notice of and to vote at the Special Meeting and at any adjournments or
postponements thereof. A list of stockholders entitled to notice of and to vote
at the Special Meeting will be available for inspection by any stockholder, for
any purpose germane to the Special Meeting, during regular business hours, for
a period of ten days prior to the meeting at the principal executive offices of
FPBB and at the Special Meeting.
Your vote is important regardless of the number of shares you own. Whether
or not you plan to attend the Special Meeting, you are urged to complete, date,
sign and return the enclosed proxy card in the envelope provided. The proxy
card is being solicited on behalf of FPBB's Board of Directors. The proxy card
shows the form in which your shares of FPBB Common Stock are registered. Your
signature must be in the same form. Your shares will be voted at the Special
Meeting in accordance with your instructions. You can revoke the proxy at any
time prior to voting, and the delivery of a proxy will not affect your right to
vote in the event you attend the Special Meeting in person. We look forward to
seeing you.
By Order of the Board of Directors,
/s/ JOHN C. TRAMMEL
John C. Trammel
SECRETARY
West Palm Beach, Florida
September 25, 1998
<PAGE>
[REPUBLIC SECURITY [FIRST PALM BEACH
FINANCIAL CORPORATION LOGO] BANCORP, INC. LOGO]
MERGER PROPOSED
YOUR VOTE IS VERY IMPORTANT
JOINT PROXY STATEMENT
---------------
REPUBLIC SECURITY FINANCIAL CORPORATION
PROSPECTUS
23,120,000 SHARES OF COMMON STOCK
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement/Prospectus")
is being furnished to shareholders of Republic Security Financial Corporation
("RSFC") and stockholders of First Palm Beach Bancorp, Inc. ("FPBB") in
connection with the solicitation of proxies by the Board of Directors of RSFC
from holders of RSFC's outstanding shares of common stock, par value $0.01 per
share (the "RSFC Common Stock"), for use at a Special Meeting of shareholders
of RSFC to be held on October 27, 1998, at 10:00 a.m. local time (together with
any adjournments or postponements thereof, the "RSFC Special Meeting") and in
connection with the solicitation of proxies by the Board of Directors of FPBB
from holders of FPBB's outstanding shares of common stock, par value $0.01 per
share (the "FPBB Common Stock"), for use at a special meeting of stockholders
of FPBB to be held on October 27, 1998, at 1:00 p.m. local time (together with
any adjournments or postponements thereof, the "FPBB Special Meeting" and,
together with the RSFC Special Meeting, the "Special Meetings").
At the Special Meetings, the shareholders of RSFC and the stockholders of
FPBB will be asked to consider and vote upon a proposal to approve the proposed
merger (the "Merger") of FPBB with and into RSFC, pursuant to the Agreement and
Plan of Merger, dated as of May 27, 1998, as amended, between RSFC and FPBB
(the "Merger Agreement"). Pursuant to the Merger Agreement, upon consummation
of the Merger each share of FPBB Common Stock will be converted into 4.194
shares of RSFC Common Stock (the "Exchange Ratio"), and cash in lieu of
fractional shares. See "THE MERGER--The Merger Agreement--Exchange Ratio." Upon
consummation of the Merger, RSFC will also convert all outstanding FPBB stock
options into RSFC stock options. Within five business days after the Merger,
RSFC will register shares which may be acquired upon exercise of such options
on a Registration Statement on Form S-8 under the Securities Act of 1933, as
amended (the "Securities Act").
The RSFC Common Stock is traded under the symbol "RSFC" on the Nasdaq
National Market. The FPBB Common Stock is traded on the Nasdaq National Market
under the symbol "FFPB." On May 27, 1998, the last trading day prior to the
execution of the Merger Agreement, the last reported sales price per share on
the Nasdaq National Market of RSFC Common Stock and FPBB Common Stock was $13
1/8 per share and $36 1/2 per share, respectively. On September 24, 1998, the
last trading day prior to the date of this Joint Proxy Statement/Prospectus,
the last reported sale price per share on the Nasdaq National Market of RSFC
Common Stock and FPBB Common Stock was $8.50 per share and $33.125 per share,
respectively. If the Merger had been consummated on September 24, 1998, each
share of FPBB Common Stock would have been converted into 4.194 shares of RSFC
Common Stock with an aggregate market value of $35.65 and the aggregate dollar
value of all RSFC shares to be issued in the Merger would have been
approximately $183.7 million. Based upon the number of shares of FPBB Common
Stock and RSFC Common Stock outstanding as of July 10, 1998, and the Exchange
Ratio, the holders of the then outstanding shares of FPBB Common Stock would
own securities representing approximately 46% of the outstanding shares of RSFC
Common Stock after consummation of the Merger.
Because the market price of RSFC Common Stock is subject to fluctuation,
the value of the shares of RSFC Common Stock that holders of FPBB Common Stock
would receive in the Merger may increase or decrease prior to and after the
Merger. See "MARKET PRICE AND DIVIDEND DATA."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
RSFC with respect to shares of the RSFC Common Stock issuable to FPBB
stockholders upon consummation of the Merger.
For shareholders of RSFC, this Joint Proxy Statement/Prospectus also
relates to proposals to approve an amendment to the RSFC Articles of
Incorporation (the "RSFC Articles") and an amendment of the Republic Security
Financial Corporation 1997 Performance Incentive Plan (the "Plan"). See
"ADDITIONAL PROPOSALS FOR CONSIDERATION AT THE RSFC SPECIAL MEETING."
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to holders of RSFC Common Stock and FPBB Common Stock on
or about September 28, 1998.
---------------
THE SHARES OF RSFC COMMON STOCK OFFERED HEREBY 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 RSFC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY NOR ARE THEY GUARANTEED BY ANY BANK OR BANK HOLDING COMPANY.
---------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS SEPTEMBER 25, 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF SO GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR THE SALE
OF ANY SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF RSFC OR FPBB SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
RSFC and FPBB are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information concerning RSFC and FPBB
may be inspected and copied at the Commission's Public Reference Section, Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, where
copies may be obtained at prescribed rates, as well as at the following
regional offices: Northeast Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048; and Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. The Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding RSFC and FPBB. Shares of RSFC Common Stock and
FPBB Common Stock are listed on the Nasdaq National Market.
RSFC has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereof, the "Registration Statement") under the
Securities Act with respect to the shares of RSFC Common Stock to be issued by
it in the Merger. This Joint Proxy Statement/Prospectus constitutes the
Prospectus of RSFC that is filed as part of such Registration Statement. As
permitted by the rules and regulations of the Commission, this Joint Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement and reference is hereby made to the Registration Statement for
further information with respect to RSFC and the RSFC Common Stock.
All information contained in this Joint Proxy Statement/Prospectus with
respect to RSFC and Republic Security Bank, a wholly owned subsidiary of RSFC
("Republic Security"), except certain financial information of FPBB described
under "THE MERGER--Opinion of Sandler O'Neill & Partners, L.P." has been
supplied by RSFC for inclusion herein and has not been independently verified
by FPBB. All information contained in this Joint Proxy Statement/Prospectus
with respect to FPBB and First Bank of Florida, a wholly owned subsidiary of
FPBB ("First Bank"), except certain financial information of RSFC described
under "THE MERGER--Opinion of Keefe, Bruyette & Woods, Inc." has been supplied
by FPBB for inclusion herein and has not been independently verified by RSFC.
i
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission by RSFC and FPBB
pursuant to the Exchange Act are incorporated in this Joint Proxy
Statement/Prospectus by reference:
1. RSFC Annual Report on Form 10-K for the fiscal year ended December 31,
1997 filed with the Commission on March 25, 1998 (the "1997 RSFC Form
10-K").
2. RSFC Current Report on Form 8-K filed with the Commission on July 10,
1998.
3. RSFC Current Report on Form 8-K filed with the Commission on May 28,
1998.
4. RSFC Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
filed with the Commission on August 14, 1998.
5. RSFC Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 filed with the Commission on May 15, 1998.
6. The description of RSFC Common Stock set forth in RSFC's Registration
Statement filed by RSFC pursuant to Section 12 of the Exchange Act
including any amendment or report filed for purposes of updating any
such description.
7. The portions of the RSFC's Proxy Statement for the Annual Meeting of
Shareholders held on April 29, 1998 that have been incorporated by
reference in the 1997 RSFC Form 10-K.
8. FPBB Registration Statement on Form 8-A dated January 25, 1995.
9. FPBB Annual Report on Form 10-K for the fiscal year ended September
30, 1997 filed with the Commission on December 23, 1997 (the "1997
FPBB Form 10-K").
10. FPBB Current Report on Form 8-K filed with the Commission on June 8,
1998.
11. FPBB Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
filed with the Commission on August 13, 1998.
12. FPBB Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 filed with the Commission on May 8, 1998.
13. FPBB Quarterly Report on Form 10-Q for the quarter ended December 31,
1997 filed with the Commission on February 9, 1998.
14. The description of FPBB Common Stock set forth in FPBB's Registration
Statement filed by FPBB pursuant to Section 12 of the Exchange Act
including any amendment or report filed for purposes of updating any
such description.
15. The portions of FPBB's Proxy Statement for the Annual Meeting of
Stockholders held on January 21, 1998 that have been incorporated by
reference in the 1997 FPBB Form 10-K.
All reports and other documents filed by RSFC or FPBB after the date of
this Joint Proxy Statement/Prospectus pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act and prior to the date of the Special Meetings shall
be deemed to be incorporated by reference herein and to be a part hereof from
the dates of filing of such reports or documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for the purposes of this
Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in another document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
ii
<PAGE>
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS RELATING
TO RSFC (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE
UPON REQUEST FROM REPUBLIC SECURITY FINANCIAL CORPORATION, 4400 CONGRESS
AVENUE, P.O. BOX 4298, WEST PALM BEACH, FLORIDA 33402-4298, ATTENTION:
SECRETARY, TELEPHONE: (561) 840-7841. THOSE DOCUMENTS RELATING TO FPBB (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST
FROM FIRST PALM BEACH BANCORP, INC., 450 SOUTH AUSTRALIAN AVENUE, WEST PALM
BEACH, FLORIDA 33401, ATTENTION: SECRETARY, TELEPHONE: (561) 655-8511. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
OCTOBER 20, 1998.
CERTAIN FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS, INCLUDING STATEMENTS ABOUT THE BUSINESS, OPERATIONS, FINANCIAL
CONDITION AND PROSPECTS OF RSFC AND FPBB, OF RSFC FOLLOWING THE MERGER (THE
"COMBINED COMPANY"), OF REPUBLIC SECURITY AND FIRST BANK FOLLOWING THEIR MERGER
(THE "COMBINED BANK"), AND VARIOUS STATEMENTS CONTAINED UNDER THE CAPTIONS
"SUMMARY," "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA" AND "THE
MERGER." THE ACTUAL RESULTS OF RSFC, FPBB, THE COMBINED COMPANY AND THE
COMBINED BANK COULD DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS.
AMONG THE FACTORS THAT COULD AFFECT THE COMBINED COMPANY'S ABILITY TO
ACHIEVE ITS GOALS, AND CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN THE FORWARD-LOOKING STATEMENTS, INCLUDE, BUT ARE NOT LIMITED TO,
THE FOLLOWING:
- THE ABILITY OF THE COMBINED COMPANY TO SUCCESSFULLY INTEGRATE RSFC'S
AND FPBB'S OPERATIONS IN A TIMELY MANNER AND TO CONTAIN RESTRUCTURING
EXPENSES;
- THE ABILITY OF THE COMBINED BANK TO SUCCESSFULLY INTEGRATE REPUBLIC
SECURITY'S AND FIRST BANK'S OPERATIONS IN A TIMELY MANNER AND TO
CONTAIN RESTRUCTURING EXPENSES;
- RAPID CHANGES IN INTEREST RATES;
- ADVERSE ECONOMIC CONDITIONS IN PALM BEACH, BROWARD, MIAMI-DADE, MARTIN
AND LEE COUNTIES, FLORIDA AS WELL AS NATIONALLY;
- INTENSE COMPETITION FOR DEPOSITORS AND BORROWERS FROM FINANCIAL
INSTITUTIONS WITH GREATER RESOURCES THAN THE COMBINED BANK;
- ADVERSE CHANGES IN LAWS AND REGULATIONS WHICH MAY ADVERSELY AFFECT THE
BUSINESSES IN WHICH THE COMBINED COMPANY WOULD BE ENGAGED; AND
- DISRUPTIONS OF OPERATIONS OF THE COMBINED COMPANY AS A RESULT OF THE
"YEAR 2000 PROBLEM."
THESE AND OTHER RISKS AND UNCERTAINTIES AFFECTING THE COMBINED COMPANY AND
THE COMBINED BANK ARE DISCUSSED IN GREATER DETAIL IN THIS JOINT PROXY
STATEMENT/PROSPECTUS.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION ...................... i
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE ................ ii
SUMMARY .................................... 1
The Companies ............................. 1
The Special Meetings ...................... 2
No Dissenters' Rights of Appraisal ........ 3
The Merger ................................ 3
Year 2000 ................................. 6
Selected Consolidated Financial
Data--Republic Security
Financial Corporation ................ 7
Selected Financial Data--First Palm
Beach Bancorp, Inc. .................. 12
Selected Comparative Per Share Data ....... 16
Recent Developments ....................... 16
MARKET PRICE AND DIVIDEND
DATA .................................... 17
THE SPECIAL MEETINGS ....................... 19
VOTING AND PROXY
INFORMATION ............................. 20
RSFC ...................................... 20
FPBB ...................................... 20
Proxies ................................... 21
NO DISSENTERS' RIGHTS
OF APPRAISAL ............................ 22
THE MERGER ................................. 23
Background to the Merger .................. 23
Recommendation of FPBB Board of
Directors; FPBB's Reasons for
the Merger ........................... 24
Opinion of Keefe, Bruyette &
Woods, Inc. .......................... 25
Recommendation of RSFC Board of
Directors; RSFC's Reasons for
the Merger ........................... 30
Opinion of Sandler O'Neill &
Partners, L.P. ....................... 31
The Merger Agreement ...................... 35
Federal Income Tax Consequences ........... 43
Stock Option Agreement .................... 44
Restrictions on Resales of Securities ..... 46
Anticipated Accounting Treatment .......... 47
Regulatory Approvals ...................... 47
Interests of Certain Persons in
the Merger ........................... 48
UNAUDITED PRO FORMA
COMBINED CONDENSED
FINANCIAL DATA .......................... 52
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MANAGEMENT FOLLOWING
THE MERGER .............................. 59
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT .......................... 62
COMPARISON OF RIGHTS OF
HOLDERS OF RSFC AND FPBB
COMMON STOCK ............................ 63
Authorized Capital Stock .................. 63
Board of Directors ........................ 63
Voting Limitations ........................ 64
Special Meetings of Shareholders;
Action Without a Meeting ............. 64
Mergers, Share Exchanges and Sales
of Assets ............................ 64
Amendment of Articles of
Incorporation and of Bylaws .......... 65
Rights of Dissenting Shareholders ......... 65
Dividends ................................. 66
Certain Anti-Takeover Provisions .......... 66
Rights Plan ............................... 68
Consideration of Other
Constituencies ....................... 70
Directors' Liability ...................... 70
SHAREHOLDER PROPOSALS ...................... 71
PROXY SOLICITATION ......................... 71
LEGAL MATTERS .............................. 71
EXPERTS .................................... 71
ADDITIONAL PROPOSALS FOR
CONSIDERATION AT THE RSFC
SPECIAL MEETING ......................... 72
ANNEX A: Agreement and Plan
of Merger ............................... A-1
ANNEX B: Stock Option Agreement ............ B-1
ANNEX C: Opinion of Sandler O'Neill
& Partners, L.P. ........................ C-1
ANNEX D: Opinion of Keefe, Bruyette
& Woods, Inc. ........................... D-1
ANNEX E: Text of Proposed
Amendment to RSFC's Articles
of Incorporation ........................ E-1
ANNEX F: Republic Security Financial
Corporation 1997 Performance
Incentive Plan .......................... F-1
</TABLE>
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SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. THE SUMMARY IS NOT
INTENDED TO BE A COMPLETE STATEMENT OF ALL MATERIAL FEATURES OF THE MERGER AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES
ATTACHED HERETO. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE REFERRED YOU.
THE COMPANIES
RSFC. RSFC is a commercial bank holding company, headquartered in West
Palm Beach, Florida. Its principal business is the operation of its subsidiary,
Republic Security, a Florida commercial bank. As of June 30, 1998, RSFC had
consolidated assets of $1.0 billion, deposits of $780 million and shareholders'
equity of $90.1 million.
Republic Security commenced operations on November 19, 1984 as a stock
savings bank. On November 8, 1995, it converted its charter from a federal
savings bank to a state chartered commercial bank. Republic Security is a
member of the Federal Reserve Bank and the Federal Home Loan Bank System (the
"FHLB"), and its deposits are insured by the Federal Deposit Insurance
Corporation (the "FDIC") up to applicable limits.
Republic Security is one of the top 10 largest independent commercial
banks headquartered in Florida, with thirty-four full-service branches, of
which thirteen branches are located in Palm Beach County, Florida, thirteen in
Broward County, Florida and eight in Miami-Dade County, Florida. Republic
Security's main business activities include attracting deposits, originating
loans, making investments and servicing loans for Republic Security and for
others. Republic Security's loan portfolio is primarily comprised of
residential and commercial real estate loans, business loans and consumer
loans, including automobile loans. At June 30, 1998, Republic Security's loan
portfolio was composed of 10% commercial purpose loans, 40% commercial real
estate loans, 37% residential real estate loans (including construction loans)
and 13% consumer loans. Earnings depend primarily upon the difference between
interest received on loans and investments and interest paid on Republic
Security's deposit base and borrowing.
On August 21, 1998, RSFC entered into a definitive agreement to acquire
Newberry Bank. At June 30, 1998, Newberry had total assets of $37 million,
deposits of $33 million and stockholders' equity of $2.4 million.
On July 2, 1998, RSFC acquired Unifirst Federal Savings Bank ("Unifirst").
At that time, Unifirst had assets of $141.5 million, deposits of $128 million
and shareholders' equity of $9.2 million.
On December 2, 1997, RSFC acquired County National Bank of South Florida.
At that time, County had assets of $255 million, deposits of $226 million and
shareholders' equity of $24.4 million.
On June 30, 1997, Republic Security acquired Family Bank. At that time,
Family Bank had assets of $256 million, deposits of $219 million and
shareholders' equity of $21.8 million.
The address of RSFC's principal executive offices is 4400 Congress Avenue,
West Palm Beach, Florida 33407 and its telephone number is (561) 840-1200.
FPBB. FPBB is a Delaware chartered savings and loan holding company,
headquartered in West Palm Beach, Florida. Through its wholly owned subsidiary,
First Bank, FPBB operates 51 banking
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offices (of which 24 are supermarket branches and 27 are stand-alone branches)
located in Palm Beach, Broward, Miami-Dade, Martin and Lee Counties in Florida,
and two mortgage loan production offices which are located in Palm Beach
County. At June 30, 1998, FPBB had total consolidated assets of approximately
$1.8 billion, deposits of approximately $1.3 billion and stockholders' equity
of approximately $121 million. FPBB is the largest, based on total deposits,
and oldest independent financial institution based in Palm Beach County.
First Bank's principal business is attracting retail deposits from the
general public and investing those deposits, together with funds generated from
operations and borrowings, primarily in one-to four-family, owner-occupied,
residential mortgage loans and, to a lesser extent, consumer loans,
construction loans, commercial real estate loans and multi-family residential
mortgage loans. In addition, First Bank invests in mortgage-backed and related
securities, securities issued by the U.S. Government agencies thereof, and
other investments in which First Bank is permitted to invest under federal laws
and regulations.
The address of FPBB's principal executive offices is 450 South Australian
Avenue, West Palm Beach, Florida 33401, and its telephone number is (561)
655-8511.
THE SPECIAL MEETINGS
GENERAL. At the RSFC Special Meeting, to be held on Tuesday, October 27,
1998, at 10:00 a.m. local time at the Palm Beach Airport Hilton, 150 Australian
Avenue, West Palm Beach, Florida 33406, RSFC shareholders will consider and
vote upon a proposal to approve the Merger Agreement, as well as proposals to
approve amendments to the RSFC Articles and the Plan. The FPBB Special Meeting
will be held on Tuesday, October 27, 1998 at 1:00 p.m. local time, at the First
Bank of Florida Corporate Headquarters, 450 S. Australian Avenue, West Palm
Beach, Florida 33401. The purpose of the FPBB Special Meeting is to consider
and vote upon a proposal to approve and adopt the Merger Agreement. See "THE
SPECIAL MEETINGS."
RECORD DATES; SHARES ENTITLED TO VOTE ON THE MERGER. Holders of record of
shares of RSFC Common Stock at the close of business on September 18, 1998 (the
"RSFC Record Date") and holders of record of shares of FPBB Common Stock at the
close of business on September 18, 1998 (the "FPBB Record Date") will be
entitled to notice of and to vote at the respective Special Meetings. At the
RSFC Record Date, there were outstanding 25,333,577 shares of RSFC Common
Stock. At the FPBB Record Date, there were outstanding 5,155,009 shares of FPBB
Common Stock. See "VOTING AND PROXY INFORMATION."
REQUIRED VOTES. The proposal to approve the Merger Agreement must be
approved by the holders of at least a majority of the shares of RSFC Common
Stock outstanding at the RSFC Record Date and at least a majority of the shares
of FPBB Common Stock outstanding at the FPBB Record Date. Brokers who hold RSFC
Common Stock and/or FPBB Common Stock will not have discretionary authority to
vote such shares in the absence of instructions from the beneficial owners
thereof. Abstentions and broker non-votes are equivalent to votes "against" the
approval of the Merger Agreement.
At the respective Record Dates, directors and executive officers of RSFC
and FPBB and their affiliates had the right to vote, in the aggregate 3,858,346
shares and 234,296 shares, respectively, of RSFC Common Stock and FPBB Common
Stock, representing 14.7% and 4.5%, respectively, of the RSFC Common Stock and
FPBB Common Stock outstanding as of the respective Record Dates. All of such
persons have informed RSFC and FPBB, as the case may be, of their intent to
vote or direct the vote of all such shares for approval and adoption of the
Merger Agreement. See "VOTING AND PROXY INFORMATION."
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<PAGE>
NO DISSENTERS' RIGHTS OF APPRAISAL
The holders of RSFC Common Stock will not be entitled to dissenters'
rights of appraisal under Florida law in connection with the Merger because the
shares of RSFC Common Stock will be listed on the Nasdaq National Market as of
the RSFC Record Date. Holders of FPBB Common Stock will not be entitled to
appraisal rights under Delaware law in connection with the Merger because the
shares of FPBB Common Stock were listed on the Nasdaq National Market as of the
FPBB Record Date, and shares of RSFC Common Stock to be issued in the Merger
will be listed on the Nasdaq National Market. See "NO DISSENTERS' RIGHTS OF
APPRAISAL."
THE MERGER
GENERAL. Under the terms of the Merger Agreement, FPBB will be merged with
and into RSFC, and FPBB will cease to exist as a separate legal entity. As a
consequence of the Merger, at the effective time of the Merger (the "Effective
Time"), each share of FPBB Common Stock issued and outstanding immediately
prior to the Effective Time, except for shares held directly or indirectly by
RSFC or FPBB (other than shares held by RSFC or FPBB in a fiduciary capacity
("Trust Account Shares") or in respect of a debt previously contracted ("DPC
Shares")), will be converted into 4.194 shares of RSFC Common Stock (the
"Exchange Ratio"). See "THE MERGER--The Merger Agreement--Exchange Ratio."
Based upon the number of shares of FPBB Common Stock and RSFC Common Stock
outstanding as of July 10, 1998 and the Exchange Ratio, the holders of the then
outstanding shares of FPBB Common Stock would own securities representing
approximately 46% of the outstanding shares of RSFC Common Stock after
consummation of the Merger. A copy of the Merger Agreement is attached as Annex
A to this Joint Proxy Statement/Prospectus. Pursuant to the Merger Agreement,
subsequent to the Merger, First Bank, a wholly owned subsidiary of FPBB, will
be merged with and into Republic Security, a wholly owned subsidiary of RSFC
(the "Bank Merger"), and First Bank will cease to exist as a separate entity.
See "THE MERGER."
THE VALUE OF RSFC COMMON STOCK THAT HOLDERS OF FPBB COMMON STOCK WILL
RECEIVE IN THE MERGER IS SUBJECT TO FLUCTUATION DUE TO CHANGES IN THE MARKET
PRICE OF RSFC COMMON STOCK. FPBB STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR RSFC COMMON STOCK. FOR CERTAIN RECENT STOCK PRICE DATA,
SEE "MARKET PRICE AND DIVIDEND DATA."
Additionally, at the Effective Time, each outstanding option to purchase
shares of FPBB Common Stock issued pursuant to FPBB's stock option plans will
be assumed by RSFC and will constitute an option to acquire on the same terms
and conditions as were applicable under such FPBB stock option plan the same
number of shares of RSFC Common Stock into which such shares would have been
converted pursuant to the Merger had such options been exercised immediately
prior to the Effective Time at a price per share equal to the exercise price
per share of FPBB Common Stock pursuant to such options, divided by the
Exchange Ratio. Within five business days after the Merger, RSFC intends to
register the shares which may be acquired upon exercise of the options on a
Registration Statement on Form S-8 under the Securities Act.
RECOMMENDATION OF FPBB'S BOARD OF DIRECTORS. The FPBB Board of Directors
(the "FPBB Board") has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, FPBB and
its stockholders. THE FPBB BOARD UNANIMOUSLY RECOMMENDS THAT THE FPBB
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT. For a discussion of
the factors considered by the FPBB Board in approving the Merger Agreement, see
"THE MERGER--Recommendation of FPBB Board of Directors; FPBB's Reasons for the
Merger."
OPINION OF KEEFE, BRUYETTE & WOODS, INC. On May 27, 1998, Keefe, Bruyette
& Woods, Inc. ("Keefe, Bruyette") delivered its oral opinion to the FPBB Board
to the effect that, as of such date, the
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<PAGE>
Exchange Ratio was fair from a financial point of view to the stockholders of
FPBB. Keefe, Bruyette has updated its opinion by delivery to the FPBB Board of
a written opinion to the same effect dated as of the date of this Joint Proxy
Statement/Prospectus. The full text of the written opinion of Keefe, Bruyette
which sets forth the assumptions made, matters considered and limitations on
the review undertaken, is attached as Annex D to this Joint Proxy
Statement/Prospectus and should be read carefully in its entirety. See "THE
MERGER--Opinion of Keefe, Bruyette & Woods, Inc."
RECOMMENDATION OF RSFC'S BOARD OF DIRECTORS. The RSFC Board of Directors
(the "RSFC Board") has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, RSFC and
its shareholders. THE RSFC BOARD UNANIMOUSLY RECOMMENDS THAT THE RSFC
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT. For a discussion of
the factors considered by the RSFC Board in approving the Merger Agreement, see
"THE MERGER--Recommendation of RSFC Board of Directors; RSFC's Reasons for the
Merger."
OPINION OF SANDLER O'NEILL & PARTNERS, L.P. On May 27, 1998, Sandler
O'Neill & Partners, L.P. ("Sandler O'Neill") delivered its oral opinion to the
RSFC Board to the effect that, as of such date, the Exchange Ratio was fair
from a financial point of view to the shareholders of RSFC. Sandler O'Neill has
updated its opinion by delivery to the RSFC Board of a written opinion to the
same effect dated as of the date of this Joint Proxy Statement/Prospectus. The
full text of the written opinion of Sandler O'Neill, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Annex C to this Joint Proxy Statement/Prospectus and should be
read carefully in its entirety. See "THE MERGER--Opinion of Sandler O'Neill &
Partners, L.P."
CONDITIONS TO THE MERGER. Consummation of the Merger is subject to various
mutual conditions, including, among others: (i) receipt by RSFC and FPBB of all
governmental approvals required in connection with the Merger; (ii) approval of
the Merger Agreement by the shareholders of RSFC and the stockholders of FPBB;
(iii) receipt from respective counsel of RSFC and FPBB of tax opinions
regarding certain federal income tax consequences of the Merger; (iv) receipt
of a letter from RSFC's independent accountants that the Merger qualifies for
pooling-of-interests accounting treatment and receipt of a letter from FPBB's
independent accountants that FPBB qualifies as a party to a pooling-of-interests
business combination; (v) the shares of RSFC Common Stock to be issued to
holders of FPBB Common Stock pursuant to the Merger shall have been authorized
for quotation on the Nasdaq National Market subject to official notice of
issuance; and (vi) satisfaction of other customary closing conditions. See "THE
MERGER--The Merger Agreement--Conditions to the Merger."
REGULATORY APPROVALS. The Merger has been approved by the Board of
Governors of the Federal Reserve System (the "FRB"). Additionally, the Bank
Merger has been approved by the Florida Department of Banking and Finance
("Florida Banking Department"). See "THE MERGER--Regulatory Approvals."
FEDERAL INCOME TAX CONSEQUENCES. The Merger is intended to qualify as a
reorganization under Section 368(a) of the Code. Accordingly, for federal
income tax purposes, it is intended that no gain or loss will be recognized by
FPBB stockholders who exchange all of their FPBB Common Stock solely for RSFC
Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in RSFC Common Stock, the receipt of which
will be taxable). In this connection, RSFC's obligation to consummate the
Merger is conditioned upon the receipt by RSFC of an opinion of Morgan, Lewis &
Bockius LLP, counsel to RSFC, and FPBB's obligation to consummate the Merger is
conditioned upon the receipt by FPBB of an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to FPBB, substantially to this effect. In addition,
in connection with the filing of the Registration Statement, RSFC has received
an opinion of Morgan, Lewis & Bockius LLP, dated September 2, 1998,
substantially to the effect set forth above. Due to the individual nature of
the tax consequences of the Merger, it is recommended that each FPBB
stockholder consult his or her own tax
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adviser concerning the federal, state, local and foreign tax consequences of
the Merger. See "THE MERGER--Federal Income Tax Consequences."
ANTICIPATED ACCOUNTING TREATMENT. The Merger is expected to qualify as a
"pooling-of-interests" for accounting and financial reporting purposes. It is a
condition to each of RSFC's and FPBB's obligation to consummate the Merger that
RSFC and FPBB receive letters dated as of the closing date addressed to RSFC
from RSFC's independent accountants and to FPBB from FPBB's independent
accountants to the effect that the Merger qualifies for pooling-of-interests
accounting treatment. See "THE MERGER--The Merger Agreement--Conditions to the
Merger" and "--Anticipated Accounting Treatment."
BOARD OF DIRECTORS AND MANAGEMENT FOLLOWING THE MERGER. Following the
consummation of the Merger, the RSFC Board and the board of directors of the
Combined Bank (the "Combined Bank Board") will each consist of 21 members,
initially comprised of the current RSFC Board members (George M. Apelian, Paula
Berliner, Dr. Thomas F. Carney, Joseph D. Cesarotti, Mary Anna Fowler, H. Gearl
Gore, Richard J. Haskins, Eugene W. Hughes, Jr., Thomas L. Langan, Jr., Lennart
E. Lindahl, Jr., Mary McCarty, Carol R. Owen, Richard C. Rathke, Rudy E.
Schupp, Victor H. Siegel, William F. Spitznagel, Bruce E. Wiita and William
Wolfson) and three FPBB designees (Fred A. Greene, R. Randy Guemple and Daniel
O. Sokoloff, M.D.). See "MANAGEMENT FOLLOWING THE MERGER" and "THE
MERGER--Interests of Certain Persons in the Merger."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by RSFC
shareholders or FPBB stockholders, (i) by mutual consent of RSFC and FPBB; (ii)
by either RSFC or FPBB if the other party has materially breached any
representation, warranty or covenant of the Merger Agreement; (iii) by either
RSFC or FPBB if either of their respective shareholders or stockholders, as the
case may be, do not approve the Merger; or (iv) by either party if the Merger
has not been consummated prior to March 31, 1999. See "THE MERGER--The Merger
Agreement--Termination."
STOCK OPTION AGREEMENT. Execution of the Stock Option Agreement, dated as
of May 27, 1998 (the "Stock Option Agreement"), by and between RSFC and FPBB
was a condition to RSFC's merger proposal. Pursuant to the Stock Option
Agreement, FPBB granted RSFC an option (the "Option") to purchase up to
1,009,725 shares of FPBB Common Stock, representing approximately 19.9% of the
issued and outstanding shares of FPBB Common Stock without giving effect to the
shares issuable upon exercise of the Option, at an exercise price of $40.50,
subject to the terms and conditions set forth therein. The Option may only be
exercised upon the occurrence of certain events (none of which have occurred).
The Stock Option Agreement is attached as Annex B to this Joint Proxy
Statement/Prospectus. Also see "THE MERGER--Stock Option Agreement."
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. The Stock Option Agreement may have the effect of discouraging
persons who might now or prior to the Effective Time be interested in acquiring
all or a significant interest in FPBB from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per share
for FPBB Common Stock than the price per share implicit in the Exchange Ratio.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of FPBB's
management and the FPBB Board have interests in the Merger in addition to their
interests as stockholders generally. These interests include, among other
things, provisions in the Merger Agreement relating to indemnification and
insurance, the payment of certain retention bonuses to officers of FPBB and the
appointment of Fred A. Greene, R. Randy Guemple and Daniel O. Sokoloff, M.D.,
currently directors of FPBB and First Bank, to the RSFC Board and the board of
directors of the Combined Bank as of the Effective Time. FPBB is a party to two
employment agreements and eight change of control severance
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agreements with executive officers of FPBB. Each agreement provides for
specified severance benefits if the individual officer's employment is
terminated for specified reasons following a "change of control" of FPBB. If
each officer terminates employment following consummation of the Merger under
circumstances entitling such officer to severance benefits, the aggregate cash
amount payable by FPBB to all such officers will be approximately $4,057,500.
See "THE MERGER--Interests of Certain Persons in the Merger."
YEAR 2000. Republic Security utilizes and is dependent upon a third-party
vendor for its primary data processing function. Republic Security also
utilizes other purchased software packages which operate on in-house computer
networks. In 1997, Republic Security developed a Year 2000 plan to assess,
remedy and test Republic Security's operations for Year 2000 compliance. In
addition, Republic Security's Year 2000 plan includes assessing the impact of
the Year 2000 issue on borrowers' ability to repay. Through formal
communication, Republic Security's primary data processing vendor and the
majority of other vendors have indicated their hardware and/or software will be
Year 2000 compliant in 1999. The majority of Republic Security's
non-information technology providers are not date sensitive. Republic Security
is developing contingency plans related to non-information technology providers
which are date sensitive and provide services which are critical to Republic
Security's operations. Republic Security has also contacted all of its
significant commercial loan customers to determine the borrowers' ability and
readiness to become Year 2000 compliant. Approximately 50% of the loan
customers contacted have responded and Republic Security has not identified any
significant issues with those customers. However, there can be no guarantee
that the systems of other companies on which Republic Security's systems and
operations rely will be timely converted and would not have an adverse effect
on Republic Security's operations.
Currently, Republic Security is upgrading or replacing purchased software
packages and in-house computer network software and hardware, as needed, and
has started to test certain software for Year 2000 compliance. Republic
Security will utilize both internal and external resources to upgrade, replace
and test hardware, software and third-party vendor programs. Republic Security
anticipates completing the Year 2000 project by October 31, 1999, which is
prior to any anticipated impact on its operating systems. As of June 30, 1998,
the Company has not incurred any significant expenses other than personnel
time. Costs to purchase computer hardware and software are estimated to be
approximately $1.2 million which will be capitalized. These cost estimates do
not include any Year 2000 costs associated with FPBB's operations. The cost of
the Year 2000 project will be funded through operating cash flows. While
management does not anticipate the cost of the Year 2000 project to have a
material impact on the Company's financial condition, operations or cash flows,
the project is currently substantially incomplete in the areas of testing the
computer systems and assessing the impact of the Year 2000 issue on certain
borrowers. The anticipated costs of the project and the date on which the
Company believes it will complete the Year 2000 project is based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third-party modification plans and other factors. Therefore, no guarantee can
be made that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties.
FPBB utilizes and is dependent upon data processing systems and software
to conduct its business. The data processing systems and software include a
mainframe processing system licensed to FPBB by an outside vendor and various
purchased software packages which are run on in-house computer networks. In
1997, FPBB initiated a review and assessment of all hardware and software to
confirm that it will function properly in the Year 2000. FPBB's mainframe
software vendor and the majority of the other vendors, which have been
contacted, have indicated that their hardware and/or software will be Year 2000
compliant. FPBB has started to test certain other software for Year 2000
compliance. FPBB has contacted its non-information technology providers and has
concluded that, with minor exception,
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its non-information technology systems are not date sensitive and will
therefore not be a Year 2000 issue. For those non-information technology
providers which are date-sensitive, FPBB has either updated the technology or
is in the process of updating the technology. FPBB, at present, is unable to
determine the financial effect of Year 2000 noncompliance by all outside
parties with whom FPBB may transact business. As First Bank principally
originates one-to-four family residential mortgage loans and other loans which
are collateralized by real property, management believes that First Bank's
credit risk related to Year 2000 issues with respect to its borrowers' ability
to make scheduled loan repayments is not material. While some expenses will be
incurred during the next 18 months, Year 2000 compliance is not expected to
have a material affect on FPBB's consolidated financial statements. The cost of
the Year 2000 project will be funded through operating cash flows. As of June
30, 1998, FPBB has expensed approximately $10,000, capitalized approximately
$2,000 and committed to spend approximately $100,000 related to Year 2000
costs. Costs related to the acquisition and upgrades of computer hardware are
capitalized. Non-capital costs addressing the Year 2000 issues will be charged
to earnings as they are incurred. Prior to the execution of the Merger
Agreement, FPBB budgeted approximately $1.0 million in total costs associated
with Year 2000 compliance. In connection with the Merger Agreement, RSFC has
indicated that the in-house data processing system currently utilized by FPBB
will be converted to RSFC's outside service bureau. Management anticipates that
approximately $600,000 of the total budget will not be spent if the Merger
closes and RSFC successfully converts to its service bureau.
SELECTED CONSOLIDATED FINANCIAL DATA--REPUBLIC SECURITY FINANCIAL CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data for the year ended December 31,
1997, the year ended December 31, 1996, and the nine month transition period
ended December 31, 1995, and the balance sheet data as of December 31, 1997 and
December 31, 1996, are derived from audited consolidated financial statements
of RSFC, incorporated by reference herein. The selected financial data for the
years ended March 31, 1995 and 1994 and the balance sheet data as of March 31,
1995 and 1994 have been derived from consolidated financial statements. The
financial data for the six-month periods ended June 30, 1998 and 1997 are
derived from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which RSFC
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Operating results for the six months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1998. The data contained below
should be read in conjunction with RSFC's consolidated financial statements and
related notes thereto incorporated by reference in this Joint Proxy
Statement/Prospectus.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA--RSFC
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------------------
1998 1997(A) 1997(B) 1996(C)
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS:
Interest income ............................ $ 34,913 $ 31,906 $ 65,667 $ 60,209
Interest expense ........................... 13,654 12,007 24,820 21,674
-------- -------- -------- --------
Net interest income ........................ 21,259 19,899 40,847 38,535
Provision for loan losses .................. 180 837 1,717 379
-------- -------- -------- --------
Net interest income after provision for loan
losses .................................... 21,079 19,062 39,130 38,156
Non-interest income ........................ 5,914 4,946 10,016 9,956
Operating expenses ......................... 16,812 21,317 46,153 36,474
-------- -------- -------- --------
Income before income taxes and accounting
change .................................... 10,181 2,691 2,993 11,638
Income taxes ............................... 3,766 297 1,187 3,874
-------- -------- -------- --------
Income before accounting change ............ 6,415 2,394 1,806 7,764
Change in method of accounting for income
taxes .....................................
Net income ................................. $ 6,415 $ 2,394 $ 1,806 $ 7,764
======== ======== ======== ========
PER SHARE DATA:
Basic earnings per common share:
Income before change in accounting for
income taxes ............................. $ .27 $ .09 $ .05 $ .33
======== ======== ======== ========
Net income ................................ $ .27 $ .09 $ .05 $ .33
======== ======== ======== ========
Diluted earnings per common share:
Income before change in accounting for
income taxes ............................. $ .26 $ .09 $ .05 $ .31
======== ======== ======== ========
Net income ................................ $ .26 $ .09 $ .05 $ .31
======== ======== ======== ========
Weighted average common shares and
common stock equivalents outstanding:
Basic ..................................... 23,367 21,715 22,070 21,112
Diluted ................................... 25,141 22,435 22,884 22,538
======== ======== ======== ========
Book value per common share(d) ............. $ 3.79 $ 3.63 $ 3.62 $ 3.48
Dividends per common share ................. $ .10 $ .09 $ .19 $ .12
======== ======== ======== ========
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
-------------- -------------------------
1995 1995 1994
-------------- ------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
SUMMARY OF OPERATING RESULTS:
Interest income ............................ $ 41,890 $ 45,074 $ 38,387
Interest expense ........................... 15,924 15,879 12,900
-------- -------- --------
Net interest income ........................ 25,966 29,195 25,487
Provision for loan losses .................. 434 319 867
-------- -------- --------
Net interest income after provision for loan
losses .................................... 25,532 28,876 24,620
Non-interest income ........................ 6,902 7,946 10,406
Operating expenses ......................... 22,813 27,657 25,708
-------- -------- --------
Income before income taxes and accounting
change .................................... 9,621 9,165 9,318
Income taxes ............................... 3,389 3,305 3,282
-------- -------- --------
Income before accounting change ............ 6,232 5,860 6,036
Change in method of accounting for income
taxes ..................................... 500
--------
Net income ................................. $ 6,232 $ 5,860 $ 6,536
======== ======== ========
PER SHARE DATA:
Basic earnings per common share:
Income before change in accounting for
income taxes ............................. $ .32 $ .32 $ .37
======== ======== ========
Net income ................................ $ .32 $ .32 $ .40
======== ======== ========
Diluted earnings per common share:
Income before change in accounting for
income taxes ............................. $ .30 $ .31 $ .36
======== ======== ========
Net income ................................ $ .30 $ .31 $ .39
======== ======== ========
Weighted average common shares and
common stock equivalents outstanding:
Basic ..................................... 18,481 17,275 15,831
Diluted ................................... 20,790 19,005 16,810
======== ======== ========
Book value per common share(d) ............. $ 3.28 $ 2.93 $ 2.93
Dividends per common share ................. $ .07 $ .04 $ .03
======== ======== ========
</TABLE>
- ----------------
(a) Includes pretax merger related expenses of $3.9 million which is included
in operating expenses.
(b) Includes pretax merger related expenses of $11.0 million of which $10.4
million is included in operating expenses and $0.6 million is included in
provision for loan losses.
(c) Includes pretax litigation settlement of $3.0 million which is included in
operating expenses.
(d) Book value per share is calculated by dividing common shareholders' equity
plus the proceeds of the assumed conversion of "in the money" options,
warrants and convertible preferred stock by the number of shares of common
stock outstanding and conversion of all "in the money" options, warrants
and convertible preferred stock.
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA--RSFC
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------------- ---------------------------
1998 1997 1997(A) 1996(B)
--------------- ------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
AT PERIOD END:
Total assets .............................. $ 1,019,764 $ 862,991 $ 949,280 $ 853,105
Investments ............................... 143,672 157,550 127,039 151,948
Loans(e) .................................. 689,604 580,717 637,620 557,040
Allowance for loan losses ................. 6,266 6,590 6,663 6,400
Total deposits ............................ 779,678 698,189 742,263 700,700
Borrowed money ............................ 125,437 56,760 100,573 45,843
Shareholders' equity ...................... 90,174 87,635 86,156 87,303
Shares outstanding ........................ 24,287 22,228 22,685 21,609
=========== ========= ========= =========
AVERAGE BALANCES:
Assets .................................... $ 927,400 $ 835,250 $ 853,700 $ 775,600
Shareholders' equity ...................... 88,100 89,800 89,300 86,000
Interest-earning assets ................... 822,900 755,450 770,400 705,700
Interest-bearing liabilities .............. 650,900 580,100 591,000 534,000
=========== ========= ========= =========
OTHER DATA:
Return on average assets(f) ............... 1.38% 1.06% 1.04% 1.35%
Return on average shareholders'
equity(f) ................................ 14.56% 9.89% 9.97% 12.17%
Average shareholders' equity to
average total assets ..................... 9.50% 10.75% 10.46% 11.09%
Shareholders' equity to total assets ...... 8.84% 10.15% 9.08% 10.23%
Net interest spread ....................... 4.29% 4.31% 4.32% 4.47%
Net interest margin ....................... 5.17% 5.27% 5.30% 5.46%
Non-performing loans(g) ................... $ 4,799 $ 6,706 $ 5,414 $ 7,143
Non-performing assets(g) .................. $ 8,434 $ 9,950 $ 8,131 $ 12,176
Non-performing loans to total loans ....... .70% 1.15% .85% 1.28%
Non-performing assets to total assets ..... .83% 1.15% .86% 1.43%
Allowance for loan losses to total
loans .................................... .91% 1.13% 1.04% 1.15%
Net charge-offs to average loans .......... .01% .02% .25% .21%
Efficiency ratio(h) ....................... 63% 70% 72% 69%
Dividend payout ratio(i) .................. 38% 122% 51% 36%
Number of full-service offices ............ 32 30 32 30
Loan servicing portfolio (in millions) .... $ 238 $ 260 $ 237 $ 277
=========== ========= ========= =========
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
-------------- ---------------------------
1995 1995 1994
-------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
AT PERIOD END:
Total assets .............................. $ 743,184 $ 701,931 $ 636,347
Investments ............................... 108,504 112,937 137,835
Loans(e) .................................. 503,578 497,200 412,183
Allowance for loan losses ................. 6,785 6,757 5,075
Total deposits ............................ 612,038 607,250 544,882
Borrowed money ............................ 35,007 21,347 24,611
Shareholders' equity ...................... 82,463 55,766 50,586
Shares outstanding ........................ 20,232 17,285 16,423
========= ========= =========
AVERAGE BALANCES:
Assets .................................... $ 694,485 $ 648,258 $ 611,098
Shareholders' equity ...................... 63,663 52,104 44,459
Interest-earning assets ................... 638,249 584,898 548,456
Interest-bearing liabilities .............. 502,554 459,484 429,925
========= ========= =========
OTHER DATA:
Return on average assets(f) ............... 0.90% 0.90% 1.08%
Return on average shareholders'
equity(f) ................................ 9.79% 11.20% 14.80%
Average shareholders' equity to
average total assets ..................... 9.17% 8.04% 7.28%
Shareholders' equity to total assets ...... 11.10% 7.93% 7.95%
Net interest spread ....................... 3.39% 4.25% 4.00%
Net interest margin ....................... 4.07% 4.99% 4.65%
Non-performing loans(g) ................... $ 5,974 $ 4,132 $ 3,309
Non-performing assets(g) .................. $ 11,234 $ 9,790 $ 13,587
Non-performing loans to total loans ....... 1.19% .83% .80%
Non-performing assets to total assets ..... 1.51% 1.39% 2.14%
Allowance for loan losses to total
loans .................................... 1.35% 1.36% 1.23%
Net charge-offs to average loans .......... .08% .02% .39%
Efficiency ratio(h) ....................... 69% 74% 72%
Dividend payout ratio(i) .................. 28% 13% 8%
Number of full-service offices ............ 27 25 21
Loan servicing portfolio (in millions) .... $ 307 $ 323 $ 189
========= ========= =========
</TABLE>
- ----------------
(e) Net of deferred loan fees, purchased loan discounts and premiums and
undisbursed loans-in-process. Includes loans held for sale.
(f) Excludes merger related expenses of $2.5 million, net of taxes, for the six
months ended June 30, 1997. Excludes merger related expenses of $8.2
million, net of taxes, and the effect of the reduction of the allowance
for deferred tax assets of $1.1 million for the year ended December 31,
1997. Excludes a litigation settlement and FDIC assessment of $2.7
million, net of taxes, for the year ended December 31, 1996.
(g) Non-performing loans are loans contractually past due 90 days or more
placed on non-accrual. Non-performing assets include non-performing loans,
other real estate owned and repossessed assets.
(h) The efficiency ratio is calculated by dividing non-interest expense by net
interest income plus non-interest income excluding realized securities
gains/losses and non-recurring expenses.
(i) Dividend payout ratio is calculated by dividing dividends declared per
share by basic earnings per share. Amounts for the six months ended June
30, 1997 and the year ended December 31, 1997 are adjusted to exclude
merger related expenses (see note (a) and (b)).
9
<PAGE>
RSFC QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER(A) QUARTER QUARTER(A)
------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income ............................................. $ 15,675 $ 16,231 $ 16,766 $ 16,995
Interest expense ............................................ 5,858 6,149 6,398 6,415
-------- -------- -------- --------
Net interest income ......................................... 9,817 10,082 10,368 10,580
Provision for loan losses ................................... 31 806 31 849
-------- -------- -------- --------
Net interest income after provision for loan losses ......... 9,786 9,276 10,337 9,731
Non-interest income ......................................... 2,468 2,478 2,817 2,253
Operating expense ........................................... 8,055 13,262 9,173 15,663
-------- -------- -------- --------
Income (loss) before income taxes ........................... 4,199 (1,508) 3,981 (3,679)
Provision (benefit) for income taxes ........................ 1,115 (818) 1,065 (175)
-------- -------- -------- --------
Net income (loss) ........................................... $ 3,084 $ (690) $ 2,916 $ (3,504)
-------- -------- -------- --------
PER SHARE DATA:
Basic earnings (loss) per common share ...................... $ 0.13 $ (.04) $ 0.12 $ (.16)
Diluted earnings (loss) per common share .................... $ 0.13 $ (.04) $ 0.12 $ (.16)
Dividends per common share .................................. $ 0.04 $ 0.05 $ 0.05 $ 0.05
Weighted average common shares and common stock equivalents
outstanding ................................................ 22,766 22,849 23,164 23,242
======== ======== ======== ========
</TABLE>
- ----------------
(a) Includes merger related expenses of $5.4 million and $2.8 million, net of
taxes, for the three months ended December 31, 1997 and June 30, 1997,
respectively.
10
<PAGE>
RSFC QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER(A) QUARTER(B)
------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income ............................................. $ 14,647 $ 14,973 $ 15,299 $ 15,290
Interest expense ............................................ 5,353 5,289 5,448 5,584
-------- -------- -------- --------
Net interest income ......................................... 9,294 9,684 9,851 9,706
Provision for loan losses ................................... 81 86 106 106
-------- -------- -------- --------
Net interest income after provision for loan losses ......... 9,213 9,598 9,745 9,600
Non-interest income ......................................... 2,145 2,418 2,610 2,783
Operating expense ........................................... 7,965 8,517 9,104 10,888
-------- -------- -------- --------
Income before income taxes .................................. 3,393 3,499 3,251 1,495
Provision for income taxes .................................. 915 975 785 1,199
-------- -------- -------- --------
Net income .................................................. $ 2,478 $ 2,524 $ 2,466 $ 296
-------- -------- -------- --------
PER SHARE DATA:
Basic earnings per common share ............................. $ 0.11 $ 0.11 $ 0.11 $ 0.01
Diluted earnings per common share ........................... $ 0.10 $ 0.10 $ 0.10 $ 0.01
Dividends per common share .................................. $ 0.03 $ 0.03 $ 0.03 $ 0.03
Weighted average common shares and common stock equivalents
outstanding ................................................ 21,594 21,662 22,410 22,613
======== ======== ======== ========
</TABLE>
- ----------------
(a) Includes pre-tax FDIC assessment of $1.2 million.
(b) Includes pre-tax litigation settlement of $3.0 million.
11
<PAGE>
SELECTED FINANCIAL DATA--FIRST PALM BEACH BANCORP, INC.
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
The following selected financial data for each of the years ended
September 30, 1997, 1996 and 1995 and the balance sheet data as of September
30, 1997 and 1996 are derived from financial statements of FPBB incorporated by
reference herein which have been audited by Deloitte & Touche LLP, independent
auditors. The selected financial data for the years ended September 30, 1994
and 1993 and the balance sheets as of September 30, 1995, 1994 and 1993, have
been derived from audited financial statements. The financial data for the
nine-month periods ended June 30, 1998 and 1997 are derived from unaudited
financial statements. The unaudited financial statements include all
adjustments, consisting of only normal recurring accruals, which FPBB considers
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the nine months ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the entire year ending September 30, 1998. The data contained below should be
read in conjunction with FPBB's consolidated financial statements and related
notes thereto incorporated by reference in this Joint Proxy
Statement/Prospectus.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------------
1998 1997
------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
SUMMARY OF OPERATING RESULTS:
Interest income .......................... $ 95,758 $ 84,937
Interest expense ......................... 64,068 51,841
-------- --------
Net Interest income ...................... 31,690 33,096
Provision for loan losses ................ 4,062 2,200
-------- --------
Net interest income after provision
for loan losses ......................... 27,628 30,896
Non-interest income ...................... 11,084 5,993
Operating expenses ....................... 29,461 25,351
-------- --------
Income before income taxes ............... 9,251 11,538
Provision for income taxes ............... 3,688 4,637
-------- --------
Net income ............................... $ 5,563 $ 6,901
-------- --------
PER SHARE DATA:
Earnings per common share:
Basic .................................... 1.12 1.41
-------- --------
Diluted .................................. 1.09 1.38
-------- --------
Average common shares and potential common
shares outstanding:
Basic .................................... 4,969 4,878
-------- --------
Diluted .................................. 5,119 5,002
-------- --------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS:
Interest income .......................... $ 116,930 $ 103,532 $ 80,964 $ 57,874 $50,580
Interest expense ......................... 72,851 61,300 48,900 30,049 28,783
--------- --------- -------- -------- -------
Net Interest income ...................... 44,079 42,232 32,064 27,825 21,797
Provision for loan losses ................ 3,281 15,704 261 135 149
--------- --------- -------- -------- -------
Net interest income after provision
for loan losses ......................... 40,798 26,528 31,803 27,690 21,648
Non-interest income ...................... 9,001 10,069 4,030 4,437 5,775
Operating expenses ....................... 34,406 35,602 26,609 22,826 19,609
--------- --------- -------- -------- -------
Income before income taxes ............... 15,393 995 9,224 9,301 7,814
Provision for income taxes ............... 6,037 446 3,578 3,502 2,597
--------- --------- -------- -------- -------
Net income ............................... $ 9,356 $ 549 $ 5,646 $ 5,799 $ 5,217
--------- --------- -------- -------- -------
PER SHARE DATA:
Earnings per common share:
Basic .................................... 1.91 0.11 1.14 1.08 N/A
--------- --------- -------- -------- ------
Diluted .................................. 1.86 0.11 1.11 1.05 N/A
--------- --------- -------- -------- ------
Average common shares and potential common
shares outstanding:
Basic .................................... 4,894 4,963 4,955 5,387 N/A
--------- --------- -------- -------- ------
Diluted .................................. 5,026 5,094 5,072 5,523 N/A
--------- --------- -------- -------- ------
</TABLE>
- ----------------
(a) FPBB adopted the provisions of SFAS No. 128, "Earnings Per Share," as of
December 31, 1997 and restated all prior periods presented. Earnings per
share as previously reported in the financial statements of FPBB,
incorporated by reference herein, were computed in accordance with APB 15.
Earnings per share information for fiscal year ending September 30, 1993
is not meaningful because FPBB did not complete the conversion until
September 29, 1993.
12
<PAGE>
SELECTED FINANCIAL DATA--FPBB (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------------------
1998 1997
--------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
BALANCE SHEET DATA:
AT PERIOD END:
Total assets ........................... $ 1,764,026 $ 1,666,396
Investments ............................ 537,799 418,973
Loans .................................. 1,064,346 1,126,314
Allowance for loan losses .............. 5,363 6,755
Total deposits ......................... 1,299,323 1,227,277
Borrowed money ......................... 304,792 294,825
Shareholders' equity ................... 120,828 109,495
Shares outstanding ..................... 5,136,459 5,030,846
----------- -----------
AVERAGE BALANCES:
Assets ................................. $ 1,799,017 $ 1,530,992
Shareholders' equity ................... 116,331 105,893
Interest-earning assets ................ 1,724,076 1,460,293
Interest-bearing liabilities ........... 1,576,831 1,351,385
----------- -----------
OTHER DATA:
Return on average assets (b) ........... 0.41% 0.60%
Return on average shareholders'
equity (b) ............................ 6.38% 8.71%
Average shareholders' equity to
average total assets .................. 6.47% 6.92%
Shareholders' equity to total
assets ................................ 6.85% 6.57%
Net interest spread .................... 2.00% 2.65%
Net interest margin .................... 2.46% 3.03%
Non-performing loans ................... $ 6,061 $ 11,017
Non-performing assets .................. $ 9,027 $ 12,117
Non-performing loans to total
loans and mortgage-backed
securities ............................ 0.40% 0.74%
Non-performing assets to total
assets ................................ 0.51% 0.73%
Allowance for loan losses to
total loans ........................... 0.50% 0.60%
Net charge-offs to average loans 0.42% 0.69%
Efficiency ratio (a) ................... 73.90% 66.98%
Number of full-service offices ......... 51 44
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------- --------------- --------------- --------------- --------------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
AT PERIOD END:
Total assets ........................... $ 1,808,420 $ 1,490,020 $ 1,208,845 $ 1,076,583 $ 856,307
Investments ............................ 514,397 276,858 327,941 449,770 387,354
Loans .................................. 1,150,146 1,019,736 824,096 578,687 430,990
Allowance for loan losses .............. 6,046 11,855 2,157 1,956 1,886
Total deposits ......................... 1,229,279 1,136,722 878,670 718,282 698,458
Borrowed money ......................... 428,710 211,025 189,582 229,892 26,325
Shareholders' equity ................... 113,030 105,425 104,611 100,462 102,330
Shares outstanding ..................... 5,047,746 5,093,096 5,133,063 5,279,897 5,496,375
----------- ----------- ----------- ----------- ------------
AVERAGE BALANCES:
Assets ................................. $ 1,584,862 $ 1,390,279 $ 1,174,179 $ 973,017 $ 820,679
Shareholders' equity ................... 107,346 111,987 102,676 103,355 53,633
Interest-earning assets ................ 1,514,274 1,327,292 1,131,729 936,613 783,058
Interest-bearing liabilities ........... 1,398,558 1,208,084 1,012,079 807,652 712,008
----------- ----------- ----------- ----------- ------------
OTHER DATA:
Return on average assets (b) ........... 0.59% 0.04% 0.48% 0.60% 0.64%
Return on average shareholders'
equity (b) ............................ 8.71% 0.49% 5.50% 5.61% 9.73%
Average shareholders' equity to
average total assets .................. 6.78% 8.06% 8.74% 10.62% 6.54%
Shareholders' equity to total
assets ................................ 6.25% 7.08% 8.65% 9.33% 11.95%
Net interest spread .................... 2.51% 2.73% 2.32% 2.46% 2.42%
Net interest margin .................... 2.91% 3.18% 2.83% 2.97% 2.78%
Non-performing loans ................... $ 8,086 $ 12,831 $ 1,814 $ 1,931 $ 2,678
Non-performing assets .................. $ 10,355 $ 16,059 $ 2,734 $ 2,473 $ 4,081
Non-performing loans to total
loans and mortgage-backed
securities ............................ 0.51% 1.02% 0.17% 0.21% 0.37%
Non-performing assets to total
assets ................................ 0.57% 1.08% 0.23% 0.23% 0.48%
Allowance for loan losses to
total loans ........................... 0.53% 1.18% 0.26% 0.34% 0.44%
Net charge-offs to average loans 0.85% 0.81% 0.01% 0.01% 0.14%
Efficiency ratio (a) ................... 71.82% 100.08% 70.81% 71.84% 72.27%
Number of full-service offices ......... 45 33 23 20 16
</TABLE>
- ----------------
(a) The efficiency ratio is calculated by dividing non-interest expense by net
interest income plus non-interest income excluding realized securities
gains/losses.
(b) For the nine-month periods ended June 30, 1998 and 1997, ratio computations
are computed on an annualized basis.
13
<PAGE>
FPBB QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
---------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income ....................................................... $ 26,988 $ 27,507 $ 30,442 $ 31,993
Interest expense ...................................................... 16,568 16,562 18,711 21,010
-------- -------- -------- --------
Net interest income ................................................... 10,420 10,945 11,731 10,983
Provision for loan losses ............................................. 802 567 831 1,081
-------- -------- -------- --------
Net interest income after provision for loan losses ................... 9,618 10,378 10,900 9,902
Non-interest income ................................................... 1,907 2,134 1,952 3,008
Operating expense ..................................................... 7,738 8,717 8,897 9,054
-------- -------- -------- --------
Income before income taxes ............................................ 3,787 3,795 3,955 3,856
Provision for income taxes ............................................ 1,514 1,520 1,603 1,400
-------- -------- -------- --------
Net income ............................................................ $ 2,273 $ 2,275 $ 2,352 $ 2,456
-------- -------- -------- --------
PER SHARE DATA:
Net income per common share
Basic ................................................................ $ 0.46 $ 0.47 $ 0.48 $ 0.50
Diluted .............................................................. $ 0.45 $ 0.46 $ 0.47 $ 0.48
Weighted average common shares and potential common shares outstanding
Basic ................................................................ 4,896 4,851 4,887 4,919
Diluted .............................................................. 5,039 4,985 5,011 5,051
======== ======== ======== ========
</TABLE>
14
<PAGE>
FPBB QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30, 1996
(UNAUDITED)
-------------------------
FIRST SECOND
QUARTER QUARTER
------------ ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest income ....................................................... $ 23,161 $ 26,505
Interest expense ...................................................... 13,780 15,673
-------- --------
Net interest income ................................................... 9,381 10,832
Provision for loan losses ............................................. 627 957
-------- --------
Net interest income (loss) after provision for loan losses ............ 8,754 9,875
Non-interest income ................................................... 1,557 1,495
Operating expense ..................................................... 6,109 6,912
-------- --------
Income (loss) before income taxes ..................................... 4,202 4,458
Provision (benefit) for income taxes .................................. 1,678 1,783
-------- --------
Net income (loss) ..................................................... $ 2,524 $ 2,675
-------- --------
PER SHARE DATA:
Earnings per common share
Basic ................................................................ $ 0.51 $ 0.53
Diluted .............................................................. $ 0.50 $ 0.52
Dividends per common share ............................................ $ 0.10 $ 0.10
Weighted average common shares and potential common shares outstanding
Basic ................................................................ 4,926 5,008
Diluted .............................................................. 5,062 5,140
======== ========
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
1996
(UNAUDITED)
---------------------------------
THIRD FOURTH
QUARTER(A) QUARTER
------------ --------------------
<S> <C> <C>
Interest income ....................................................... $ 26,932 $ 26,934
Interest expense ...................................................... 15,654 16,193
-------- ----------
Net interest income ................................................... 11,278 10,741
Provision for loan losses ............................................. 1,429 12,691
-------- ----------
Net interest income (loss) after provision for loan losses ............ 9,849 (1,950)
Non-interest income ................................................... 1,560 5,457
Operating expense ..................................................... 6,884 15,697
-------- ----------
Income (loss) before income taxes ..................................... 4,525 (12,190)
Provision (benefit) for income taxes .................................. 1,835 (4,850)
-------- ----------
Net income (loss) ..................................................... $ 2,690 $ (7,340) (a)
-------- ----------
PER SHARE DATA:
Earnings per common share
Basic ................................................................ $ 0.54 $ (1.48)
Diluted .............................................................. $ 0.53 $ (1.44)
Dividends per common share ............................................ $ 0.10 $ 0.10
Weighted average common shares and potential common shares outstanding
Basic ................................................................ 4,966 4,953
Diluted .............................................................. 5,097 5,081
======== ==========
</TABLE>
- ----------------
(a) Includes one-time SAIF assessment expense of $4.0 million, net of income
tax.
15
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
The following table sets forth certain information concerning the RSFC
Common Stock and the FPBB Common Stock. The tables also include certain pro
forma per share combined information which is based on the historical data of
RSFC and FPBB adjusted to give effect to the Merger, excluding anticipated
cost-savings from operational efficiencies of the Combined Company. The data
contained below should be read in conjunction with the consolidated financial
statements and related notes thereto of RSFC and FPBB incorporated by reference
in this Joint Proxy Statement/Prospectus. See also "Unaudited Pro Forma
Combined Condensed Financial Data."
<TABLE>
<CAPTION>
RSFC FPBB
-------------------------- --------------------------
EQUIVALENT
PRO FORMA PRO FORMA
PER SHARE PER SHARE
HISTORICAL DATA HISTORICAL DATA (1)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
BOOK VALUE PER SHARE(2):
June 30, 1998 ............................................. $ 3.79 $ 4.29 $ 23.52 $ 17.99
December 31, 1997 / September 30, 1997 .................... $ 3.62 $ 4.43 $ 22.43 $ 18.58
December 31, 1996 / September 30, 1996 .................... $ 3.48 $ 4.17 $ 21.87 $ 17.49
CASH DIVIDENDS DECLARED PER SHARE:
Six months ended June 30, 1998 ............................ $ .10 $ .10 $ .35 $ .42
Year ended December 31, 1997 / September 30, 1997 ......... $ .19 $ .19 $ .60 $ .80
Year ended December 31, 1996 / September 30, 1996 ......... $ .12 $ .12 $ .40 $ .50
Nine months ended December 31, 1995 ....................... $ .07 $ .07 $ .15 $ .29
INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
Six months ended June 30, 1998 ............................ $ .26 $ .20 $ .64 $ .84
Year ended December 31, 1997 (3) / September 30, 1997 $ .05 $ .23 $ 1.86 $ .96
Year ended December 31, 1996 / September 30, 1996 ......... $ .31 $ .17 $ .11 $ .71
Nine months ended December 31, 1995 ....................... $ .30 $ .26 $ 1.02 $ 1.09
</TABLE>
- ----------------
(1) The equivalent pro forma per share data represents the value of the pro
forma per share data multiplied by the Exchange Ratio.
(2) Book value per share is calculated by dividing common shareholders' equity
plus the proceeds of the assumed conversion of "in the money" options,
warrants and convertible preferred stock by the number of common stock
outstanding and conversion of all "in the money" options, warrants and
convertible preferred stock.
(3) Includes non-recurring merger expenses of $8.2 million, net of tax related
to the County and Family Bank mergers.
RECENT DEVELOPMENTS
On September 14, 1998, RSFC entered into a definitive agreement to acquire
Northside Bank of Tampa, Florida. At June 30, 1998, Northside Bank had total
assets of $70 million, deposits of $60 million and stockholders' equity of $9
million.
On September 8, 1998, RSFC entered into a definitive agreement to acquire
the two Florida branch offices of Household Bank, FSB ("Household"), a wholly
owned subsidiary of Household International, Inc. The two branches of Household
are located in Tampa and Orlando. The branches have approximately $32 million
in loans and approximately $19 million in deposits.
On August 21, 1998, RSFC entered into a definitive agreement to acquire
Newberry Bank. Newberry Bank has two branches, one in Newberry, Florida and one
in Ocala, Florida. At June 30, 1998, Newberry had total assets of $37 million,
deposits of $33 million and stockholders' equity of $2.4 million.
16
<PAGE>
MARKET PRICE AND DIVIDEND DATA
RSFC
The RSFC Common Stock is traded under the symbol "RSFC" on the Nasdaq
National Market. It is the present intention of the RSFC Board to continue to
pay regular quarterly cash dividends. However, the declaration and payment of
future dividends is at the sole discretion of the RSFC Board and the amount, if
any, depends upon the earnings, financial condition and capital needs of RSFC
and Republic Security and other factors, including restrictions arising from
federal and state banking laws and regulations to which RSFC and Republic
Security are subject.
The table below sets forth, for the fiscal quarters indicated, the high
and low bid prices for the RSFC Common Stock as reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
PRICE PER SHARE OF DIVIDEND PER SHARE
RSFC COMMON STOCK OF RSFC
------------------------ -------------------
HIGH LOW COMMON STOCK
----------- ---------- -------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter ...................................... $ 6 $ 5 1/8 $.03
Second Quarter ..................................... 6 1/4 5 1/2 .03
Third Quarter ...................................... 5 7/8 5 1/8 .03
Fourth Quarter ..................................... 6 1/8 5 1/4 .03
YEAR ENDING DECEMBER 31, 1997
First Quarter ...................................... 8 5 7/8 .04
Second Quarter ..................................... 9 5/8 6 7/8 .05
Third Quarter ...................................... 11 1/2 8 1/16 .05
Fourth Quarter ..................................... 10 5/8 8 3/8 .05
YEAR ENDING DECEMBER 31, 1998
First Quarter ...................................... 11 1/2 8 1/4 .05
Second Quarter ..................................... 13 7/8 10 5/8 .05
Third Quarter (through September 24, 1998) ......... 11 15/16 7 1/2 .06
</TABLE>
The following table sets forth the closing sale price per share of RSFC
Common Stock and the FPBB Common Stock and the equivalent per share price for
FPBB Common Stock giving effect to the Merger on (i) May 27, 1998, the last
business day preceding public announcement of the proposed Merger; and (ii)
September 24, 1998, the last practicable trading day prior to the printing of
this Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
RSFC FPBB EQUIVALENT PRICE PER
COMMON STOCK COMMON STOCK FPBB SHARE(1)
-------------- -------------- ---------------------
<S> <C> <C> <C>
May 27, 1998 ............... $13 1/8 $36 1/2 $55.05
September 24, 1998 ......... $ 8 1/2 $33 1/8 $35.65
</TABLE>
- ----------------
(1) The equivalent price per share of FPBB Common Stock at each specified date
was determined by multiplying the last reported closing sale price of
RSFC Common Stock on each specified date by the Exchange Ratio of 4.194.
RSFC shareholders and FPBB stockholders are advised to obtain current
market quotations for the FPBB Common Stock and RSFC Common Stock. It is
expected that the market price of RSFC Common Stock will fluctuate between the
date of this Joint Proxy Statement/Prospectus and the date on which the Merger
is consummated and thereafter. Because the number of shares of RSFC Common
Stock to be received by FPBB stockholders in the Merger for each share of FPBB
Common Stock is fixed (subject to possible increase in certain circumstances)
and because the market price of the RSFC Common Stock is subject to
fluctuation, the value of the shares of RSFC Common Stock that holders of FPBB
Common Stock would receive in the Merger may increase or decrease prior to the
Merger. No assurance can be given concerning the market price of RSFC Common
Stock before or after the Effective Time. See "THE MERGER--The Merger
Agreement--Exchange Ratio and--Termination."
17
<PAGE>
FPBB
FPBB's common stock is traded on the Nasdaq National Market under the
symbol "FFPB." Newspaper stock tables list the Company as First Palm (FstPalm).
As of September 18, 1998, there were 5,155,009 shares of common stock
outstanding and 564 stockholders of record, not including the number of persons
or entities whose stock is held in nominee or "street" name through various
brokerage firms or banks.
The table below sets forth, for the fiscal quarters indicated, the high
and low sale prices for the FPBB Common Stock as reported by Nasdaq National
Market.
<TABLE>
<CAPTION>
PRICE PER SHARE OF
FPBB COMMON STOCK DIVIDENDS
--------------------- PER SHARE OF
HIGH LOW FPBB COMMON STOCK
--------- --------- ------------------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1996
First Quarter ....................................... $24 5/8 $21 1/8 $0.10
Second Quarter ...................................... 23 5/8 20 3/4 0.10
Third Quarter ....................................... 23 3/4 20 7/8 0.10
Fourth Quarter ...................................... 23 1/2 19 1/2 0.10
YEAR ENDED SEPTEMBER 30, 1997
First Quarter ....................................... 25 7/8 22 3/4 0.15
Second Quarter ...................................... 30 1/4 23 1/4 0.15
Third Quarter ....................................... 34 3/8 26 1/2 0.15
Fourth Quarter ...................................... 35 5/8 30 1/4 0.15
YEAR ENDING SEPTEMBER 30, 1998
First Quarter ....................................... 43 1/8 35 1/8 0.175
Second Quarter ...................................... 46 36 3/4 0.175
Third Quarter ....................................... 50 35 1/4 0.175
Fourth Quarter (through September 24, 1998) ......... 44 1/2 29
</TABLE>
18
<PAGE>
THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is being furnished to the holders of
RSFC Common Stock in connection with the solicitation of proxies by the RSFC
Board for use at the RSFC Special Meeting to be held on Tuesday, October 27,
1998, at 10:00 a.m., local time, at the Palm Beach Airport Hilton, 150
Australian Avenue, West Palm Beach, Florida 33406 and at all adjournments and
postponements thereof, and to the holders of FPBB Common Stock in connection
with the solicitation of proxies by the FPBB Board for use at the FPBB Special
Meeting to be held on Tuesday, October 27, 1998, at 1:00 p.m., local time, at
the First Bank of Florida Corporate Headquarters, 450 S. Australian Avenue,
West Palm Beach, Florida 33401, and at all adjournments and postponements
thereof.
At the respective Special Meetings, the holders of RSFC Common Stock and
FPBB Common Stock will separately consider and vote upon proposals to approve
and adopt the Merger Agreement. A copy of the Merger Agreement is attached as
Annex A to this Joint Proxy Statement/Prospectus. Pursuant to the Merger
Agreement, upon satisfaction or waiver of certain conditions described in the
Merger Agreement, (i) FPBB will be merged with and into RSFC, (ii) each
outstanding share of FPBB Common Stock except for shares held directly or
indirectly by RSFC or FPBB (other than Trust Account Shares or DPC Shares) will
be converted into the right to receive 4.194 shares of RSFC Common Stock and
(iii) FPBB will cease to exist as a separate legal entity. The Merger Agreement
contemplates that, subsequent to the Merger, (i) First Bank will be merged with
and into Republic Security and (ii) First Bank will cease to exist as a
separate entity. In addition, at the RSFC Special Meeting, the RSFC
shareholders will be asked to vote on certain other matters. See "ADDITIONAL
PROPOSALS FOR CONSIDERATION AT THE RSFC SPECIAL MEETING."
A representative of Ernst & Young LLP, independent certified public
accountants of RSFC, will be present at the RSFC Special Meeting, and a
representative of Deloitte & Touche LLP, independent auditors of FPBB, will be
present at the FPBB Special Meeting, and each will have an opportunity to make
a statement, if such representative so desires, and to respond to appropriate
questions raised at such Special Meeting.
19
<PAGE>
VOTING AND PROXY INFORMATION
RSFC
The RSFC Board has fixed the close of business on September 18, 1998 as
the RSFC Record Date for determining the holders of RSFC Common Stock entitled
to receive notice of and to vote at the RSFC Special Meeting. At the close of
business on the RSFC Record Date, there were 25,333,577 shares of RSFC Common
Stock outstanding. As of such date, such shares of RSFC Common Stock were held
by approximately 1,930 shareholders of record. The presence in person or by
proxy of holders of record of shares representing a majority of the total
issued and outstanding shares of the RSFC Common Stock will constitute a quorum
at the RSFC Special Meeting.
Under Florida law, the affirmative vote of the holders of at least a
majority of the shares of RSFC Common Stock outstanding at the RSFC Record Date
is required in order to adopt the Merger Agreement. Approval of the amendment
to the RSFC Articles and the amendment to the Plan require that the number of
votes cast in favor exceed the number of votes cast against. The holders of
RSFC Common Stock are entitled to one vote on all matters properly brought
before the RSFC Special Meeting for each share of RSFC Common Stock held by
such persons. Votes may be cast in person at the RSFC Special Meeting or by
proxy.
As of the RSFC Record Date, directors and executive officers of RSFC and
their affiliates had the right to vote 3,858,346 shares of RSFC Common Stock in
the aggregate (representing approximately 14.7% of the outstanding shares of
RSFC Common Stock as of the RSFC Record Date). Such persons have informed RSFC
that they intend to vote or direct the vote of all such shares of RSFC Common
Stock for the approval and adoption of the Merger Agreement.
Any RSFC shareholder who signs and returns a proxy may revoke it at any
time before it has been voted at the RSFC Special Meeting by (i) delivering to
the Secretary of RSFC written notice of its revocation, (ii) executing and
delivering to the Secretary of RSFC a proxy bearing a later date or (iii)
attending the RSFC Special Meeting and voting in person. Attendance at the RSFC
Special Meeting will not in and of itself constitute a revocation of any proxy
given to RSFC. Written notice of revocation should be sent to Republic Security
Financial Corporation, P.O. Box 4298, West Palm Beach, Florida 33402-4298,
Attention: Secretary. All properly executed proxies, if received in time for
voting and not revoked, will be voted in accordance with the instructions
specified, or, if no instructions are specified, will be voted FOR the approval
of the Merger Agreement and the amendments to the RSFC Articles and the Plan.
FPBB
The FPBB Board has fixed the close of business on September 18, 1998 as
the FPBB Record Date for determining the holders of FPBB Common Stock entitled
to receive notice of and to vote at the FPBB Special Meeting. At the close of
business on the FPBB Record Date, there were 5,155,009 shares of FPBB Common
Stock outstanding. As of such date, the shares of FPBB Common Stock were held
by approximately 564 stockholders of record. The presence in person or by proxy
of holders of record of shares representing a majority of the total outstanding
shares of FPBB Common Stock will constitute a quorum at the FPBB Special
Meeting.
Under Delaware law, the affirmative vote of the holders of at least a
majority of the shares of FPBB Common Stock outstanding at the FPBB Record Date
is required in order to approve the Merger Agreement. The holders of FPBB
Common Stock are entitled to one vote on all matters properly brought before
the FPBB Special Meeting for each share of FPBB Common Stock held by such
persons. Votes may be cast in person at the FPBB Special Meeting or by proxy.
As of the FPBB Record Date, directors and executive officers of FPBB and
their affiliates had the right to vote 234,296 shares of FPBB Common Stock in
the aggregate representing approximately 4.5%
20
<PAGE>
of the outstanding shares of FPBB Common Stock as of the FPBB Record Date. Such
persons have informed FPBB that they intend to vote or direct the vote of all
such shares of FPBB Common Stock for the approval and adoption of the Merger
Agreement.
Any FPBB stockholder who signs and returns a proxy may revoke it at any
time before it has been voted at the FPBB Special Meeting by (i) delivering to
the Secretary of FPBB written notice of its revocation, (ii) executing and
delivering to the Secretary of FPBB a proxy bearing a later date or (iii)
attending the FPBB Special Meeting and voting in person. Attendance at the FPBB
Special Meeting will not in and of itself constitute a revocation of any proxy
given to FPBB. Written notice of revocation should be sent to First Palm Beach
Bancorp, Inc., 450 S. Australian Avenue, West Palm Beach, Florida 33401,
Attention: Secretary. All properly executed proxies, if received in time for
voting and not revoked, will be voted in accordance with the instructions
specified, or, if no instructions are specified, will be voted FOR the approval
and adoption of the Merger Agreement.
PROXIES
All shares represented by properly executed proxies received prior to or
at the respective Special Meetings and not revoked will be voted in accordance
with the instructions indicated in such proxies. If no instructions are
indicated on a properly executed returned proxy, such proxies will be voted (i)
FOR approval of the proposals set forth thereon (the "Proposals") and (ii)
otherwise in the discretion of the proxy holders as to any other matter which
may come before the applicable Special Meeting or any adjournment or
postponement thereof, including, among other things, a motion to adjourn or
postpone such Special Meeting to another time and/or place, for the purpose of
soliciting additional proxies or otherwise; provided, however, that no proxy
which is voted against the proposal to approve and adopt the Merger Agreement
will be voted in favor of any such adjournment or postponement. Any proxy card
not returned will have the same effect as a vote "against" the Merger. A
properly executed proxy marked "ABSTAIN," although counted for purposes of
determining whether there is a quorum and for purposes of determining the
aggregate voting power and number of shares represented and entitled to vote at
the Special Meetings, will not be voted and will have the effect of a vote
"against" the Merger. Brokers and nominees are precluded from exercising their
voting discretion with respect to the approval and adoption of the Proposals
and thus, absent specific instructions from the beneficial owner of such
shares, are not empowered to vote such shares with respect to the approval and
adoption of such Proposals. Therefore, because the affirmative vote of a
majority of the shares of RSFC and FPBB Common Stock outstanding on the Record
Dates is required to approve the Merger, a "broker non-vote" (i.e., shares held
by brokers or nominees that are represented at a meeting but with respect to
which the broker or nominee is not empowered to vote on a particular Proposal)
will have the effect of a vote against the Merger. Shares represented by
"broker non-votes" will, however, be counted for purposes of determining
whether there is a quorum at the Special Meetings. "Broker non-votes" for the
RSFC Special Meeting will not be treated as shares voted for purposes of the
approval of the amendment to the RSFC Articles and the amendment to the Plan.
Neither the management of RSFC nor of FPBB, as the case may be, knows of
any business to be presented at its respective Special Meeting other than such
business described in this Joint Proxy Statement/Prospectus. Should additional
business properly come before either of the Special Meetings, the persons
acting as the proxies will have discretion to vote in accordance with their own
judgment on such business; provided, however, that such discretionary authority
will only be exercised to the extent possible under applicable federal and
state securities and corporation laws.
21
<PAGE>
NO DISSENTERS' RIGHTS OF APPRAISAL
RSFC. Under Florida law, shareholders' right to dissent from a plan of
merger does not apply if the security they hold is registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders as of the record date for
determining shareholders entitled to vote upon the plan of merger. The holders
of RSFC Common Stock will not be entitled to dissenters' rights of appraisal
under Florida law in connection with the Merger because the RSFC Common Stock
will be listed on the Nasdaq National Market as of the RSFC Record Date.
FPBB. With respect to holders of FPBB Common Stock, under Delaware law,
stockholders in a public company are not entitled to appraisal rights in a
merger if the consideration they receive in the merger consists only of shares
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders and
cash in lieu of fractional shares. Accordingly, holders of FPBB Common Stock
are not entitled to appraisal rights in connection with the Merger because the
shares of FPBB Common Stock will be listed on the Nasdaq National Market as of
the FPBB Record Date and shares of RSFC Common Stock to be issued in the Merger
will be listed on the Nasdaq National Market. See "COMPARISON OF RIGHTS OF
HOLDERS OF RSFC AND FPBB COMMON STOCK--Rights of Dissenting Shareholders."
22
<PAGE>
THE MERGER
BACKGROUND TO THE MERGER
First Bank, formerly First Federal Savings and Loan Association of the
Palm Beaches, converted from the mutual to the stock form of organization in
1993, and simultaneously therewith was acquired by FPBB in a holding company
formation transaction. The period since the First Bank conversion has been one
of continuous and significant change in the financial services industry, marked
by steadily increasing competition and widespread consolidation. Based on the
FPBB Board's belief that continued consolidation and competition in the
financial services industry would make it increasingly difficult for smaller
thrifts or thrift holding companies such as FPBB to maintain their competitive
position and market share, the FPBB Board has from time to time considered and
analyzed, with the assistance of Keefe, Bruyette, FPBB's strategic
alternatives, including prospects for FPBB continuing as an independent entity
and possible business combination transactions with financial institutions of
varying sizes and the effects of such transactions on FPBB and its
stockholders, employees and the communities it serves.
In April 1998, the FPBB Board formally retained Keefe, Bruyette to serve
as its financial advisor in connection with its review of its strategic
alternatives and potential merger and acquisition transactions. Keefe, Bruyette
reviewed with the FPBB Board FPBB's strategic alternatives and the current
condition of the financial institution merger and acquisition market. Based on
Keefe, Bruyette's analysis and recommendations and based on the values that the
FPBB Board believed might be obtainable in a business combination transaction,
the FPBB Board authorized Keefe, Bruyette to contact representatives of certain
selected financial institutions to ascertain their interest in engaging in a
business combination transaction with FPBB. These institutions were selected by
Keefe, Bruyette based on their suitability with respect to certain
characteristics, including size, location, performance, operating strategy,
share value, pro forma impact, and the possibility that a merger of FPBB with
such institution could result in a subsequent acquisition of the combined
entity by another financial institution.
In late April and early May 1998, Keefe, Bruyette communicated with 19
financial institutions regarding their interest in engaging in a business
combination transaction with FPBB. A number of these institutions expressed
interest, and each of such companies was requested to deliver to Keefe,
Bruyette on May 12, 1998 a written proposal containing the per share price and
other proposed terms upon which such party would be willing to enter into a
business combination transaction with FPBB. On May 12, 1998, the RSFC Board met
by teleconference to review a possible combination with FPBB and to authorize
RSFC management to submit a proposal. Three companies, including RSFC,
submitted preliminary proposals for a business combination transaction. Shortly
thereafter, representatives of Keefe, Bruyette offered each of the three
companies that had submitted a proposal an opportunity to conduct comprehensive
on-site due diligence and to improve the terms of its proposal. Two of the
three companies conducted on-site due diligence of FPBB, and on May 26, 1998
both of these companies submitted revised proposals. The third company was not
prepared to proceed with its due diligence investigation or to submit a revised
proposal within the time frame proposed by FPBB. Of the two proposals received,
RSFC's proposal, in which each share of FPBB Common Stock would be exchanged
for 4.194 shares of RSFC Common Stock (having an indicated value of $55.05
based on the closing price of RSFC Common Stock on May 26, 1998), offered the
highest per share consideration to the holders of FPBB Common Stock. The other
proposal contemplated a stock for stock merger which had an indicated value per
share of FPBB Common Stock of $42.00 per share based on the closing price of
the common stock of such bidder on May 26, 1998.
In the afternoon and evening of May 26 and continuing through the next
day, FPBB's management together with its legal and financial advisors held
discussions with RSFC's management and its legal and financial advisors
concerning the terms of a proposed business combination between the parties. On
May 27, 1998, the terms of the Merger Agreement and the Stock Option Agreement
to be presented to the FPBB Board were finalized.
23
<PAGE>
At a meeting held on May 27, 1998, the FPBB Board reviewed the terms of
the revised proposals received by Keefe, Bruyette. The FPBB Board then reviewed
and discussed, with the assistance of its legal and financial advisors, the
Merger Agreement and the Stock Option Agreement. FPBB's management and legal
and financial advisors also reviewed with the FPBB Board their due diligence
findings concerning RSFC. Representatives of Keefe, Bruyette reviewed financial
information concerning RSFC, FPBB and the proposed transaction, and delivered
to the FPBB Board Keefe, Bruyette's oral opinion (which was subsequently
confirmed in writing) that, as of such date, the Exchange Ratio was fair, from
a financial point of view, to the holders of FPBB Common Stock. See "--Opinion
of Keefe, Bruyette & Woods, Inc." Based upon the FPBB Board's review and
discussion of the definitive terms of the transaction, the opinion of Keefe,
Bruyette and other relevant factors, the FPBB Board, by unanimous vote of all
directors, authorized and approved the execution of the Merger Agreement and
the Stock Option Agreement.
At a meeting held on May 27, 1998, the RSFC Board considered a combination
with FPBB. Among other things, the RSFC Board received a presentation from its
legal counsel regarding the directors' obligations with respect to the proposed
transaction, a presentation from management describing FPBB and First Bank, the
results of due diligence and the business terms of the proposed transaction,
and an extensive presentation from Sandler O'Neill analyzing financial
information and ratios with respect to each of RSFC, FPBB and the Combined
Company. Sandler O'Neill then delivered its oral opinion (subsequently
confirmed in writing) that, as of such date, the Exchange Ratio was fair, from
a financial point of view, to the holders of RSFC Common Stock. See "--Opinion
of Sandler O'Neill & Partners, L.P." Based on its review of the information
presented at the meeting and other relevant factors, the RSFC Board unanimously
approved the Merger Agreement and the Stock Option Agreement and recommended
approval of the Merger Agreement to the RSFC shareholders.
On August 17, 1998, RSFC and FPBB amended the Merger Agreement to change
the Index Group (as defined in the Merger Agreement) which is used for purposes
of the termination provision. The Index Group was changed due to announced
acquisitions of two bank holding companies that comprised part of the original
Index Group.
Following the meetings, the Merger Agreement and the Stock Option
Agreement were executed by the parties.
RECOMMENDATION OF FPBB BOARD OF DIRECTORS; FPBB'S REASONS FOR THE MERGER
The FPBB Board believes that the Merger is fair to, and in the best
interests of, FPBB and its stockholders. ACCORDINGLY, THE FPBB BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE HOLDERS OF
FPBB COMMON STOCK VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY. See
"--Background to the Merger" above and "--Opinion of Keefe, Bruyette & Woods,
Inc." below.
The terms of the Merger, including the Exchange Ratio, are the result of
arm's-length negotiations between representatives of FPBB and RSFC. In reaching
its decision to approve the Merger Agreement and the Stock Option Agreement,
the FPBB Board consulted with its legal and financial advisors and with
management of FPBB, and, without assigning any relative or specific weights,
considered a number of factors, both from a short-term and long-term
perspective, including, without limitation, the following:
(i) the FPBB Board familiarity with and review of FPBB's business,
financial condition, results of operations and prospects, including, without
limitation, its potential growth and profitability and the business risks
associated therewith;
(ii) the current and prospective environment in which FPBB operates,
including national and local economic conditions, the competitive environment
for savings banks and other financial institutions generally, the increasing
consolidation in the financial services industry and the competitive effects of
such increased consolidation on smaller financial institutions such as FPBB;
24
<PAGE>
(iii) information concerning the business, financial condition, results of
operations and prospects of RSFC, including the recent performance of RSFC
Common Stock, the historical financial data of RSFC, customary statistical
measurements of RSFC's financial performance and the future prospects for RSFC
Common Stock following the Merger;
(iv) the value to be received by holders of FPBB Common Stock pursuant to
the Merger Agreement in relation to the historical trading prices of FPBB
Common Stock;
(v) the information presented by Keefe, Bruyette to the FPBB Board with
respect to the Merger and the opinion of Keefe, Bruyette that, as of the date
of such opinion, the Exchange Ratio was fair to the holders of FPBB Common
Stock from a financial point of view (see "--Opinion of Keefe, Bruyette &
Woods, Inc." below);
(vi) the process conducted by FPBB's management and its financial advisor
in exploring and determining the potential value which could be realized by
FPBB stockholders in a business combination transaction, including the contacts
between FPBB's financial advisor and certain financial institutions, the fact
that each of such financial institutions which expressed interest in a business
combination transaction with FPBB was afforded an opportunity to submit
proposals for such a transaction to FPBB, the terms of the proposals received
by FPBB from such financial institutions and the fact that the indicated value
of the Exchange Ratio in the RSFC proposal was higher as of May 26, 1998 than
the indicated values of the per share consideration offered in the other
proposal submitted to FPBB (see "--Background to the Merger");
(vii) the financial and other significant terms of the proposed Merger
with RSFC, and the review by FPBB with its legal and financial advisors of the
provisions of the Merger Agreement and the Stock Option Agreement;
(viii) the expected impact of the Merger on FPBB's business, employees,
customers and communities, the compatibility of the respective businesses and
management philosophies of RSFC and FPBB, and the expectation that RSFC will
continue to provide quality service to the customers and the communities served
by FPBB;
(ix) the FPBB Board belief that the receipt of RSFC Common Stock in the
Merger generally will permit holders of FPBB Common Stock to defer any federal
income tax liability associated with the increase in the value of their stock
as a result of the Merger (see "--Certain Federal Income Tax Consequences"
below); and
(x) the alternative strategic courses available to FPBB, including
remaining independent and exploring other potential business combination
transactions.
The foregoing discussion of the information and factors considered by the
FPBB Board is not intended to be exhaustive but includes all of the material
factors considered by the FPBB Board. In the course of its deliberations with
respect to the Merger, the FPBB Board discussed the anticipated impact of the
Merger on FPBB, its stockholders and its various other constituencies. No
negative factors regarding the Merger were identified during these discussions.
In reaching its determination to approve and recommend the Merger, the FPBB
Board did not assign any relative or specific weights to the factors considered
in reaching such determination, and individual directors may have given
differing weights to different factors.
OPINION OF KEEFE, BRUYETTE & WOODS, INC.
At the May 27, 1998 meeting of the FPBB Board, during which the FPBB Board
approved the Merger Agreement, Keefe, Bruyette delivered to the FPBB Board an
oral opinion (which opinion was subsequently confirmed by delivery of a written
opinion, dated May 27, 1998) to the effect that, as of the date of such opinion
and based upon and subject to certain matters stated therein, the Exchange
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Ratio was fair, from a financial point of view, to the holders of the FPBB
Common Stock. In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Keefe, Bruyette updated certain analyses performed in
connection with its opinion and reviewed the assumptions on which such analyses
were based and the factors considered in connection therewith.
Keefe, Bruyette has delivered to the FPBB Board its updated written
opinion dated the date of this Joint Proxy Statement/Prospectus to the effect
that as of such date the Exchange Ratio is fair, from a financial point of
view, to the holders of FPBB Common Stock. Keefe, Bruyette's opinion is
addressed to the FPBB Board and does not constitute a recommendation as to how
any stockholder of FPBB should vote with respect to the Merger Agreement.
THE FULL TEXT OF THE OPINION OF KEEFE, BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS ANNEX D AND IS INCORPORATED HEREIN BY REFERENCE. FPBB
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING
SUMMARY OF THE OPINION IS A DESCRIPTION OF ALL MATERIAL ANALYSES UNDERLYING THE
FAIRNESS OPINION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION.
In rendering its opinion, Keefe, Bruyette (i) reviewed, among other
things, the Merger Agreement, Annual Reports to stockholders and Annual Reports
on Form 10-K of FPBB and Annual Reports on Form 10-K of RSFC, certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of FPBB and
Quarterly Reports on Form 10-Q of RSFC and certain internal financial analyses
and forecasts for FPBB prepared by management; (ii) held discussions with
members of senior management of FPBB and RSFC regarding past and current
business operations, regulatory relationships, financial condition and future
prospects of the respective companies; (iii) compared certain financial and
stock market information for FPBB and RSFC with similar information for certain
other companies the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the banking
industry; and (v) performed such other studies and analyses as it considered
appropriate.
In conducting its review and arriving at its opinion, Keefe, Bruyette
relied upon and assumed the accuracy and completeness of all of the financial
and other information provided to it or publicly available, and Keefe, Bruyette
did not attempt to verify such information independently. Keefe, Bruyette
relied upon the management of FPBB as to the reasonableness and achievability
of the financial and operating forecasts and projections (and assumptions and
bases therefor) provided to Keefe, Bruyette and assumed that such forecasts and
projections reflected the best available estimates and judgments of such
management and that such forecasts and projections will be realized in the
amounts and in the time periods estimated by such management. Keefe, Bruyette
also assumed, without independent verification, that the aggregate allowances
for loan losses for FPBB and RSFC are adequate to cover such losses. Keefe,
Bruyette did not make or obtain any evaluations or appraisals of the property
of FPBB or RSFC, nor did Keefe, Bruyette examine any individual credit files.
The following is a summary of all material financial analyses employed by
Keefe, Bruyette in connection with providing its opinion.
(a) FINANCIAL SUMMARY OF THE RSFC OFFER. Keefe, Bruyette calculated the
multiple which the $55.05 per share offer (derived by multiplying the Exchange
Ratio of 4.194 times $13.125, the last reported sale price of Republic Security
on May 26, 1998) represents when compared to FPBB's March 31, 1998 stated book
value per share of $23.14, its March 31, 1998 estimated tangible book value per
share of $22.64, its trailing 12 months (March 31, 1997 to March 31, 1998)
earnings per share of $1.84 and its estimated 1998 earnings per share (provided
by management) of $1.71. The price to book value multiple was 238 percent, the
price to tangible book value was 243 percent, the price to the trailing 12
months earnings per share was 29.92 times and the price to the 1998 earnings
estimates per share was 32.19.
(b) ANALYSIS OF SELECTED MERGER TRANSACTIONS. Keefe, Bruyette reviewed
certain financial data related to a set of recent comparable nationwide thrift
holding company acquisitions with transaction
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values over $100 million since January 1, 1998. These transactions were: the
First Charter Corporation acquisition of HFNC Financial Corp., the Second
Bancorp, Inc. acquisition of Trumbull Financial Corp., the UCBH Holdings, Inc.
acquisition of USB Holdings, the FirstMerit Corp. acquisition of Security First
Corp., the Astoria Financial Corporation acquisition of Long Island Bancorp,
the HUBCO Inc. acquisition of Dime Financial Corp., the HUBCO Inc. acquisition
of ISB Financial Corp., the Washington Mutual acquisition of HF Ahmanson & Co.,
the FIRSTPLUS Financial acquisition of Life Financial Corp., the Commercial
Federal acquisition of First Colorado Bancorp, the BB&T Corp. acquisition of
Maryland Federal Bancorp, the Commercial Federal acquisition of AmerUs Bank,
the FirstFed Financial Services acquisition of First Shenango Bancorp, the 1855
Bancorp acquisition of Sandwich Bancorp, the Fifth Third Bancorp acquisition of
CitFed Bancorp, Inc., and the Fifth Third Bancorp acquisition of State Savings
Company.
Keefe, Bruyette calculated an average of the comparable group's multiple
of price to the targets' future and trailing 12 months earnings as 22.36 times
and 23.33 times, respectively, compared to a multiple of price to future and
trailing 12 months earnings of 32.19 times and 29.92 times, respectively, for
the Merger; an average multiple of price to the targets' stated book value of
2.61 times compared to a multiple of 2.38 times associated with the Merger; an
average multiple of price to the targets' estimated tangible book value of 2.70
times compared to a multiple of 2.43 times associated with the Merger; and an
average multiple of price to the targets' asset value of 25.58 times compared
to a multiple of 16.39 times associated with the Merger; an average multiple of
price to the targets' tangible book premium to core deposits value of 26.32
times compared to a multiple of 13.90 times associated with the Merger. In
addition, Keefe, Bruyette's analysis showed the following concerning FPBB's
financial performance: that the return on equity on a year-to-date basis was
7.60 percent, compared with an average of 13.68 percent for the targets' group;
that the return on assets on a year-to-date basis was 0.49 percent, compared
with an average of 1.24 percent for the targets' group; that the equity to
assets ratio was 6.53 percent, compared to an average of 9.89 percent; that the
ratio of nonperforming assets to total assets was 0.57 percent, compared to an
average of 0.75 percent.
Keefe, Bruyette reviewed a second category of certain financial data
related to a set of recent comparable nationwide thrift holding company
acquisitions with transaction values over $100 million from January 1, 1997 to
December 31, 1997. Keefe, Bruyette calculated an average of the comparable
group's multiple of price to the targets' future and trailing 12 months
earnings as 17.52 times and 25.35 times, respectively, compared to a multiple
of price to future and trailing 12 months earnings of 32.19 times and 29.92
times, respectively, for the Merger; an average multiple of price to the
targets' stated book value of 2.10 times compared to a multiple of 2.38 times
associated with the Merger; an average multiple of price to the targets'
estimated tangible book value of 2.27 times compared to a multiple of 2.43
times associated with the Merger; and an average multiple of price to the
targets' asset value of 19.73 times compared to a multiple of 16.39 times
associated with the Merger; an average multiple of price to the targets'
tangible book premium to core deposits value of 18.40 times compared to a
multiple of 13.90 times associated with the Merger. In addition, Keefe,
Bruyette's analysis showed the following concerning FPBB's financial
performance: that the return on equity on a year-to-date basis was 7.60
percent, compared with an average of 9.60 percent for the targets' group; that
the return on assets on a year-to-date basis was 0.49 percent, compared with an
average of 0.86 percent for the targets' group; that the equity to assets ratio
was 6.53 percent, compared to an average of 9.44 percent; that the ratio of
nonperforming assets to total assets was 0.57 percent, compared to an average
of 1.24 percent.
No company or transaction used as a comparison in the above analysis is
identical to FPBB, RSFC or the Merger. Accordingly, an analysis of the results
of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
(c) SELECTED PEER GROUP ANALYSIS. Keefe, Bruyette compared the financial
performance and market performance of RSFC based on various financial measures
of earnings performance, operating
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efficiency, capital adequacy and asset quality and various measures of market
performance, including market/book values, price to earnings and dividend
yields to those of a group of comparable holding companies. For purposes of
such analysis, the financial information used by Keefe, Bruyette was as of and
for the quarter ended March 31, 1998 and the market price information was as of
May 26, 1998. The companies in the peer group were Southeastern banks which had
total assets ranging from approximately $1 billion to $5 billion. The companies
were: BancorpSouth, Inc., United Bankshares, Inc., Hancock Holding Company, F&M
National Corporation, First United Bancshares, Inc., Carolina First
Corporation, MainStreet BankGroup Inc., Republic Bancshares, Inc., Triangle
Bancorp, Inc., Republic Banking Corporation of Florida, Hamilton Bancorp, Inc.,
Simmons First National Corporation, Alabama National BanCorporation, Century
South Banks, Inc., and Peoples Holding Company.
Keefe, Bruyette's analysis showed the following concerning RSFC financial
performance: that the return on equity on an annualized basis was 14.44%,
compared with an average of 12.96% for the peer group; that the return on
assets on an annualized basis was 1.39%, compared with an average of 1.16% for
the group; that the net interest margin on an annualized basis was 5.22%,
compared with an average of 4.36%; that the efficiency ratio on an annualized
basis was 62.54%, compared with an average of 59.35%; that the equity to assets
ratio was 8.7%, compared to an average of 9.03%; that the ratio of
nonperforming assets to total loans and other real estate owned was 1.29%,
compared to an average of 0.93%; that the ratio of loan loss reserve to
nonperforming loans was 107%, compared to an average of 342%.
Keefe, Bruyette's analysis further showed the following concerning RSFC
market performance: that RSFC price to earnings multiple based on 1998
estimated earnings was 23.86 times, compared to an average for the group of
18.95 times; that their price to book value multiples were 3.52 and, compared
to a group average of 2.54 times; the dividend yield was 1.52%, compared to an
average for the group of 1.57%. For purposes of the above calculations, all
earnings estimates are based upon the I/B/E/S published estimates for RSFC.
Keefe, Bruyette analyzed the pro forma market multiples of RSFC Common
Stock based on estimated EPS, book value and tangible book value per share for
RSFC after the transaction. Based on this analysis of RSFC's pro forma trading
multiples, the pro forma price to earnings multiple based on 1999 estimated
earnings was 17.59 times, the pro forma price to book value multiples was 3.06
and the pro forma price to tangible book value multiples was 3.15.
(d) CONTRIBUTION ANALYSIS. Keefe, Bruyette analyzed the relative
contribution of each of RSFC and FPBB to certain pro forma balance sheet and
income statement items of the combined entity. The contribution analysis showed
that FPBB would contribute approximately 55.0% of the combined common equity
and 38.9% of the combined estimated 1998 net income, 60.6% of the combined
total assets and 36.9% of the total combined market capitalization of the pro
forma combined entity. Keefe, Bruyette compared the relative contribution of
such balance sheet and income statement items with the estimated pro forma
ownership of 46.21% for FPBB stockholders based on an Exchange Ratio of 4.194.
(e) PRO FORMA EPS, BOOK VALUE AND DIVIDENDS PER SHARE. Keefe, Bruyette
analyzed the pro forma EPS, book value and dividends per share of FPBB Common
Stock assuming an exchange of 4.194 shares of RSFC Common Stock for each share
of FPBB Common Stock. Based on 1999 earnings per share of $2.49 for FPBB and
$.63 for RSFC, FPBB's 1999 pro forma EPS would have increased to $3.13,
reflecting a 25.7 percent increase. FPBB's pro forma March 31, 1999 stated book
value per share would be $19.97, a 13.7 percent decrease from FPBB's stated
book value per share of $23.14. FPBB's pro forma annualized dividends per share
would be $.84, a 20 percent increase from FPBB's annualized dividend per share
of $.70.
(f) FINANCIAL IMPACT ANALYSIS. Keefe, Bruyette performed pro forma merger
analysis that combined projected income statement and balance sheet
information. Assumptions regarding the accounting treatment, acquisition
adjustments, and cost savings were used to calculate the financial
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impact that the Merger would have on certain projected financial results of
RSFC. This analysis was based on analyst and the respective managements'
estimates of FPBB and RSFC's 1999 earnings per share and on managements'
estimates of expected cost savings and a non-recurring merger and restructuring
charge to be realized or incurred in connection with the Merger. These
projections were discussed with the management of each of FPBB and RSFC. The
actual results achieved following the Merger will vary from the projected
results, and the variations may be material.
Keefe, Bruyette calculated the impact of the Merger on RSFC's earnings per
share, book value, return on equity and leverage ratio. Keefe, Bruyette
analyzed the pro forma EPS, book value and dividends per share of RSFC Common
Stock assuming an exchange of 4.194 shares of RSFC Common Stock for each share
of FPBB Common Stock. This analysis indicated that the Merger is expected to
increase Republic Security's projected 1999 earnings per share, book value,
tangible book value and leverage ratio.
(g) SHAREHOLDER PRESENT VALUE ANALYSIS. Keefe, Bruyette estimated the
present value of future cash flows that would accrue to a holder of a share of
FPBB Common Stock assuming that the stockholder held the stock for between one
and five years and then sold it. The analysis was based on earnings forecasts
prepared by management for the years 1998 through 2000 and an annual net income
growth rate of 13.33% for the years 2000 through 2002. A 40 % dividend payout
ratio was assumed for FPBB through the year 2002. An estimated year end stock
price was estimated for each year by multiplying the projected annual earnings
by a price to trailing twelve months earnings multiple of 18.00 times. The
estimated stock price for each year and the estimated dividends were discounted
at a rate of 14.00% producing present values ranging from $34.34 to $37.14.
These values were compared to the $55.05 offer from RSFC.
Keefe, Bruyette repeated this analysis using a price to trailing twelve
months earnings multiple of 22.00 times. The estimated stock price for each
year and the estimated dividends were discounted at a rate of 15.00% producing
present values ranging from $37.54 to $43.88. These values were compared to the
$55.05 offer from RSFC.
Keefe, Bruyette repeated the analysis was based on earnings forecasts
prepared by management for the years 1998 through 2000 and with a lower annual
net income growth rate scenario of 9.04% for the years 2000 through 2002. A 40%
dividend payout ratio was assumed for FPBB through the year 2002. An estimated
year end stock price was estimated for each year by multiplying the projected
annual earnings by a price to trailing twelve months earnings multiple of 18.00
times. The estimated stock price for each year and the estimated dividends were
discounted at a rate of 14.00% producing present values ranging from $30.59 to
$34.34. These values were compared to the $55.05 offer from RSFC.
Keefe, Bruyette repeated this analysis using a price to trailing twelve
months earnings multiple of 22.00 times. The estimated stock price for each
year and the estimated dividends were discounted at a rate of 15.00% producing
present values ranging from $35.30 to $37.54. These values were compared to the
$55.05 offer from RSFC.
Keefe, Bruyette stated that the discounted cash flow present value
analysis is a widely-used valuation methodology but noted that it relies on
numerous assumptions, including asset and earnings growth rates, terminal
values and discount rates. The analysis did not purport to be indicative of the
actual values or expected values of FPBB Common Stock.
(h) OTHER ANALYSIS. Keefe, Bruyette also reviewed selected investment
research reports, earnings estimates, historical stock price performance
relative to the Standard & Poors 500 and to an index of bank and thrift stocks,
and other financial data for FPBB and RSFC.
The summary contained herein provides a description of the material
analyses prepared by Keefe, Bruyette in connection with the rendering of its
opinion. The summary set forth above does not purport to be a complete
description of the analyses performed by Keefe, Bruyette in connection with the
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rendering of its opinion. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Keefe,
Bruyette believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses without
considering all analyses, or selecting part of the above summary, without
considering all factors and analyses, would create an incomplete view of the
processes underlying the analyses set forth in Keefe, Bruyette's presentations
and opinion. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analyses.
In performing its analyses, Keefe, Bruyette made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of FPBB and RSFC. The
analyses performed by Keefe, Bruyette are not necessarily indicative of actual
values or actual future results which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely
as part of Keefe, Bruyette's analysis of the fairness, from a financial point
of view, of the Exchange Ratio in the Merger. These analyses were provided to
the FPBB Board in connection with the delivery of Keefe, Bruyette's opinion.
The analyses do not purport to be appraisals or to reflect the prices at which
a company actually might be sold or the prices at which any securities may
trade at the present time or at any time in the future. In addition, as
described above, Keefe, Bruyette's opinion, along with its presentation to the
FPBB Board, was just one of many factors taken into consideration by the FPBB
Board in unanimously approving the Merger Agreement.
Keefe, Bruyette, as part of its investment banking business, is
continually engaged in the valuation of banking businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. As specialists in the securities of banking companies, Keefe,
Bruyette has experience in, and knowledge of, the valuation of banking
enterprises. In the ordinary course of its business as a broker-dealer, Keefe,
Bruyette may, from time to time, purchase securities from, and sell securities
to, FPBB and RSFC and as a market maker in securities Keefe, Bruyette may from
time to time have a long or short position in, and buy or sell, debt or equity
securities of FPBB and RSFC for Keefe, Bruyette's own account and for the
accounts of its customers.
FPBB has agreed to pay Keefe, Bruyette concurrently with the first to be
executed of an agreement in principle or a definitive agreement contemplating
the consummation of a Transaction a cash fee of $100,000. An additional cash
fee of $100,000 will be paid promptly after the mailing of any proxy statement
or registration statement relating to the Transaction. In addition, FPBB has
agree to pay Keefe, Bruyette, at the time of closing, a cash fee ("Contingent
Fee") equal to 1.0% of the market value of the aggregate consideration offered
in exchange for the outstanding shares of common stock of FPBB in the
Transaction. Based on the closing price of RSFC Common Stock on September 24,
1998, the amount of the Contingent Fee would have been $1.9 million. The fee
paid prior to the Contingent Fee payment will be credited against the
Contingent Fee. Pursuant to the Keefe, Bruyette engagement agreement, FPBB also
agreed to reimburse Keefe, Bruyette for reasonable out-of-pocket expenses and
disbursements incurred in connection with its retention and to indemnify
against certain liabilities, including liabilities under the federal securities
laws.
RECOMMENDATION OF RSFC'S BOARD OF DIRECTORS; RSFC'S REASONS FOR THE MERGER
Since 1992, the RSFC Board has been pursuing a Shareholder Value Plan, a
key strategic element of which includes growth through mergers and
acquisitions. In the last five years, RSFC has completed seven acquisitions. If
the Merger is consummated, it will be RSFC's eighth acquisition over such time
period. The RSFC Board believes that a merger with FPBB represents an
opportunity for RSFC to enhance its long-term growth prospects by expanding
Republic Security's geographical presence, diversifying its loan portfolio and
providing for the potential to increase earnings per share over the long term.
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The RSFC Board considered the fact that by acquiring FPBB, Republic
Security will significantly expand and enhance its Southeast banking franchise,
thereby enhancing long-term growth opportunities. The RSFC Board believes the
in-market combination of RSFC and FPBB will present an opportunity to further
leverage RSFC's cost base. RSFC anticipates that the Combined Bank will have at
least 85 full-service banking centers from which to serve the attractive
Florida market. In addition, the RSFC Board believes that the Merger will allow
RSFC to utilize its commercial banking platform and technological expertise to
enhance the performance of FPBB's operations while FPBB provides an entrance
into supermarket banking for RSFC.
Furthermore, in determining its decision to approve the Merger and whether
the consideration being paid to the stockholders of FPBB in connection with the
Merger is fair to RSFC and its shareholders from a financial point of view, the
RSFC Board considered the anticipated financial benefits of the Merger. The
Merger is expected to be accretive to RSFC's earnings per share and book value
per share. On a pro forma basis, the Combined Bank's return-on-average-assets
(ROAA), return-on-average-equity (ROAE) and efficiency ratio will compare
favorably to its peer group. The RSFC Board reviewed and analyzed internally
and externally prepared financial analyses of the Combined Company considering
post-merger cost savings in arriving at anticipated financial benefits. The
cost savings of approximately $9.5 million are expected to be realized in the
areas of employee compensation and benefits, occupancy expense and other
non-interest expenses. The RSFC Board also reviewed and considered transaction
values of recent thrift mergers. In addition, in reaching its decision, the
RSFC Board considered the opinion of Sandler O'Neill.
In reaching its decision to approve and adopt the Merger Agreement, the
RSFC Board also considered factors that are not favorable to the Merger,
including (i) the potential adverse impact of FPBB's high concentration of
certificates of deposit and higher interest-bearing savings accounts on the
Combined Bank's net-interest margin, (ii) the likelihood that significant
certificates of deposit will run off as RSFC conforms FPBB's deposit pricing to
its own levels and (iii) the potential adverse impact of integrating the
operations of an institution larger than RSFC. In reaching its determination to
approve the Merger, the RSFC Board did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors. After deliberating with respect to the
Merger and the other transactions contemplated by the Merger Agreement, and
considering the matters discussed above, the RSFC Board unanimously approved
the Merger Agreement and the transactions contemplated thereby as being in the
best interests of RSFC and its shareholders.
AFTER EVALUATING THE FAVORABLE AND UNFAVORABLE FACTORS DISCUSSED ABOVE AS
WELL AS OTHERS, THE RSFC BOARD UNANIMOUSLY DETERMINED TO APPROVE THE MERGER
AGREEMENT AND RECOMMENDS THAT THE RSFC SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE MERGER AGREEMENT.
OPINION OF SANDLER O'NEILL & PARTNERS, L.P.
Pursuant to a letter agreement dated as of May 14, 1998 (the "Sandler
O'Neill Agreement"), RSFC retained Sandler O'Neill as an independent financial
advisor in connection with RSFC's consideration of a possible business
combination with FPBB. Sandler O'Neill is a nationally recognized investment
banking firm whose principal business specialty is banks and savings
institutions. In the ordinary course of its investment banking business,
Sandler O'Neill is regularly engaged in the valuation of such businesses and
their securities in connection with mergers and acquisitions and other
corporate transactions.
In connection with its consideration of the Merger, the RSFC Board
requested Sandler O'Neill to render its opinion as to the fairness of the
Exchange Ratio to the holders of shares of RSFC Common Stock from a financial
point of view. On May 27, 1998, Sandler O'Neill delivered to RSFC's Board its
opinion that, as of such date, the Exchange Ratio was fair to the holders of
shares of RSFC Common Stock from a financial point of view. Sandler O'Neill has
also delivered to RSFC's Board a written opinion dated the date of this Joint
Proxy Statement/Prospectus (the "Sandler O'Neill Fairness Opinion") which is
substantially identical to the May 27, 1998 opinion.
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THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH SETS FORTH
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
RENDERING SUCH OPINION, IS ATTACHED AS ANNEX C TO THIS JOINT PROXY STATEMENT/
PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE
OPINION SET FORTH HEREIN IS A DESCRIPTION OF ALL MATERIAL ANALYSES UNDERLYING
THE FAIRNESS OPINION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX C.
RSFC'S SHAREHOLDERS ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS OPINION IN
ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO RSFC'S BOARD FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF SHARES OF RSFC COMMON STOCK. IT
DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF RSFC TO ENGAGE IN THE
MERGER OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES OF RSFC COMMON STOCK AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE RSFC SPECIAL MEETING WITH RESPECT TO THE MERGER
OR ANY OTHER MATTER RELATED THERETO.
In connection with rendering its May 27, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of all
such material analyses, but does not purport to be a complete description of
all the analyses underlying Sandler O'Neill's opinion. The preparation of a
fairness opinion is a complex process involving subjective judgments and is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinion. In performing its analyses,
Sandler O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many of which
cannot be predicted and are beyond the control of RSFC, FPBB and Sandler
O'Neill. Any estimates contained in Sandler O'Neill's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates on the values of
companies do not purport to be appraisals or necessarily reflect the prices at
which companies or their securities may actually be sold. Because such
estimates are inherently subject to uncertainty, none of RSFC, FPBB or Sandler
O'Neill assumes responsibility for their accuracy.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of RSFC Common Stock on May
26, 1998 of $13.125 and an Exchange Ratio of 4.194, Sandler O'Neill calculated
an implied transaction value per share of FPBB of $55.05. Based upon FPBB's
March 31, 1998 financial information and an Exchange Ratio of 4.194, Sandler
O'Neill calculated the price to tangible book value, price to last twelve
months' normalized earnings and deposit premium. This analysis yielded a price
to tangible book value multiple of 243%, a price to last twelve months'
earnings multiple of 30.75x and a deposit premium of 12.6%.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of RSFC Common Stock and FPBB Common Stock,
and the relationship between the movements in the prices of RSFC Common Stock
and FPBB Common Stock, respectively, to movements in certain stock indices,
including the Standard & Poor's 500 Index, the Nasdaq Bank Index and a selected
composite group of publicly traded commercial banking institutions (in the case
of RSFC) and savings institutions (in the case of FPBB). During the one-year
period ended May 22, 1998, RSFC Common Stock outperformed the Standard & Poors
Index and the Nasdaq Bank Index and performed on par with the selected peer
group. During the one-year period ended May 22, 1998, FPBB Common Stock
performed on a par with the Standard & Poors Index and underperformed the
Nasdaq Bank Index and the selected peer group.
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
FPBB and two groups of selected institutions. The first group consisted of FPBB
and the following nine publicly traded regional savings institutions (the
"Regional Group"): BankAtlantic Bancorp, Inc.,
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BankUnited Financial Corp., CENIT Bancorp, Inc., Community Savings Bankshares
(MHC), Fidelity Bankshares, Inc. (MHC), First Financial Holdings, Inc., First
Liberty Financial Corp., Harbor Florida Bancshares, Inc. and Eagle Bancshares.
Sandler O'Neill also compared FPBB to a group of seven savings institutions
which had a return on equity of greater than 15% (based on last twelve months'
earnings) and a price-to-tangible book value of greater than 240% (the
"Highly-Valued Group"). The Highly-Valued Group was comprised of Anchor BanCorp
Wisconsin, Flagstar Bancorp, Inc., D&N Financial Corp., First Federal Capital
Corp., Metropolitan Financial Corp., People's Bancshares, Inc. and WSFS
Financial Corp. The analysis compared publicly available financial information
for FPBB and the median data for each of the Regional Group and the
Highly-Valued Group as of and for each of the years ended December 31, 1993
through December 31, 1997 and as of and for the twelve months ended March 31,
1998.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
RSFC and two different groups of commercial banks. The first group consisted of
RSFC and the following fifteen publicly traded regional commercial banks (the
"Commercial Regional Group"): ABC Bancorp, Alabama National BanCorp., Capital
City Bank Group, Inc., Century South Banks, Inc., City Holding Co., First
Charter Corp., Hamilton Bancorp, Inc., Horizon Bancorp, Inc., Peoples Holding
Co., Premier Bancshares, Inc., Republic Banking Corp. of Florida, Seacoast
Banking Corp. of Florida, Simmons First National Corp., Triangle Bancorp, Inc.,
and Union Bankshares Corp. Sandler O'Neill also compared RSFC to a group of
twelve commercial banks which had a return on equity of greater than 16% (based
on last twelve months' earnings) and a price-to-tangible book value of greater
than 300% (the "Commercial Highly-Valued Group"). The Commercial Highly-Valued
Group was comprised of CVB Financial Corp., Hamilton Bancorp, Inc., Investors
Financial Services, Irwin Financial Corp., Independent Bank Corp., Lakeland
Financial Corp., Mississippi Valley Bancshares, Oriental Financial Group, Inc.,
Premier Bancshares, Inc., Prime Bancshares, Inc., Sterling Bancshares, Inc. and
U.S.B. Holding Corp. The analysis compared publicly available financial
information for RSFC and the median data for each of the Commercial Regional
Group and the Commercial Highly-Valued Group as of and for each of the years
ended December 31, 1993 through December 31, 1997 and as of and for the twelve
months ended March 31, 1998.
ANALYSES OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed 23
transactions announced from January 1, 1998 to May 22, 1998 involving publicly
traded savings institutions as acquired institutions with transaction values
over $15 million ("Nationwide Transactions") and 25 transactions announced from
January 1, 1997 to May 22, 1998 involving publicly traded savings institutions
in the Southeast Region (Arkansas, Florida, Georgia, Louisiana, Mississippi,
North Carolina, South Carolina, Virginia and West Virginia) as acquired
institutions with transaction values over $15 million ("Regional
Transactions"). Sandler O'Neill reviewed the ratios of transaction value to
last twelve months' net income, transaction value to tangible book value,
transaction value to book value, tangible book premium to core deposits,
transaction value to total deposits and transaction value to total assets and
computed high, low, mean and median ratios and premiums for the respective
groups of transactions. These multiples were applied to FPBB's financial
information as of and for the twelve months ended March 31, 1998. Based upon
the median multiples for Nationwide Transactions, Sandler O'Neill derived an
imputed range of values per share of FPBB Common Stock of $40.51 to $86.29.
Based upon the median multiples for Regional Transactions, Sandler O'Neill
derived an imputed range of values per share of FPBB Common Stock of $41.18 to
$68.56.
No company involved in the transactions included in the above analysis is
identical to RSFC or FPBB and no transaction included in the above analysis is
identical to the Merger. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of RSFC and FPBB and the companies to which they are being
compared.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of FPBB through the year 2004
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under various circumstances, assuming FPBB performed in accordance with the
earnings forecasts of its management and certain variations thereof. To
approximate the terminal value of FPBB Common Stock at December 31, 2004,
Sandler O'Neill applied price to earnings multiples ranging from 15x to 35x and
applied multiples of tangible book value ranging from 150% to 400%. The
dividend income streams and terminal values were then discounted to present
values using different discount rates (ranging from 9% to 15%) chosen to
reflect different assumptions regarding required rates of return of holders or
prospective buyers of FPBB Common Stock. This analysis, assuming the current
dividend payout ratio and management's earnings forecasts, indicated an imputed
range of values per share of FPBB Common Stock of between $17.28 and $48.85
when applying the price to earnings multiples, and an imputed range of values
per share of FPBB Common Stock of between $21.08 and $71.27 when applying
multiples of tangible book value. In connection with its analysis, Sandler
O'Neill used sensitivity analyses to consider the effects changes in the
underlying assumptions (including variations with respect to the growth rate of
assets, net interest spread, non-interest income, non-interest expenses and
dividend payout ratio) would have on the resulting present value.
PRO FORMA MERGER ANALYSIS. Sandler O'Neill analyzed certain potential pro
forma effects of the Merger on RSFC, based upon an Exchange Ratio of 4.194,
RSFC's and FPBB's current and projected income statements and balance sheets,
and assumptions regarding the economic environment, accounting and tax
treatment of the Merger, charges associated with the Merger, operating
efficiencies and other adjustments, including certain balance sheet
restructuring transactions, discussed with the senior managements of RSFC and
FPBB. This analysis indicated that the Merger would be accretive to RSFC's
earnings per share in all periods analyzed, and accretive to tangible book
value per share of RSFC Common Stock for all periods analyzed. The actual
results achieved by RSFC may vary from projected results and the variations may
be material.
Sandler O'Neill, as part of its investment banking business, is regularly
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions. In
connection with this opinion, we have reviewed, among other things: (i) the
Merger Agreement and exhibits thereto; (ii) the Stock Option Agreement, dated
as of May 27, 1998, by and between RSFC and FPBB; (iii) certain publicly
available financial statements of RSFC and other historical financial
information provided by RSFC that we deemed relevant; (iv) certain publicly
available financial statements of FPBB and other historical financial
information provided by FPBB that we deemed relevant; (v) certain financial
analyses and forecasts of RSFC prepared by and reviewed with management of RSFC
and the views of senior management of RSFC regarding RSFC's past and current
business operations, results thereof, financial condition and future prospects,
including the pro forma impact of RSFC's acquisition of Unifirst Federal
Savings Bank; (vi) certain financial analyses and forecasts of FPBB prepared by
and reviewed with management of FPBB and the views of senior management of FPBB
regarding FPBB's past and current business operations, results thereof,
financial condition and future prospects; (vii) the pro forma impact of the
Merger on RSFC; (viii) the publicly reported historical price and trading
activity for RSFC and FPBB's common stock, including a comparison of certain
financial and stock market information for RSFC and FPBB with similar publicly
available information for certain other companies the securities of which are
publicly traded; (ix) the financial terms of recent business combinations in
the savings institution industry, to the extent publicly available; (x) the
current market environment generally and the banking environment in particular;
and (xi) such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Sandler O'Neill considered
relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its May 27, 1998 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions upon which such analyses were
based and the factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all
the financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it,
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and Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of RSFC or FPBB or any of their subsidiaries, or the
collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals (relying, where relevant, on the analyses and
estimates of RSFC and FPBB). Sandler O'Neill is not an expert in the evaluation
of allowances for loan losses and it has not made an independent evaluation of
the adequacy of the allowance for loan loses of RSFC or FPBB, nor has it
reviewed any individual credit files relating to RSFC or FPBB. With RSFC's
consent, Sandler O'Neill has assumed that the respective aggregate allowances
for loan losses for both RSFC and FPBB are adequate to cover such losses and
will be adequate on a pro forma basis for the combined entity. In addition,
Sandler O'Neill has not conducted any physical inspection of the properties or
facilities of RSFC or FPBB. With respect to all financial information and
projections reviewed with each company's management, Sandler O'Neill assumed,
with RSFC's consent, that they had been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the respective
managements of the respective future financial performances of RSFC and FPBB
and that such performances will be achieved. Sandler O'Neill expressed no
opinion as to such financial projections or the assumptions on which they were
based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the
Merger Agreement and all related agreements are true and correct, that each
party to such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the conditions precedent
in the Merger Agreement are not waived. Sandler O'Neill also assumed, with
RSFC's consent, that there has been no material change in RSFC's and FPBB's
assets, financial condition, results of operations, business, or prospects
since the date of the most recent financial statements made available to them,
that the Merger will be accounted for as a pooling-of-interests, that RSFC and
FPBB will remain as going concerns for all periods relevant to its analyses and
that the Merger will qualify as a tax-free reorganization for federal income
tax purposes.
Under the Sandler O'Neill Agreement, RSFC will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial part of which is
contingent upon the consummation of the Merger. Under the terms of the Sandler
O'Neill Agreement, based upon the closing price of RSFC Common Stock on
September 24, 1998 RSFC will pay Sandler O'Neill a transaction fee of
approximately $1.8 million, of which $726,011 has been paid and the remainder
of which will be paid when the Merger is consummated. Sandler O'Neill has also
received a fee of $75,000 for rendering its fairness opinion, which will be
credited against that portion of the transaction fee payable upon consummation
of the Merger. RSFC has also agreed to reimburse Sandler O'Neill its reasonable
out-of-pocket expenses incurred in connection with its engagement and to
indemnify Sandler O'Neill and its affiliates and their respective partners,
directors, officers, employees, agents and controlling persons against certain
expenses and liabilities, including liabilities under securities laws.
In the ordinary course of its business, Sandler O'Neill may actively trade
the equity and debt securities of RSFC and FPBB and their respective affiliates
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
THE MERGER AGREEMENT
THE FOLLOWING INFORMATION CONCERNING THE MERGER INSOFAR AS IT RELATES TO
MATTERS CONTAINED IN THE MERGER AGREEMENT DESCRIBES THE MATERIAL ASPECTS OF THE
MERGER BUT DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION THEREOF AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, WHICH IS
INCORPORATED HEREIN BY REFERENCE AND ATTACHED HERETO AS ANNEX A. RSFC
SHAREHOLDERS AND FPBB STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN
ITS ENTIRETY.
THE MERGER. The Merger Agreement provides that, following the satisfaction
or waiver (where permissible) of certain conditions set forth therein,
including, among other things, the receipt of all
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necessary regulatory approvals, the expiration of all waiting periods in
respect thereto and the approval of the Merger Agreement by the requisite vote
of the shareholders of RSFC and the stockholders of FPBB, at the Effective
Time, FPBB will be merged with and into RSFC, the separate existence of FPBB
will thereupon cease and RSFC will continue as the surviving corporation (the
"Combined Company").
The Merger Agreement provides that as soon as practicable after the
Effective Time on the Effective Date, First Bank will be merged with and into
Republic Security, the separate existence of First Bank will thereupon cease,
and Republic Security will continue as the resulting corporation (the "Combined
Bank").
COMBINED COMPANY. At the Effective Time, each issued and outstanding share
of RSFC Common Stock shall remain issued and outstanding and unaffected by the
Merger. The Articles of Incorporation and Bylaws of RSFC as in effect
immediately prior to the Effective Time will be the Articles of Incorporation
and Bylaws of the Combined Company after the Effective Time, until thereafter
changed or amended as provided therein or by applicable law.
COMBINED BANK. At the Effective Time, each issued and outstanding share of
Republic Security's common stock shall remain issued and outstanding and
unaffected by the Merger. The Articles of Incorporation and Bylaws of Republic
Security as in effect immediately prior to the Effective Time will be the
Articles of Incorporation and Bylaws of the Combined Bank after the Effective
Time, until thereafter changed or amended as provided therein or by applicable
law.
EXCHANGE RATIO. At the Effective Time, by virtue of the Merger and without
any action by any holder of FPBB Common Stock, each outstanding share of FPBB
Common Stock except for shares held directly or indirectly by RSFC or FPBB
(other than Trust Account Shares or DPC Shares) will be converted into 4.194
shares of RSFC Common Stock (the "Exchange Ratio").
Additionally, at the Effective Time, each outstanding option to purchase
shares of FPBB Common Stock issued pursuant to FPBB's stock option plans will
be assumed by RSFC and will constitute an option to acquire on the same terms
and conditions as were applicable to such FPBB stock option, the same number of
shares of RSFC Common Stock into which such shares would have been converted
pursuant to the Merger had such options been exercised immediately prior to the
Effective Time at a price per share equal to the exercise price for the shares
of FPBB Common Stock otherwise purchasable pursuant to such options, divided by
the Exchange Ratio.
At the Effective Time, the stock transfer books of FPBB shall be closed
and there shall be no further registration of transfers of FPBB Common Stock.
Immediately after the Effective Time, transmittal letters will be mailed to
each holder of record of FPBB Common Stock to be used in forwarding his or her
certificates evidencing such shares for surrender and exchange for certificates
evidencing the shares of RSFC Common Stock to which he or she has become
entitled. After receipt of such transmittal form, each holder of certificates
formerly representing FPBB Common Stock should surrender such certificates to
the transfer agent, and each such holder will receive in exchange therefor
certificates evidencing the number of shares of RSFC Common Stock to which such
holder is entitled. Such transmittal letters will be accompanied by
instructions specifying other details of the exchange. FPBB STOCKHOLDERS SHOULD
NOT SEND IN THEIR STOCK CERTIFICATES TO THE TRANSFER AGENT UNTIL THEY RECEIVE A
TRANSMITTAL LETTER FOLLOWING THE EFFECTIVE TIME.
NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates representing shares of FPBB Common Stock will cease to have any
rights with respect to FPBB Common Stock. The sole right of holders of such
certificates shall be the right to receive the number of shares of RSFC Common
Stock which the holder of such certificate is entitled to receive. The holder
of such unexchanged certificate will not be entitled to receive any dividends
or other distributions declared or made after the Effective Time with respect
to RSFC Common Stock until the certificate is surrendered. Subject to
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applicable laws, such dividends and distributions, if any, will be accumulated
and, at the time of such surrender, all such unpaid dividends and distributions
will be paid, without interest. None of RSFC, FPBB, the transfer agent or any
other person will be liable to any holder of shares of FPBB Common Stock for
any amount delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
If a certificate for FPBB Common Stock has been lost, stolen or destroyed,
the transfer agent will issue RSFC Common Stock in accordance with the Merger
Agreement upon receipt of appropriate evidence as to such loss, theft or
destruction, appropriate evidence as to the ownership of such certificate by
the claimant and appropriate and customary indemnification.
For a description of the differences between the rights of the holders of
RSFC Common Stock and FPBB Common Stock, see "COMPARISON OF RIGHTS OF HOLDERS
OF RSFC AND FPBB COMMON STOCK."
GOVERNANCE OF THE COMBINED COMPANY. The Merger Agreement sets forth
certain matters related to the board of directors and the executive officers of
the Combined Company and the Combined Bank, from and after the Effective Time.
For a description of such matters, see "MANAGEMENT FOLLOWING THE MERGER."
CONDITIONS TO THE MERGER. The respective obligations of RSFC and FPBB to
consummate the Merger are subject to the satisfaction (or waiver, where legally
allowed), at or prior to the Effective Time, of a number of conditions set
forth in the Merger Agreement, including: (i) approval and adoption of the
Merger Agreement by the requisite votes of the RSFC shareholders and FPBB
stockholders; (ii) authorization for quotation on the Nasdaq National Market of
the shares of RSFC Common Stock to be issued in the Merger, subject to official
notice of issuance; (iii) the receipt of the requisite local, state and federal
regulatory approvals (the "Requisite Regulatory Approvals"), with such
Requisite Regulatory Approvals remaining in full force as of the Effective
Time; (iv) the Registration Statement (as defined herein) of which this Joint
Proxy Statement/Prospectus forms a part shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission; (v) the
absence of any order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") which prohibits the consummation of the Merger or any of the
other transactions contemplated by the Merger Agreement, and the absence of any
statute, rule, regulation, order, injunction or decree having been enacted,
entered, promulgated or enforced by any governmental entity prohibiting,
restricting or making illegal consummation of the Merger; (vi) the absence of
any proceeding initiated by any governmental entity seeking an Injunction;
(vii) the accuracy of the representations of the other party to the Merger
Agreement as of the Closing Date as though made thereon and as of the date of
the Merger Agreement, subject to the materiality standards set forth in the
Merger Agreement, and the receipt of a certificate to the foregoing effect
signed on behalf of such other party by the chief executive officer and chief
financial officer thereof; (viii) the performance by the other party to the
Merger Agreement in all material respects of all of the obligations required to
be performed by it under the Merger Agreement at or prior to the Closing Date,
and the receipt of a certificate to the foregoing effect signed on behalf of
such other party by the chief executive officer and chief financial officer
thereof; (ix) the receipt of an opinion from Morgan, Lewis & Bockius LLP,
counsel to RSFC (in the case of the obligations of RSFC to consummate the
Merger) and the receipt of an opinion from Skadden, Arps, Slate, Meagher & Flom
LLP, counsel to FPBB (in the case of the obligations of FPBB to consummate the
Merger), in form and substance reasonably satisfactory to the party receiving
such opinion, dated the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time,
the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that,
accordingly, for federal income tax purposes (a) no gain or loss will be
recognized by RSFC or FPBB as a result of the Merger, (b) no gain or loss will
be recognized by the FPBB stockholders who exchange all of their FPBB Common
Stock solely for RSFC Common Stock
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pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in RSFC Common Stock), and (c) the aggregate tax
basis of the RSFC Common Stock received by the FPBB stockholders who exchange
all of their FPBB Common Stock solely for RSFC Common Stock pursuant to the
Merger will be the same as the aggregate tax basis of the FPBB Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received); and, in rendering such
opinion, such counsel may require and rely upon representations and covenants,
including those contained in certificates of officers of RSFC, FPBB and others,
reasonably satisfactory in form and substance to such counsel; and (x) the
receipt of a letter from Ernst & Young LLP, addressed to RSFC, to the effect
that the Merger will qualify for "pooling-of-interests" accounting treatment.
No assurance can be provided as to whether all of the other conditions
precedent to the Merger will be satisfied or, where legally permitted, waived
by the party permitted to do so.
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS. In the Merger
Agreement, FPBB has agreed that, prior to the Effective Time and except as
previously disclosed to RSFC, expressly contemplated or permitted by the Merger
Agreement or the Stock Option Agreement, dated as of May 27, 1998, by and
between RSFC and FPBB, (i) FPBB and its subsidiaries will carry on their
businesses in the ordinary course consistent with past practice, and (ii)
without limiting the generality of clause (i) FPBB will not, and will not
permit any of its subsidiaries to: (a) solely in the case of FPBB, declare or
pay any dividends on, or make other distributions in respect of, any of its
capital stock, other than normal quarterly dividends not in excess of $0.175
per share of FPBB Common Stock; (b) (1) repurchase, redeem or otherwise acquire
(except for the acquisition of Trust Account Shares and DPC Shares) any shares
of the capital stock of FPBB or any subsidiary thereof, or any securities
convertible into or exercisable for any capital stock of FPBB or any subsidiary
thereof, subject to the terms and conditions of the Merger Agreement, in each
case, consistent with past practice, (2) split, combine or reclassify any
shares of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or (3) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with respect
to any of the foregoing, except, in the case of subclauses (2) and (3), for the
issuance of FPBB Common Stock upon the exercise or fulfillment of rights or
options issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on May 27, 1998
and in accordance with their terms as of such date, (c) amend the certificate
of incorporation of FPBB ("FPBB Articles"), the bylaws of FPBB (the "FPBB
Bylaws") or other similar governing documents; (d) make any capital
expenditures other than those which (1) are made in the ordinary course of
business or are necessary to maintain existing assets in good repair and (2) in
any event are in an amount of no more than $500,000 in the aggregate; (e) enter
into any new line of business; (f) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire any assets, which would be material,
individually or in the aggregate, to FPBB, or which could reasonably be
expected to impede or delay consummation of the Merger, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
past practices; (g) take any action that is intended or may reasonably be
expected to result in any of FPBB's representations and warranties in the
Merger Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in the Merger Agreement not being satisfied; (h) change its
methods of accounting in effect at March 31, 1998, except as required by
changes in generally accepted accounting principles ("GAAP") or regulatory
accounting principles as concurred to by FPBB's independent auditors; (i) (1)
except as otherwise provided in the Merger Agreement, as required by applicable
law or as required to maintain qualification pursuant to the Code, adopt,
amend, or terminate any employee benefit plan or any agreement, arrangement,
plan or policy between FPBB or any of its subsidiaries and one or more of its
current or former directors, officers or employees (except that FPBB may adopt
the amendments to its deferred benefit plan as agreed to by RSFC in the Merger
Agreement), or (2) except
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for normal increases in the ordinary course of business consistent with past
practice or except as required by applicable law, increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any of FPBB's benefit, pension or compensation plans or
agreements as in effect as of May 27, 1998 (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares), provided, however, that
nothing contained in the Merger Agreement will prohibit FPBB (A) from paying
fiscal 1998 bonuses in an aggregate amount not to exceed $300,000 or (B) from
paying retention bonuses in an amount not to exceed $735,000; (j) take or cause
to be taken any action which would disqualify the Merger as a
"pooling-of-interests" for accounting purposes or a reorganization under
Section 368(a) of the Code; (k) other than activities in the ordinary course of
business consistent with past practice, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise
dispose of, any of its material assets, properties or other rights or
agreements; (l) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity; (m) file any application
to relocate or terminate the operations of any banking office of it or any of
its subsidiaries; (n) create, renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which FPBB or any of its
subsidiaries is a party or by which FPBB or any of its subsidiaries or their
respective properties is bound, other than the renewal in the ordinary course
of business of any lease the term of which expires prior to the Closing Date;
or (o) agree or commit to do any of the foregoing.
In the Merger Agreement, FPBB has agreed that, prior to the Effective
Time, it will not, and will not permit any of its subsidiaries to, authorize or
permit any of its officers, directors, employees or agents to directly or
indirectly solicit, initiate or encourage any inquiries relating to, or the
making of any proposal which constitutes, a "takeover proposal" (as defined
below), or, subject to the fiduciary duties of the FPBB Board, recommend or
endorse any takeover proposal, or participate in any discussions or
negotiations, or provide third parties with any nonpublic information, relating
to any such inquiry or proposal or otherwise facilitate any effort or attempt
to make or implement a takeover proposal. FPBB may communicate information
about any such takeover proposal to its stockholders if, in the judgment of the
FPBB's Board, based upon the advice of outside counsel, such communication is
required under applicable law. FPBB will immediately cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than RSFC with respect to any of the
foregoing. FPBB will take all actions necessary or advisable to inform the
appropriate individuals or entities referred to in the first sentence of this
paragraph of their obligations. FPBB will notify RSFC immediately if any such
inquiries or takeover proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, FPBB , and FPBB will promptly inform RSFC in
writing of all of the relevant details with respect to such inquiries or
proposals. As used in the Merger Agreement, "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other
business combination involving FPBB or any subsidiary of FPBB or any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, FPBB or any subsidiary of FPBB other than
the transactions contemplated or permitted by the Merger Agreement.
In the Merger Agreement, RSFC has agreed that, prior to the Effective Time
and except as previously disclosed to FPBB, as contemplated by the Merger
Agreement or consented to in writing by FPBB, RSFC will not, and will not
permit any of its subsidiaries to (i) solely in the case of RSFC, declare or
pay any dividends on or make any other distributions in respect of any of its
capital stock other than its current quarterly dividends, provided that RSFC
may increase the quarterly cash dividend on RSFC Common Stock in a manner
consistent with past practice; (ii) take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in the Merger Agreement being or becoming untrue, or in any of the
conditions to the Merger not being satisfied; (iii) take any action or enter
into any agreement that could reasonably be expected to jeopardize or
materially delay the receipt of any Requisite Regulatory Approval; (iv) change
its methods of accounting in effect at March 31, 1998, except in accordance
with changes in GAAP or
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regulatory accounting principles as concurred with by RSFC's independent
auditors; (v) take or cause to be taken any action which would disqualify the
Merger as a "pooling-of-interests" for accounting purposes or a reorganization
under Section 368(a) of the Code; or (vi) agree to do any of the foregoing. In
addition, RSFC has agreed that, prior to the Effective Time, except as
expressly contemplated or permitted by the Merger Agreement, or with the prior
written consent of FPBB, it will, and will cause its subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past
practice.
The Merger Agreement also contains certain other agreements relating to
the conduct of the parties prior to the Effective Time, including, among other
things, those requiring each party (i) to use its reasonable best efforts to
promptly apply for and obtain all permits, consents, approvals and
authorizations of all third parties and governmental entities necessary or
advisable to consummate the transactions contemplated by the Merger Agreement;
(ii) subject to certain limitations regarding privileged or confidential
information and otherwise, to afford to the officers, employees, accountants,
counsel and other representatives of the other party to the Merger Agreement
access during normal business hours to all of such party's properties, books,
contracts, commitments, records, officers, employees, accountants, counsel and
make available all information concerning its business, properties and
personnel as such other party may reasonably request; (iii) to call, give
notice of, convene and hold the RSFC Special Meeting, in the case of RSFC, and
the FPBB Special Meeting, in the case of FPBB, and each party has agreed to
recommend to its shareholders or stockholders, as the case may be, through its
board of directors, subject, in the case of FPBB, to the fiduciary duties of
its board of directors, the Merger Agreement and the transactions contemplated
thereby and related matters; (iv) to use and cause its subsidiaries to use
reasonable best efforts to take all actions necessary, proper or advisable to
comply with any legal requirements in connection with the Merger and, subject
to the conditions described under "--The Merger Agreement--Conditions to the
Merger," to consummate the Merger, and to obtain all required governmental and
third party approvals; (v) in the case of RSFC, to use reasonable best efforts
to cause the shares of RSFC Common Stock to be issued in the Merger to be
approved for quotation on the Nasdaq National Market, subject to official
notice of issuance, as of the Effective Time; and (vi) to coordinate the
payment of dividends with respect to RSFC Common Stock and FPBB Common Stock
such that RSFC shareholders and FPBB stockholders will not receive more than
one dividend, or fail to receive one dividend, for any single calendar quarter
due to the exchange of RSFC Common Stock for FPBB Common Stock.
In addition, RSFC has agreed to provide indemnification to the officers,
directors and employees of FPBB to the full extent permitted by law from and
after the Effective Time and to provide, for a period of three years after the
Effective Time, directors' and officers' liability insurance for the directors
and officers of FPBB to the maximum extent available at an annual premium not
to exceed 200% of the amount expended by FPBB as of the date of the Merger
Agreement. See "--Interests of Certain Persons in the Merger."
Pursuant to the Merger Agreement, RSFC has agreed to assume FPBB's
indemnification obligations under the Agreement and Plan of Merger, dated as of
May 31, 1995, by and between FPBB and PBS Financial Corporation.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, each of RSFC and
FPBB has made certain customary representations and warranties relating to,
among other things, the parties' respective organization, authority relative to
the Merger Agreement, capitalization, subsidiaries, required consents and
approvals, taxes, employee benefit plans, material contracts, litigation,
compliance with applicable laws, environmental matters, reliability of
financial statements and the absence of material adverse changes in the
parties' businesses, financial condition or results of operations. For detailed
information on such representations and warranties, see the Merger Agreement
attached hereto as Annex A and incorporated by reference herein. Pursuant to
the Merger Agreement, it is a condition to each party's obligation to
consummate the Merger that the representations and warranties of the other
party contained in the Merger Agreement be true and correct in all material
respects as of the date of the Merger Agreement and as of the Effective Time;
provided, however, that such representations and
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warranties will be deemed to be true and correct in all material respects
unless the failure to be true and correct, individually or in the aggregate,
has had (i) a material adverse change from the business, financial condition or
results of operations of the party making such representations and warranties
and its subsidiaries, taken as a whole, any such effect attributable to or
resulting from (w) any change in banking or similar laws, rules or regulations
of general applicability or interpretations thereof by courts or governmental
authorities, (x) any change in GAAP or regulatory accounting principles
applicable to banks, thrifts or their holding companies generally, (y) any
action or omission of FPBB or RSFC or any subsidiary of either of them taken
with the prior written consent of the other party hereto, or (z) any expenses
incurred by such party in connection with the Merger Agreement or the
transactions contemplated thereby as represented in the Merger Agreement or
(ii) has a material adverse effect on the ability of RSFC or FPBB to consummate
the transactions contemplated by the Merger Agreement. See "--The Merger
Agreement--Conditions to the Merger."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by both the FPBB stockholders and the RSFC
shareholders: (i) by mutual written consent of FPBB and RSFC, if the board of
directors of each so determines by a vote of a majority of the members of its
entire board of directors; (ii) by either RSFC or FPBB upon written notice to
the other party if any governmental entity of competent jurisdiction issues a
final nonappealable order enjoining or otherwise prohibiting the Merger; (iii)
by either RSFC or FPBB if the Merger is not consummated on or before March 31,
1999, unless the failure of the Merger to be consummated by such date is due to
the failure of the party seeking to terminate the Merger Agreement to perform
or observe the covenants and agreements of such party set forth therein; (iv)
by either RSFC or FPBB (provided that the terminating party shall not be in
material breach of any of its obligations with respect to obtaining the
approval of its shareholders under the Merger Agreement) if any approval of
either of the FPBB stockholders or RSFC shareholders required for the
consummation of the Merger is not obtained by reason of the failure to obtain
the required vote at a duly held meeting of the RSFC shareholders or the FPBB
stockholders, as the case may be, or at any adjournment or postponement
thereof; (v) by either RSFC or FPBB (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained in the Merger Agreement) if there is a material breach of
any of the representations or warranties set forth in the Merger Agreement on
the part of the other party and that breach is not cured within 30 days
following written notice to the party committing the breach, or which breach,
by its nature, cannot be cured prior to the Closing (as defined in the Merger
Agreement), provided that neither party shall have the right to terminate the
Merger Agreement for this reason unless the breach of representation or
warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
hereby under the standard set forth in the section of the Merger Agreement
described in "--Merger Agreement-Representations and Warranties"; or (vi) by
either RSFC or FPBB (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in the Merger Agreement) if there is a material breach of any of the
covenants or agreements set forth in the Merger Agreement on the part of the
other party, which breach shall not have been cured within 30 days following
receipt by the breaching party of written notice of such breach from the other
party thereto, or which breach, by its nature, cannot be cured prior to the
Closing. The provisions relating to the termination of the Merger Agreement can
be found in Section 9 of the Merger Agreement which is attached hereto as Annex
A.
In the event of termination of the Merger Agreement, pursuant to its terms
the Merger Agreement will become void and have no effect, except with respect
to the parties' obligations with respect to confidential information and
expenses set forth in the Merger Agreement and except that termination will not
relieve or release a breaching party from liability or damages for its willful
breach of the Merger Agreement.
The Merger Agreement also could have been terminated prior to the
Effective Time by FPBB, at any time during the ten-day period commencing two
days after the Determination Date (as defined below), had all of the conditions
in either of clauses (x) or (y) been satisfied:
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(x) both (1) the Average Closing Price (as defined below) was less than
$11.15625; and (2) (i) the number obtained by dividing the Average Closing
Price by $13.125 (such number being referred to herein as the "Parent
Ratio") was less than (ii) the number obtained by dividing the Index Price
(as defined below) on the Determination Date (as defined below) by the
Index Price on May 27, 1998, and subtracting 0.15 from such quotient (such
number being referred to herein as the "Index Ratio"); or
(y) the Average Closing Price was less than $9.84375.
Had either (x) or (y) above been satisfied and had FPBB given a termination
notice, RSFC would have had the option during a five-day period after receipt
of FPBB's notice of termination, in the case of a termination invoked under
clause (x), of adjusting the Exchange Ratio to equal the lesser of (i) a number
equal to a quotient, the numerator of which is the product of 0.85, $13.125 and
the Exchange Ratio (as then in effect) and the denominator of which is the
Average Closing Price, and (ii) a number equal to a quotient, the numerator of
which is the Index Ratio multiplied by the Exchange Ratio (as then in effect)
and the denominator of which is the Parent Ratio, or, in the case of a
termination invoked under clause (y), to elect to increase the Exchange Ratio
to equal a number equal to a quotient, the numerator of which is the product of
0.75, $13.125 and the Exchange Ratio (as then in effect) and the denominator of
which is the Average Closing Price. If RSFC had made this election, no
termination would have occurred and the Merger Agreement would have remained in
effect in accordance with its terms (except as the Exchange Ratio would have
been so modified). For purpose of the foregoing, capitalized terms have the
following definitions:
"Average Closing Price" means the average of the last reported sale
prices per share of Parent Common Stock as reported on the Nasdaq National
Market (as reported in THE WALL STREET JOURNAL or, if not reported therein,
in another mutually agreed upon authoritative source) for the 20
consecutive trading days on the Nasdaq National Market ending at the close
of trading on the Determination Date.
"Determination Date" means the fifth business day prior to the date on
which the last of the Requisite Regulatory Approvals shall be received,
without regard to any requisite waiting periods in respect thereof. The
Determination Date was August 25, 1998.
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
common stock of 13 bank holding companies, as listed in the Merger
Agreement.
Neither of the conditions contained in clauses (x) or (y) was satisified,
however, and FPBB, therefore, did not and will not have any right to terminate
the Merger Agreement under this provision. It bears noting that the last
reported sale price of RSFC Common Stock on September 24, 1998, the day prior
to this Joint Proxy Statement/Prospectus, was $8.50.
WAIVER; AMENDMENT; FEES; EXPENSES. Subject to compliance with applicable
law, the Merger Agreement may be amended by the parties thereto, by action
taken or authorized by their respective boards of directors, at any time before
or after approval of the matters presented in connection with the Merger by
either FPBB stockholders or RSFC shareholders; provided, however, that after
any approval of the transactions contemplated by the Merger Agreement by FPBB
stockholders, there may not be, without further approval of such stockholders,
any amendment of the Merger Agreement which reduces the amount or changes the
form of the Merger consideration other than as contemplated by the Merger
Agreement. The Merger Agreement may not be amended except by an instrument in
writing signed by each of the parties thereto.
Prior to the Effective Time, each of the parties to the Merger Agreement
may, to the extent legally allowed and only in a written instrument, extend the
time for the performance of any of the obligations or other acts of the other
party to the Merger Agreement, waive any inaccuracies in the representations
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or warranties of the other party contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement or waive compliance with
any of the agreements or conditions of the other party contained in the Merger
Agreement. In addition, the Merger Agreement permits RSFC at any time to change
the method of effecting the combination with FPBB if and to the extent that
RSFC deems such change desirable provided that no such change may alter or
change the Merger consideration, adversely affect the tax treatment of FPBB
stockholders as a result of receiving the Merger consideration or materially
impede or delay consummation of the transactions contemplated by the Merger
Agreement. Each party to the Merger Agreement will bear all expenses incurred
by it in connection with the Merger Agreement and the transactions contemplated
thereby.
FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material federal income tax considerations of
general application that should be considered by shareholders of RSFC and the
stockholders of FPBB in evaluating the Merger. This discussion is based upon
the Code, Treasury Department regulations promulgated thereunder, court
decisions and administrative pronouncements published to date. Any or all of
the above are subject to change, possibly with retroactive effect. Subsequent
statutory or administrative changes or clarifications or court decisions could
cause this discussion to become inaccurate or incomplete. This discussion does
not address all tax matters that may affect RSFC, FPBB or their respective
stockholders and does not consider various factual circumstances applicable to
any particular stockholder. In particular, it does not address federal income
tax considerations to investors who are dealers in securities, mutual funds,
insurance companies, nonresident aliens, foreign entities, tax-exempt entities,
or holders who do not hold their shares as capital assets or who hold their
shares as part of a hedge, straddle or conversion transaction, and does not
address particular situations where shares are received in exchange for
services rendered. In addition, the following discussion does not address the
tax consequences of the Merger under foreign, state or local tax laws. Holders
of FPBB Common Stock are advised and expected to consult their own tax advisors
regarding the federal income tax consequences of the Merger in light of their
personal circumstances and the consequences under state, local and foreign tax
laws.
RSFC has received an opinion of Morgan, Lewis & Bockius LLP, counsel to
RSFC, dated September 2, 1998 substantially to the effect that, on the basis of
facts, representations and assumptions set forth or referred to in such opinion
which are consistent with the expected state of facts existing at the Effective
Time, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that,
accordingly, for federal income tax purposes:
(a) No gain or loss will be recognized by RSFC or FPBB as a result of
the Merger.
(b) No gain or loss will be recognized by the FPBB stockholders who
exchange all of their FPBB Common Stock solely for RSFC Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in RSFC Common Stock).
(c) The aggregate tax basis of the RSFC Common Stock received by FPBB
stockholders who exchange all of their FPBB Common Stock solely for RSFC Common
Stock pursuant to the Merger will be the same as the aggregate tax basis of the
FPBB Common Stock surrendered in exchange therefor (reduced by any amount
allocable to the fractional share interest in RSFC Common Stock for which cash
is received).
In addition, such opinion also provides that it is the opinion of Morgan,
Lewis & Bockius LLP that the statements of law and conclusions of law contained
herein are, in all material respects, true, correct and complete.
RSFC's obligation to consummate the Merger is conditioned upon the receipt
of a further opinion of Morgan, Lewis & Bockius LLP, and FPBB's obligation to
consummate the Merger is conditioned
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upon the receipt of an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in
each case dated the Effective Time, opining as to the same federal income tax
consequences discussed in (a), (b) and (c) above and as further described in
the next paragraph and under "--The Merger Agreement-Conditions to the Merger."
Each counsel's opinion is subject to certain assumptions and
qualifications and is conditioned upon the accuracy of certain factual
information, representations and covenants provided to such counsel by RSFC,
FPBB and others. Any inaccuracy in such factual information, representations
and covenants could adversely affect the conclusions identified herein and, in
particular, could result in FPBB or FPBB stockholders recognizing gain as a
result of the Merger. In addition, neither RSFC nor FPBB has requested or
received a ruling from the Internal Revenue Service (the "IRS") on the matters
discussed herein. The IRS may disagree with some of the conclusions set forth
below, and no assurance can be given that such conclusions would be sustained
by a court if challenged by the IRS.
In the event that (i) FPBB fails to receive its tax opinion from Skadden,
Arps, Slate, Meagher & Flom LLP as discussed in the second preceding paragraph,
(ii) FPBB determines to waive the condition to its obligation to consummate the
Merger relating thereto and (iii) the material federal income tax consequences
to FPBB stockholders are different from those described above, FPBB will
resolicit the approval of the FPBB stockholders prior to proceeding with
consummation of the Merger.
RSFC will also resolicit the approval of the RSFC shareholders prior to
proceeding with the consummation of the Merger if the receipt of the tax
opinion of Morgan Lewis & Bockius LLP, dated as of the Effective Time, is
waived and there is a material change in federal income tax consequences.
Based upon the current ruling position of the IRS, cash received by a FPBB
stockholder in lieu of a fractional share interest in RSFC Common Stock will be
treated as received in redemption of such fractional share interest, and a FPBB
stockholder should generally recognize capital gain or loss for federal income
tax purposes measured by the difference between the amount of cash received and
the portion of the tax basis of the share of FPBB Common Stock allocable to
such fractional share interest. Such gain or loss should be long-term capital
gain or loss if the holding period for such share of FPBB Common Stock is
greater than one year at the Effective Time. The holding period of a share of
RSFC Common Stock received in the Merger (including a fractional share interest
deemed received and redeemed as described above) will include the holder's
holding period in the FPBB Common Stock surrendered in exchange therefor.
First Bank has pre-1988 bad debt reserves for federal income tax purposes
of approximately $22 million. Whether any or all of First Bank's pre-1988 bad
debt reserves would have to be recaptured for federal income tax purposes as a
result of the Bank Merger have been left to be specified in Treasury
regulations. Although there can be no assurance as to the content or the
operation of such Treasury regulations or as to when such Treasury regulations
might be issued, based on the legislative history to the Code it appears that
the Bank Merger should not trigger the recapture of First Bank's pre-1988
reserves and that, instead, Republic Security should succeed to such reserves.
Nevertheless, such reserves could be subject to future recapture for federal
income tax purposes, and may be subject to recapture in connection with the
Merger under certain state and local tax laws.
STOCK OPTION AGREEMENT
Pursuant to the Stock Option Agreement, FPBB has granted RSFC an option to
acquire, under certain circumstances, a number of shares equivalent to 19.9% of
the issued and outstanding FPBB Common Stock as of May 27, 1998. A copy of the
Stock Option Agreement is attached hereto as Annex B and shareholders of RSFC
and stockholders of FPBB are urged to read the Stock Option Agreement in its
entirety for a more complete description of the rights and parties thereunder.
Execution of the Stock Option Agreement was a condition to RSFC's merger
proposal. The Stock Option Agreement is intended to increase the likelihood
that the Merger will be consummated in
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accordance with the terms of the Merger Agreement. Consequently, certain
aspects of the Stock Option Agreement may have the effect of discouraging
persons who might now or at any other time prior to the Effective Time be
interested in acquiring all of or a significant interest in FPBB from
considering or proposing such an acquisition, even if such persons were
prepared to offer to pay consideration to the FPBB stockholders which had a
higher current market price than the shares of RSFC Common Stock to be received
per share of FPBB Common Stock pursuant to the Merger Agreement. The
acquisition of FPBB (other than pursuant to the Merger Agreement) could cause
the Option to become exercisable. The existence of the Option could
significantly increase the cost to a potential acquiror of acquiring FPBB
compared to its cost had the Stock Option Agreement and the Merger Agreement
not been entered into. Such increased cost might discourage a potential
acquiror from considering or proposing an acquisition or might result in a
potential acquiror proposing to pay a lower per share price to acquire FPBB
than it might otherwise have proposed to pay. FPBB and RSFC believe that the
exercise or repurchase of the Option is likely to prohibit any other acquiror
of FPBB from accounting for an acquisition thereof using the
"pooling-of-interests" accounting method for a period of two years.
Accordingly, the existence of the Stock Option Agreement may deter
significantly or completely preclude an acquisition of FPBB by certain other
financial services organizations.
Under the terms of the Stock Option Agreement, the exercise price is
$40.50 per share and payable in cash. The number of shares of FPBB Common Stock
issuable under the Stock Option Agreement, and the exercise price, are subject
to adjustment in the event of certain changes in FPBB's capitalization.
Subject to certain limitations, the option is exercisable, in whole or in
part, at any time or from time to time after the occurrence of both an
Extension Event (as defined in the Stock Option Agreement) and a Purchase Event
(as defined in the Stock Option Agreement) prior to the occurrence of an
Exercise Termination Event (as defined in the Stock Option Agreement), provided
that RSFC has sent written notice of such exercise within 90 days following
such Purchase Event. Extension Events and Purchase Events are events which
primarily involve attempts by (i) FPBB to merge, consolidate or otherwise sell
substantially all of its common stock or assets to an entity other than RSFC or
(ii) another entity to acquire 20% or more of the voting power of FPBB or any
subsidiary thereof.
The Stock Option Agreement also contains a provision allowing RSFC to
require FPBB upon the occurrence of a Repurchase Event (as defined below) to
repurchase the Option as well as all shares of FPBB Common Stock previously
purchased pursuant to the Stock Option Agreement, at such prices as are set
forth in the Stock Option Agreement. The Stock Option Agreement also provides
FPBB the right after the termination of the option to repurchase FPBB Common
Stock acquired pursuant to the Stock Option Agreement, subject to certain
conditions and limitations.
A Repurchase Event will deemed to have occurred (i) upon the consummation
of any merger, consolidation or similar transaction involving FPBB or any
purchase, lease or other acquisition of all or a substantial portion of the
assets of FPBB, other than any such transaction which would not constitute an
Acquisition Transaction (as defined in the Stock Option Agreement) or (ii) upon
the acquisition by any person of beneficial ownership of 50% or more of the
then outstanding shares of FPBB Common Stock, provided that no such event shall
constitute a Repurchase Event unless an Extension Event shall have occurred
prior to an Exercise Termination Event.
Except to the extent that RSFC has previously exercised its rights to
require repurchase of the Option or shares purchased pursuant to the Option,
during the six-month period commencing following the first occurrence of an
Exercise Termination Event, FPBB may repurchase from RSFC at a price set forth
in the Stock Option Agreement all (but not less than all, subject to certain
conditions set forth in the Stock Option Agreement) of the FPBB Common Stock
acquired by RSFC pursuant to the Stock Option Agreement and with respect to
which RSFC has beneficial ownership at the time of such repurchase. The
repurchase price takes into account such factors as interest on the price paid
for the shares of FPBB Common Stock repurchased and RSFC's out-of-pocket
expenses incurred in connection with the transactions contemplated by the
Merger Agreement.
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RSFC may request FPBB to prepare, file and keep current with respect to
the Option Shares, a registration statement with the Commission. FPBB is
required to use its reasonable best efforts to cause such registration
statement to be filed as expeditiously as possible and to become effective and
then to remain effective for 180 days or such shorter time as may be reasonably
necessary to effect such sales or other disposition of shares underlying the
Option. RSFC has the right to demand two such registrations.
Neither FPBB nor RSFC may assign any of its rights and obligations under
the Stock Option Agreement or the Option to any other person without the
express written consent of the other party, except that if a Purchase Event
occurs prior to an Exercise Termination Event, RSFC, subject to the terms of
the Stock Option Agreement, may sell, assign, transfer or otherwise dispose of
the Option or all or any of the shares of FPBB Common Stock acquired by it
pursuant to the Option if it gives FPBB written notice of the proposed
transaction setting forth the terms of the proposed transaction. This notice
will be deemed an offer to purchase such Option by RSFC to FPBB, which may be
accepted within 10 business days of the receipt of such notice, on the same
terms and conditions and at the same price at which RSFC is proposing to
transfer the Option or such shares to a third party. In the event of the
failure or refusal of the Company to purchase the Option or all the shares
covered by notice or if any governmental entity disapproves FPBB's proposed
purchase of the Option or such shares, RSFC may, within 60 days from the date
of notice, sell all, but not less than all, of the Option or such shares to
such third party at no less than the price specified in the prior notice and on
terms no more favorable to the purchaser than those set forth in the notice.
The restrictions on the sale of the Option or any of the shares of FPBB Common
Stock acquired pursuant to the Option do not apply to (i) any disposition as a
result of which such proposed transferee would beneficially own not more than
2% of the voting power of FPBB, (ii) any disposition of FPBB Common Stock by a
person to whom FPBB has sold shares of FPBB Common Stock issued upon exercise
of the Option or (iii) any sale by means of a public offering registered under
the Securities Act.
RESTRICTIONS ON RESALES OF SECURITIES
The shares of RSFC Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any FPBB stockholder who may be
deemed to be an "affiliate" of FPBB for purposes of Rule 145 under the
Securities Act. Affiliates may not sell their shares of RSFC Common Stock
acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. This Joint Proxy Statement/Prospectus does
not cover any resales of RSFC Common Stock received in the Merger by persons
who may deemed to be affiliates of FPBB. Persons who may be deemed to be
affiliates of FPBB generally include individuals or entities that control, are
controlled by or are under common control with FPBB, and may include certain
officers and directors as well as principal stockholders of FPBB.
Commission guidelines regarding qualifying for the pooling-of-interests
method of accounting also limit sales by affiliates of the acquiring and
acquired company in a business combination. Commission guidelines indicate
further that the pooling-of-interests method of accounting will generally not
be challenged on the basis of sales by affiliates for the acquiring or acquired
company if they do not dispose of any of the shares of the corporation they own
or shares of a corporation they receive in connection with a merger during the
period beginning 30 days before the effective date of the merger and ending
when financial results covering at least 30 days of post-merger operations of
the combined entity have been published.
RSFC and FPBB have each agreed in the Merger Agreement to use their best
efforts to cause each person who is an affiliate (for purposes of Rule 145 of
the Securities Act and for purposes of qualifying the Merger for
pooling-of-interests accounting treatment) of such party to deliver to the
other party a written agreement intended to ensure compliance with the
Securities Act and preserve the ability to treat the Merger as a
pooling-of-interests. In addition, RSFC has agreed in the Merger Agreement to
46
<PAGE>
use all reasonable efforts to publish, not later than 15 days after the end of
the first full calendar month following the Effective Time, financial results
covering at least 30 days of post-Merger combined operations.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling-of-interests" for
accounting and financial reporting purposes. As a result of
pooling-of-interests accounting, the consolidated financial statements of RSFC
after the Merger will combine the accounts of FPBB with those of RSFC.
It is a condition to each of RSFC's and FPBB's obligation to consummate
the Merger that RSFC and FPBB receive a letter dated as of the closing date
addressed to RSFC from RSFC's independent accountants and to FPBB from FPBB's
independent accountants to the effect that the Merger qualifies for
pooling-of-interests accounting treatment. See "THE MERGER--The Merger
Agreement--Conditions to the Merger."
REGULATORY APPROVALS
Under the Merger Agreement, RSFC and FPBB have obtained all necessary
actions or nonactions, waivers, consents and approvals from any governmental
authority necessary, proper or advisable to consummate and make effective the
proposed transaction. The Requisite Regulatory Approvals include approvals of
the FRB under the Bank Holding Company Act with respect to the Merger and the
Florida Banking Department in connection with the Bank Merger. As a bank
holding company, RSFC's activities and those of its banking and nonbanking
subsidiaries are limited to the business of banking and activities closely
related to banking. The subsidiary depository institutions of RSFC (the
"banking subsidiaries"), including its principal bank subsidiary, Republic
Security, are subject to supervision and examination by their respective
federal and state banking authorities. The banking subsidiaries are supervised
by the FRB as member banks and the Florida Banking Department as
Florida-chartered institutions. In addition, the FDIC has broad enforcement
authority over federally-insured depository institutions, such as the banking
subsidiaries.
In reviewing the proposed transaction under the applicable statutes, FRB
considered the financial and managerial resources and future prospects of the
existing and proposed organizations and the convenience and needs of the
communities to be served, including but not limited to the capital adequacy,
the Year 2000 readiness and the status of electronic data processing systems.
In addition, the FRB is prohibited from approving any transaction if it would
result in a monopoly or would 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 if its effect in any section of the United
States would be substantially to lessen competition, or to tend to create a
monopoly, or result in a restraint of trade, unless the FRB finds that the
anti-competitive effects of the transaction 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. Even though the Merger
has received FRB approval, the Merger may not be consummated for a time, during
which time the Department of Justice may challenge the Merger on antitrust
grounds and seek the divestitures of certain assets and operations. In
addition, under the Community Reinvestment Act of 1977, as amended (the "CRA"),
the FRB considered the record of performance of each of the depository
institution subsidiaries of RSFC and FPBB in meeting the credit needs of the
entire community of each institution, including low and moderate income
neighborhoods. FRB regulations required publication of, notice of, and the
opportunity for public comment on, the proposed transaction and may hold a
public hearing, if deemed appropriate. The Florida Banking Department also had
to approve the proposed transaction and applied similar standards and
requirements for its approval of the transaction.
The resulting company and institutions will continue to be subject to the
regulation of the FRB, the Florida Banking Department and the FDIC. Such
regulation includes but is not limited to activities restrictions, limitations
on transactions with affiliates, cross-guarantee and holding company liability
47
<PAGE>
requirements, capital adequacy and prompt corrective action requirements,
dividend restrictions, change in bank control requirements, banking agency
enforcement, and potential new restrictions or controls mandated by future
legislation or regulations.
RSFC is not aware of any regulatory approvals that would be required for
consummation of the Merger or the Bank Merger, except as described above.
Should any other approvals be required, it is presently contemplated that such
approvals would be sought. There can be no assurance that any other approvals,
if required, will be obtained.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain executive officers and certain members of the FPBB Board
may be deemed to have interests in the Merger that are in addition to their
interests as stockholders of FPBB generally. The FPBB Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
FPBB DIRECTORS AND OFFICERS. The Merger Agreement provides that at the
Effective Time certain FPBB directors and officers will be appointed to the
RSFC Board. See "MANAGEMENT FOLLOWING THE MERGER."
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation in which any person who is or has been a director, officer or
employee of FPBB is or is threatened to be, made a party based in whole or in
part on, or pertaining to (i) the fact that such person was a director, officer
or employee of FPBB or First Bank; or (ii) the Merger Agreement or the
transactions contemplated thereby, RSFC will, subject to the conditions set
forth in the Merger Agreement, indemnify such person to the fullest extent
permitted by law against any liability or expense incurred in connection with
any such claim or proceeding. In addition, pursuant to the Merger Agreement,
RSFC will be required to maintain directors' and officers liability insurance
for the benefit of persons serving as officers and directors of FPBB
immediately prior to the Effective Time for a period of three (3) years
following the Effective Time with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such, provided that in no event shall RSFC be required to
expend on an annual basis more than 200% of the amount which FPBB currently
expends for such insurance.
EMPLOYMENT AGREEMENTS. Each of FPBB and First Bank is a party to
employment agreements with each of Louis O. Davis, Jr. and R. Randy Guemple
(each, an "Executive" and the agreements, the "Employment Agreements"), which
Employment Agreements were entered into on May 20, 1997 and pursuant to which,
for an initial term of three years (the "Term"), Mr. Davis will serve as
President and Chief Executive Officer and Mr. Guemple will serve as Executive
Vice President and Chief Operating Officer of FPBB.
In accordance with the terms of the Employment Agreements, if the
applicable Executive's employment is terminated in certain circumstances
following a Change of Control (as defined in the Employment Agreements), FPBB
will pay to the Executive the severance payments and will provide to the
Executive the severance benefits as follows: each Executive will be entitled to
receive, in lieu of any other payments due to the Executive: (1) a lump sum
cash payment equal to three times the Executive's highest annual base salary
achieved during the Term, (2) a lump sum cash payment equal to the aggregate
value of all cash bonus or long-term or short-term incentive compensation
awards that would have been paid to the Executive for the thirty-six months
following the termination of his employment (the "Payment Period"), assuming
that he would have earned a bonus equal to the highest bonus actually paid to
him during the Term, (3) the continuation of employee welfare benefits during
the Payment Period, reduced to the extent the Executive receives such benefits
from a subsequent employer, (4) a lump sum cash payment equal to the excess, if
any, of (a) the present value of the aggregate benefits to which the Executive
would have been entitled under all defined benefit pension plans of FPBB
(whether or not qualified) had he continued to be employed during the Payment
Period,
48
<PAGE>
calculated (i) by adding to the service level actually determined under any
such plan an additional service amount equal to the Payment Period and (ii) by
adding to the compensation level determined under any such plan the amounts
payable under clauses (1) and (2) above, over (ii) the present value of the
benefits to which the Executive is actually entitled under such defined benefit
pension plans as of the date of the termination of his employment and (5) the
reimbursement of legal fees and expenses, if any, incurred by the Executive in
disputing any issue relating to the termination of his employment. The
Employment Agreements also provide that if any payment to be made to the
Executive or any benefit to be received by the Executive would be rendered
non-deductible by reason of the application of Section 280G of the Code, such
payments and, if necessary, such benefits will be reduced to the extent
necessary to allow such payments and benefits to be deductible. Approval by the
stockholders of FPBB of the Merger Agreement will constitute a Change of
Control for purposes of the Employment Agreements. The Merger Agreement
provides that consummation of the Merger is deemed to be "Good Reason" under
the Employment Agreements.
Pursuant to the terms of the Employment Agreements, it is presently
estimated (based upon information currently available) that if each Executive's
employment is terminated following approval by the stockholders of FPBB of the
Merger Agreement, the Executive will be entitled to a lump sum cash severance
payment approximately in the following amount: Mr. Davis, $981,000; and Mr.
Guemple, $497,000.
CHANGE OF CONTROL AGREEMENTS. Each of FPBB and First Bank is also a party
to Change of Control agreements with each of Calvin L. Cearley, Alissa Ballot,
Suzanne Brenner, William R. Martin, Rodney J. Bayliff, John Rudy, John Trammel,
Rita Zambuto and one other employee (each, an "Employee" and each agreement, a
"Change of Control Agreement"), which Change of Control Agreements remain in
effect until May 19, 2001 (the "Current Term"). On May 20, 1999, and on each
May 20 thereafter, the term of the Change of Control Agreement will be extended
for one additional year, unless earlier terminated pursuant to the terms of the
Change of Control Agreements (such additional years, together with the Current
Term, the "Protective Period").
In accordance with the terms of the Change of Control Agreements, if the
applicable Employee's employment is terminated following a Change of Control
and during the Protective Period by FPBB or First Bank other than for Cause or
by the Employee with Good Reason (each term, as defined in the Change of
Control Agreements), First Bank will pay to the Employee the severance payments
and will provide to the Employee the severance benefits as follows: each
Employee will be entitled to receive: (1) a lump sum cash payment equal to
three times the sum of (a) the higher of (i) such Employee's annual base salary
in effect at the time of termination and (ii) such Employee's annual base
salary in effect immediately prior to the Change of Control and (b) the higher
of (i) the annual bonus awarded to such Employee in any of the three years
ended prior to the date of termination and (ii) the annual bonus awarded to
such Employee in any of the three years ended prior to the Change of Control,
(2) the continuation of employee welfare benefits for three years following the
date of termination or, if earlier, until the Employee receives substantially
similar benefits from a subsequent employer (the "Continuation Period"), (3) a
lump sum cash payment equal to the excess, if any, of (a) the present value of
the aggregate benefits to which the Employee would have been entitled under all
defined benefit pension plans of First Bank (whether or not qualified) had he
or she continued to be employed during the Continuation Period, calculated (i)
by adding to the service level actually determined under any such plan an
additional service amount equal to the remaining term of the Change of Control
Agreements and (ii) by adding to the compensation level determined under any
such plan the amounts payable under clauses (1) and (2) above, over (ii) the
present value of the benefits to which the Employee is actually entitled under
such defined benefit pension plans as of the date of the termination of his or
her employment and (4) the reimbursement of legal fees and expenses, if any,
incurred by the Executive in disputing any issue relating to the termination of
his or her employment. The Change of Control Agreements also provide that if
any payment to be made to the Executive or any benefit to be received by the
Executive would be rendered non-deductible by reason of the application of
Section 280G of the Code, such payments and, if necessary, such benefits will
be reduced to the extent necessary to allow such payments and benefits to be
deductible. Approval by the stockholders of FPBB
49
<PAGE>
of the Merger Agreement will constitute a Change of Control for purposes of the
Change of Control Agreements. The Merger Agreement provides that consummation
of the Merger is deemed to be "Good Reason" under the Change of Control
Agreements.
Pursuant to the terms of the Change of Control Agreements , it is
presently estimated (based upon information currently available) that if each
Employee's employment is terminated following approval by the stockholders of
FPBB of the Merger Agreement, the Employee will be entitled to a lump sum cash
severance payment approximately in the following amount: Mr. Cearley, $324,500;
Ms. Ballot, $355,000; Ms. Brenner, $295,000; Mr. Martin, $285,000; Mr. Bayliff,
$232,000; Mr. Rudy, $438,000; Mr. Trammel, $315,000; and Ms. Zambuto, $335,000.
To the extent that any of the above individuals receives the benefit of
accelerated vesting on stock options and shares issued pursuant to the RRP
Plans (as defined below), such payments may be reduced as required under the
Change of Control Agreements to comply with Code Section 280G.
OPTIONS. FPBB maintains the 1993 Incentive Stock Option Plan (the "Option
Plan"). Pursuant to the Option Plan, upon a Change of Control of FPBB, all
outstanding unvested options and limited rights to acquire shares of FPBB
Common Stock will become exercisable immediately in full. Consummation of the
Merger will constitute a "change of control" for this purpose. The following
executives hold options to purchase the following number of shares of FPBB
Common Stock whose vesting will accelerate and which will first become
exercisable upon the consummation of the Merger: Mr. Davis, 200; Mr. Guemple,
200; Mr. Cearley, 5,334; Ms. Brenner, 2,500; and Mr. Martin, 2,500.
At the Effective Time, each option granted by FPBB to purchase shares of
FPBB Common Stock shall be converted automatically into an option to purchase
shares of RSFC Common Stock in an amount and at an exercise price determined as
follows: (a) the number of shares of RSFC Common Stock to be subject to the
option immediately after the Effective Time shall be equal to the product of
the number of shares of FPBB Common Stock subject to the option immediately
before the Effective Time, multiplied by the Exchange Ratio, provided that any
fractional shares of RSFC Common Stock resulting from such multiplication shall
be rounded down to the nearest share; and (b) the exercise price per share of
RSFC Common Stock under the option immediately after the Effective Time shall
be equal to the exercise price per share of FPBB Common Stock under the option
immediately before the Effective Time divided by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent. The vesting
provisions and other terms of the option immediately after the Effective Time
shall be the same as the corresponding terms in effect immediately before the
Effective Time.
50
<PAGE>
The following table sets forth, with respect to (i) each Executive
Officer, (ii) a group consisting of all the Executive Officers (the "Executive
Officer Group") and (iii) the FPBB Board as a group (the "Non-Executive
Director Officer Group"), the number of shares of FPBB Common Stock subject to
outstanding options held by such persons as of the Effective Time.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS CURRENTLY EXERCISE PRICE
OPTIONS HELD EXERCISABLE PER OPTION
-------------- ------------------- -----------------
<S> <C> <C> <C>
Louis O. Davis, Jr. .......................... 105,334 105,134 $ 25.44
R. Randy Guemple ............................. 50,000 50,000 $ 29.02675
Alissa Ballot ................................ 7,500 7,500 $ 27.375
Rodney Bayliff ............................... 0 0 N/A
Suzanne Brenner .............................. 2,500 0 $ 38.125
Calvin Cearley ............................... 8,000 2,666 $ 33.1875
William R. Martin ............................ 2,500 0 $ 38.4375
John A. Rudy ................................. 15,000 15,000 $ 29.0625
John Trammel ................................. 23,400 23,400 $ 22.22
Rita Zambuto ................................. 15,000 15,000 $ 29.0625
Executive Officer Group (10 persons) ......... 229,434 218,700 $ 26.98
Non-Executive Officer Director Group
(6 persons) ................................. 68,726 68,726 $ 14.99
</TABLE>
RECOGNITION AND RETENTION PLANS. First Bank maintains the Recognition and
Retention Plan for Officers and Employees (the "Employees' RRP") and also
maintains the Recognition and Retention Plan for Outside Directors (the
"Directors' RRP" and, together with the Employees' RRP, the "RRP Plans").
Pursuant to the terms of the RRP Plans, a participant may be awarded Plan
Shares, which are FPBB Common Stock equivalents and which vest in accordance
with the individual award agreements. Notwithstanding any vesting schedule to
the contrary, upon a termination of employment (or separation from service, as
applicable) following a Change in Control (as defined in the RRP Plans), each
Plan Share award will be fully vested and will be paid in FPBB Common Stock as
soon as practicable thereafter. Consummation of the Merger will constitute a
Change in Control for purposes of the Employees' RRP and approval by the
stockholders of FPBB of the Merger Agreement will constitute a Change in
Control for purposes of the Directors' RRP. The following executives and
directors hold the following Plan Shares which will vest upon, and be paid as
soon as practicable following, termination of employment (or service as a
director) following the consummation of the Merger: Mr. Cearley, 500; Ms.
Brenner, 250; and Mr. Martin, 250 (executives); and Dr. Hadley, 3,534; Dr.
Sokoloff, 3,534 (directors).
PENSION PLAN AND ESOP. The First Bank of Florida Employees' Pension Plan
("First Bank Pension Plan") is expected to be terminated and/or frozen at or
shortly following the consummation of the Merger. Such action will cause the
accrued benefits of each participant employed by First Bank to be 100% vested
without regard to length of service. In addition, the First Bank of Florida
Employee Stock Ownership Plan provides for 100% vesting for all participants on
the date that FPBB's stockholders approve the Merger. All of the executive
officers of FPBB and First Bank are already fully vested in both plans, except
for Ms. Brenner and Mr. Martin, who are not participants in either plan, and
Ms. Ballot and Mr. Cearley, who are participants but not vested in either plan.
The Merger will result in the vesting of the benefits of Ms. Ballot and Mr.
Cearley under both plans.
51
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The accompanying unaudited pro forma combined condensed statement of
financial condition presents the combined financial position of RSFC and FPBB
at June 30, 1998, assuming that the proposed Merger had occurred as of June 30,
1998. Such pro forma information is based upon the historical statements of
financial condition data of the respective companies, at that date, giving
effect to the proposed Merger using the pooling-of-interests method of
accounting described in the accompanying notes to the unaudited pro forma
combined condensed financial data.
The accompanying unaudited pro forma combined condensed statements of
income give effect to the proposed Merger by combining the results of
operations of RSFC and FPBB for the six months ended June 30, 1998 using the
pooling-of-interests method of accounting described in the accompanying notes.
The accompanying unaudited pro forma combined condensed statements of income
give effect to the proposed Merger by combining the results of operations of
RSFC for the years ended December 31, 1997 and 1996 and the nine months ended
December 31, 1995 with the results of operations of FPBB for the years ended
September 30, 1997 and 1996 and the nine months ended September 30, 1995,
respectively, using the pooling-of-interests method of accounting described in
the accompanying notes to the unaudited pro forma combined condensed financial
data.
The accompanying unaudited pro forma combined condensed financial data
should be read in conjunction with the separate historical financial statements
and notes thereto of RSFC and FPBB. The following unaudited pro forma combined
condensed financial data is presented for information purposes only and is not
necessarily indicative of the results of future operations of the combined
entity or the actual results that would have been achieved had the Merger been
consummated on the dates presented.
52
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF
FINANCIAL CONDITION AT JUNE 30, 1998
<TABLE>
<CAPTION>
RSFC FPBB PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
-------------- -------------- ------------------- --------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Cash and amounts due from depository
institutions ..................................... $ 28,998 $ 28,673 $ 57,671
Interest-bearing deposits in other financial in
institutions ..................................... 95,166 73,529 $ (10,700)(a) 157,995
----------- ---------- ---------- ----------
Cash and cash equivalents ......................... 124,164 102,202 (10,700) 215,666
Investments held to maturity ....................... 7,778 7,778
Investments available-for-sale ..................... 135,894 537,799 673,693
Loans--net ......................................... 683,338 1,058,983 1,742,321
Property and equipment--net ........................ 25,549 28,404 (5,300)(a) 48,653
Other real estate owned ............................ 3,431 2,648 6,079
Goodwill--net ...................................... 6,830 2,485 9,315
Other assets ....................................... 32,788 31,505 (2,600)(a) 61,685
----------- ---------- ---------- ----------
TOTAL $ 1,019,764 $1,764,026 $ (18,600) $2,765,190
=========== ========== ========== ==========
LIABILITIES:
Deposits ........................................... $ 779,678 $1,299,323 $2,079,001
Securities sold under agreements to repurchase ..... 9,382 9,382
Federal Home Loan Bank advances .................... 115,000 270,850 385,850
Other liabilities .................................. 25,530 73,025 98,555
----------- ---------- ----------
TOTAL LIABILITIES 929,590 1,643,198 2,572,788
----------- ---------- ----------
SHAREHOLDERS' EQUITY:
Common stock ....................................... 243 55 $ 157(b) 455
Additional paid-in capital ......................... 63,642 46,030 (157)(b) 109,515
Employee stock ownership plan ...................... (315) (315)
Recognition and retention plans .................... (141) (141)
Retained earnings .................................. 25,951 74,291 $ (18,600)(b) 81,642
Unrealized gain (loss) on investments available
for sale, net of taxes ........................... 338 908 1,246
----------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY .......................... 90,174 120,828 (18,600) 192,402
----------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......... $ 1,019,764 $1,764,026 $ (18,600) $2,765,190
=========== ========== ========== ==========
Stated book value per share (c) ..................... $ 3.79 $ 23.52 $ 4.29
=========== ========== ==========
Tangible book value per share (c) ................... $ 3.52 $ 23.04 $ 4.09
=========== ========== ==========
Total risk based capital ratio ...................... 12.91% 16.38% 12.94%
=========== ========== ==========
Tier 1 risk based capital ratio ..................... 11.95% 15.80% 11.79%
=========== ========== ==========
Leverage capital ratio .............................. 8.73% 7.81% 6.63%
=========== ========== ==========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
53
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
RSFC FPBB COMBINED
(HISTORICAL) (HISTORICAL) PRO FORMA
-------------- -------------- ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans ................................. $ 30,313 $ 43,201 $ 73,514
Interest and dividends on investments ...................... 4,600 20,061 24,661
-------- -------- --------
Total interest income ....................................... 34,913 63,262 98,175
-------- -------- --------
Interest Expense:
Interest on deposits ....................................... 11,554 30,861 42,415
Interest on borrowings ..................................... 2,100 11,564 13,664
-------- -------- --------
Total interest expense ...................................... 13,654 42,425 56,079
-------- -------- --------
Net interest income ......................................... 21,259 20,837 42,096
Provision for loan losses ................................... 180 3,094 3,274
-------- -------- --------
Net interest income after provision for loan losses ......... 21,079 17,743 38,822
-------- -------- --------
Service charge on deposit accounts .......................... 3,289 2,200 5,489
Gain on sale of loans and servicing ......................... 647 2,390 3,037
Other income ................................................ 1,978 3,120 5,098
-------- -------- --------
Total non-interest income ................................... 5,914 7,710 13,624
-------- -------- --------
Operating Expenses:
Employee compensation and benefits ......................... 8,370 10,997 19,367
Occupancy and equipment .................................... 3,514 3,689 7,203
Data processing ............................................ 817 371 1,188
Communications ............................................. 618 421 1,039
Professional fees .......................................... 454 181 635
Insurance .................................................. 266 577 843
Goodwill amortization ...................................... 260 89 349
Other ...................................................... 2,513 3,688 6,201
-------- -------- --------
Total ....................................................... 16,812 20,013 36,825
-------- -------- --------
Income before income taxes .................................. 10,181 5,440 15,621
Income taxes ................................................ 3,766 2,191 5,957
-------- -------- --------
Net income .................................................. $ 6,415 $ 3,249 $ 9,664
======== ======== ========
Earnings per common share:
Basic ...................................................... $ 0.27 $ 0.65 $ 0.21
Diluted .................................................... $ 0.26 $ 0.64 $ 0.20
======== ======== ========
Weighted average common shares and potential common shares
outstanding: ..............................................
Basic ...................................................... 23,827 4,975 44,488
Diluted .................................................... 25,422 5,098 47,412
======== ======== ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
54
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1997
-------------- --------------
RSFC FPBB COMBINED
(HISTORICAL) (HISTORICAL) PRO FORMA
-------------- -------------- -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans ................................. $ 53,995 $ 87,746 $ 141,741
Interest and dividends on investments ...................... 11,672 29,184 40,856
-------- --------- ---------
Total interest income ....................................... 65,667 116,930 182,597
-------- --------- ---------
Interest Expense:
Interest on deposits ....................................... 22,477 57,535 80,012
Interest on borrowings ..................................... 2,343 15,316 17,659
-------- --------- ---------
Total interest expense ...................................... 24,820 72,851 97,671
-------- --------- ---------
Net interest income ......................................... 40,847 44,079 84,926
Provision for loan losses ................................... 1,717 3,281 4,998
-------- --------- ---------
Net interest income after provision for loan losses ......... 39,130 40,798 79,928
-------- --------- ---------
Service charge on deposit accounts .......................... 6,209 4,106 10,315
Gain on sale of loans and servicing ......................... 379 -- 379
Other income ................................................ 3,428 4,895 8,323
-------- --------- ---------
Total non-interest income ................................... 10,016 9,001 19,017
-------- --------- ---------
Operating Expenses:
Employee compensation and benefits ......................... 18,715 18,511 37,226
Occupancy and equipment .................................... 6,767 6,729 13,496
Data processing ............................................ 1,165 660 1,825
Communications ............................................. 1,160 766 1,926
Professional fees .......................................... 2,300 396 2,696
Advertising and promotion .................................. 620 1,005 1,625
Insurance .................................................. 425 977 1,402
Other real estate owned--net ............................... 1,241 329 1,570
Goodwill amortization ...................................... 565 194 759
Other ...................................................... 3,910 4,839 8,749
Merger expenses ............................................ 9,285 9,285
-------- ---------
Total ....................................................... 46,153 34,406 80,559
-------- --------- ---------
Income before income taxes .................................. 2,993 15,393 18,386
Income taxes ................................................ 1,187 6,037 7,224
-------- --------- ---------
Net income .................................................. $ 1,806 $ 9,356 $ 11,162
======== ========= =========
Earnings per common share:
Basic ...................................................... $ .05 $ 1.91 $ .24
Diluted .................................................... $ .05 $ 1.86 $ .23
======== ========= =========
Weighted average common shares and potential common
shares outstanding:
Basic ...................................................... 22,070 4,894 43,240
Diluted .................................................... 22,884 5,026 44,842
======== ========= =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
55
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1996
-------------- --------------
RSFC FPBB COMBINED
(HISTORICAL) (HISTORICAL) PRO FORMA
-------------- -------------- -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans ................................. $ 50,643 $ 84,090 $ 134,733
Interest and dividends on investments ...................... 9,566 19,442 29,008
-------- --------- ---------
Total interest income ....................................... 60,209 103,532 163,741
-------- --------- ---------
Interest Expense:
Interest on deposits ....................................... 21,079 48,614 69,693
Interest on borrowings ..................................... 595 12,686 13,281
-------- --------- ---------
Total interest expense 21,674 61,300 82,974
-------- --------- ---------
Net interest income ......................................... 38,535 42,232 80,767
Provision for loan losses ................................... 379 15,704 16,083
-------- --------- ---------
Net interest income after provision for loan losses ......... 38,156 26,528 64,684
-------- --------- ---------
Service charge on deposit accounts .......................... 5,618 3,206 8,824
Gain on sale of loans and servicing ......................... 1,053 3,494 4,547
Other income ................................................ 3,285 3,369 6,654
-------- --------- ---------
Total non-interest income ................................... 9,956 10,069 20,025
-------- --------- ---------
Operating Expenses:
Employee compensation and benefits ......................... 15,702 15,905 31,607
Occupancy and equipment .................................... 6,113 4,830 10,943
Data processing ............................................ 1,011 470 1,481
Communications ............................................. 1,067 640 1,707
Professional fees .......................................... 2,655 203 2,858
Advertising and promotion .................................. 722 663 1,385
Insurance .................................................. 1,966 8,848 10,814
Other real estate owned--net ............................... 530 451 981
Goodwill amortization ...................................... 471 145 616
Litigation settlement ...................................... 3,000 3,000
Other ...................................................... 3,237 3,447 6,684
-------- --------- ---------
Total ....................................................... 36,474 35,602 72,076
-------- --------- ---------
Income before income taxes .................................. 11,638 995 12,633
Income taxes ................................................ 3,874 446 4,320
-------- --------- ---------
Net income .................................................. $ 7,764 $ 549 $ 8,313
======== ========= =========
Earnings per common share:
Basic ...................................................... $ 0.33 $ 0.11 $ 0.17
Diluted .................................................... $ 0.31 $ 0.11 $ 0.17
======== ========= =========
Weighted average common shares and potential common
shares outstanding:
Basic ...................................................... 21,112 4,963 42,472
Diluted .................................................... 22,538 5,094 44,496
======== ========= =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
56
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1995
-------------- --------------
RSFC FPBB COMBINED
(HISTORICAL) (HISTORICAL) PRO FORMA
-------------- -------------- ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans ................................. $ 35,713 $ 43,049 $ 78,762
Interest and dividends on investments ...................... 6,177 19,935 26,112
-------- -------- ---------
Total interest income ....................................... 41,890 62,984 104,874
-------- -------- ---------
Interest Expense:
Interest on deposits ....................................... 14,873 29,794 44,667
Interest on borrowings ..................................... 1,051 8,665 9,716
-------- -------- ---------
Total interest expense ...................................... 15,924 38,459 54,383
-------- -------- ---------
Net interest income ......................................... 25,966 24,525 50,491
Provision for loan losses ................................... 434 244 678
-------- -------- ---------
Net interest income after provision for loan losses ......... 25,532 24,281 49,813
-------- -------- ---------
Service charge on deposit accounts .......................... 4,222 1,929 6,151
Gain on sale of loans and servicing ......................... 625 82 707
Other income ................................................ 2,055 181 2,236
-------- -------- ---------
Total non-interest income ................................... 6,902 2,192 9,094
-------- -------- ---------
Operating Expenses:
Employee compensation and benefits ......................... 10,888 10,171 21,059
Occupancy and equipment .................................... 4,153 3,050 7,203
Data processing ............................................ 576 424 1,000
Communications ............................................. 744 314 1,058
Professional fees .......................................... 2,042 332 2,374
Advertising and promotion .................................. 450 496 946
Insurance .................................................. 817 1,412 2,229
Other real estate owned--net ............................... 623 63 686
Goodwill amortization ...................................... 165 165
Other ...................................................... 2,355 1,683 4,038
-------- -------- ---------
Total ....................................................... 22,813 17,945 40,758
-------- -------- ---------
Income before income taxes .................................. 9,621 8,528 18,149
Income taxes ................................................ 3,389 3,313 6,702
-------- -------- ---------
Net income .................................................. $ 6,232 $ 5,215 $ 11,447
======== ======== =========
Earnings per common share:
Basic ...................................................... $ 0.32 $ 1.05 $ 0.27
Diluted .................................................... $ 0.30 $ 1.02 $ 0.26
======== ======== =========
Weighted average common shares and potential common
shares outstanding:
Basic ...................................................... 18,481 4,980 40,583
Diluted .................................................... 20,790 5,096 43,012
======== ======== =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
57
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma combined condensed statement of
financial condition presents the combined financial position of RSFC and FPBB
as of June 30, 1998, assuming that the proposed Merger had occurred as of June
30, 1998. The accompanying unaudited combined condensed pro forma statements of
income give effect to the proposed Merger by combining the results of
operations of the respective companies for the six months ended June 30, 1998,
the years ended December 31, 1997 and 1996, and the nine months ended December
31, 1995, assuming that the proposed Merger, which is expected to be accounted
for as a pooling-of-interests, had occurred as of the beginning of each period
presented. No adjustments for cost synergies are reflected in the pro forma
combined condensed statements of income. The following pooling-of-interests
adjustments were made:
(a) The unaudited pro forma combined condensed statement of financial
condition includes adjustments for non-recurring costs estimated to be
approximately $18.6 million, net of taxes, will be recorded in
connection with the Merger. These costs consist of approximately $7.2
million in professional fees, $6.3 million in employee severance
payments and payments associated with employee change in control
agreements, $5.3 million in write-offs of fixed assets primarily
associated with FPBB's inhouse data processing system and signs, $2.6
million in the write-off of certain prepaid assets and other assets not
useful to the Combined Company, $1.8 million in electronic data
processing and personnel costs to combine the operations and $1.9
million in lease and other contract buy-outs and miscellaneous expenses
associated with the integration of the two companies. Because such
costs are non-recurring, they have not been recorded in the
accompanying unaudited pro forma combined condensed statements of
income. However, such costs will be charged to income in the period in
which the merger is consummated. In addition, upon consummation of the
Merger, RSFC will conform FPBB's accounting and credit policies to
those of RSFC, including those related to the allowance for loan
losses. Further, RSFC will evaluate alternative plans related to the
collectibility of the various loan portfolios, and such procedures may
result in a charge to the provision for loan losses because of
differences in the reserve factors applied to loans graded substandard
and possible changes to management's collection plans related to
individual loan portfolios.
(b) To reflect issuance of approximately 21.2 million shares of RSFC Common
Stock in exchange for all of the outstanding shares of FPBB Common
Stock based upon applying the Exchange Ratio fixed at 4.194 multiplied
by the number of shares of FPBB Common Stock outstanding at June 30,
1998.
(c) Stated book value per share is calculated by dividing common
shareholders' equity plus the proceeds of the assumed conversion of "in
the money" options, warrants and convertible preferred stock by the
number of shares of RSFC Common Stock outstanding plus the equivalent
common shares from the assumed conversion of "in the money" options,
warrants and convertible preferred stock. Tangible book value per share
is calculated by dividing common shareholders' equity plus the proceeds
of the assumed conversion of "in the money" options, warrants and
convertible preferred stock less goodwill by the number of shares of
RSFC Common Stock outstanding plus the equivalent common shares from
the assumed conversion of "in the money" options, warrants and
convertible preferred stock.
58
<PAGE>
MANAGEMENT FOLLOWING THE MERGER
Following the consummation of the Merger, the composition of the RSFC
Board and the Republic Security Board of Directors will each consist of 21
members, initially comprised of the current RSFC and Republic Security Boards
of Directors' members (George M. Apelian, Paula Berliner, H. Gearl Gore, Joseph
D. Cesarotti, Mary Anna Fowler, Richard J. Haskins, Eugene W. Hughes, Lennart
E. Lindahl, Jr., Carol R. Owen, Richard C. Rathke, Rudy E. Schupp, Victor H.
Siegel, William F. Spitznagel, Bruce E. Wiita and William Wolfson, Jr.) and
three FPBB designees (Fred A. Greene, R. Randy Guemple and Daniel O. Sokoloff,
M.D.), to be elected as directors of RSFC upon consummation of the Merger (the
"Designees"). The RSFC Board is divided into three classes, each of which has a
term of three years.
Certain information with respect to each director and Designees to the
RSFC Board is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMBINED COMPANY
- -------------------------- ----- ----------------------------------------
<S> <C> <C>
Rudy E. Schupp 47 Chairman of the Board and
Chief Executive Officer
Lennart E. Lindahl, Jr. 54 Vice Chairman of the Board and Director
Carol R. Owen 62 Chairman--Broward County and Director
Richard J. Haskins 48 Executive Vice President and Director
George M. Apelian 66 Executive Vice President--Miami-Dade
County and Director
Paula Berliner 54 Director
Dr. Thomas F. Carney 71 Director
Joseph D. Cesarotti 69 Director
Mary Anna Fowler 70 Director
H. Gearl Gore 50 Director
Fred A. Greene 66 Director
R. Randy Guemple 46 Director
Eugene W. Hughes, Jr. 65 Director
Thomas J. Langan, Jr. 77 Director
Mary McCarty 43 Director
Richard C. Rathke 66 Director
Victor H. Siegel 50 Director
Daniel O. Sokoloff, M.D. 46 Director
William F. Spitznagel 71 Director
Bruce E. Wiita 60 Director
William Wolfson 69 Director
</TABLE>
DIRECTORS OF THE RSFC AND BANK BOARDS OF DIRECTORS
George M. Apelian, 66, has served as President and director of County
Financial Corporation ("CFC") since 1984, and as President, Chief Executive
Officer and director of County since 1984. From 1983 to 1984 he was Executive
Vice President of both CFC and County. From 1979 to 1983, Mr. Apelian held
various offices with the National Bank of Florida, Miami, Florida, including
the office of President from 1982 to 1983. Mr. Apelian has been in the banking
industry since 1958.
Paula Berliner, 54, has been a Director of RSFC since June 1997, when RSFC
purchased Family and was a Director of Family since its inception. Ms. Berliner
has been Vice President and Director of Acorn Holding Corp., a public venture
capital company traded on the Nasdaq Small-Cap Market, since June 1992. During
the two years prior to her employment with Acorn Holding Corp., Ms. Berliner
was Vice President and a director of Broward Window Products, Inc., a company
specializing in the sale of window-related products.
Dr. Thomas F. Carney, 71, has served as a member of the Board of Directors
of CFC since 1962 and as Chairman of the Board of County since 1967. Dr. Carney
has served as a member of the Board of
59
<PAGE>
Directors of County since 1984 and continues now to serve as the Chairman of
the Board. Dr. Carney also served as a director of Carney Bank, Boynton Beach,
Florida. His brother, Joseph E. Carney, Jr., and his son, Peter Carney, also
serve as directors of CFC and County. Dr. Carney also served as Chairman of the
Board of the former Dixie National Bank of Dade County.
Joseph D. Cesarotti, 69, has been a Director of RSFC since June 1997, when
RSFC purchased Family and was a Director of Family since its inception. Mr.
Cesarotti has been retired since June 1992. Prior to his retirement and from
1956, Mr. Cesarotti served as President and Chief Executive Officer of Sungraf
Inc., a sign manufacturing company.
Mary Anna Fowler, 70, has been a Director of RSFC since June 1997, when
RSFC purchased Family and was a Director of Family since its inception. Since
1991, Ms. Fowler has been Vice President of Exotic Gardens, Inc., a florist
company.
H. Gearl Gore, 50, has been a Director and the Secretary of RSFC since its
inception. He has been the President of H. Gearl Gore, Inc., a real estate
appraisal firm in Jupiter, Florida since 1983. In 1996, approximately 43% of
that firm's gross revenues were derived from appraisal services provided to
Republic Security. Mr. Gore has been the President and Chief Operating Officer
of Northco Investment Properties, Inc., a real estate brokerage firm in
Jupiter, Florida, from 1981 to present. From 1975 to 1980 he was Florida state
sales director for United Sun Life Insurance Co. He served as a Councilman for
the Town of Jupiter from 1981 to 1983.
Richard J. Haskins, 48, has been Executive Vice President and Chief
Financial Officer of RSFC and Republic Security since 1989, Senior Vice
President of RSFC and Republic Security since August 1984, and a Director of
RSFC and Republic Security since 1986. For ten years prior to 1984, he had been
an accountant with the West Palm Beach, Florida office of Deloitte Haskins &
Sells, certified public accountants, where he held the position of Manager.
Eugene W. Hughes, Jr., 65, has been a Director of RSFC since June 1997,
when RSFC purchased Family and was a Director of Family since its inception.
Mr. Hughes served as Vice President of Family from August 1988 to December 31,
1994 and as Controller from 1992 to December 31, 1994. Mr. Hughes is currently
retired.
Thomas J. Langan, Jr., 77, served as a Director of Carney from 1991 until
the merger with County in 1996. He became a director of CFC following the
consummation of the merger. Mr. Langan was in the banking profession from 1949
to 1983.
Lennart E. Lindahl, Jr., 54, has been a Director of RSFC since its
inception. From 1970 through 1994, he was President of Lindahl, Browning,
Ferrari & Hellstrom, Inc., Consulting Engineers in Jupiter, Florida, and
currently serves as its Chairman of the Board. He is past chairman of the
Economic Council of Palm Beach County and past president of the Palm Beach
County Development Board. Additionally, he currently serves as a member and was
a past Chairman of the Florida Inland Navigation District. Mary McCarty, 43,
has served as a Director of CFC since May 1997. She was Vice Mayor of the City
of Delray Beach and a Member of the City Commission in 1987. She was elected to
District IV Palm Beach County Commission in November 1990 and continues to
serve in such position. She was voted Chair of the Palm Beach Commission in
November of 1992. Mrs. McCarty was self-employed as a promotional consultant
until November 1990.
Carol R. Owen, 62, has been a Director of RSFC since June 1997, when RSFC
purchased Family and was a Director, Chief Executive Officer and President of
Family since its inception.
Richard C. Rathke, 66, has been a Director of RSFC since its inception. He
has been the President of RCR Enterprises, Inc., a real estate development firm
in Jupiter, Florida, since 1979. From 1966 to 1979 he was the President and
owner of Trans Pacific Trading Co. of Fort Lauderdale, Florida, a firm engaged
in importing and retail sales.
60
<PAGE>
Rudy E. Schupp, 47, has been President and Chief Executive Officer of RSFC
since 1985, and the President and Chief Executive Officer of Republic Security
since its inception. From 1980 to 1984, Mr. Schupp was employed by AmeriFirst
Bank, FSB, Miami, Florida, where he held the position of Division Vice
President and, previously, was Senior Vice President and Division Manager of
the Orlando Division of AmeriFirst Bank, FSB. Mr. Schupp was a Manager in
Consumer Bank Planning and Marketing at First Union National Bank, Charlotte,
North Carolina, from 1977 to 1980.
Victor Siegel, M.D., 50, has been a Director of RSFC since 1989. He is a
physician and surgeon specializing in Obstetrics and Gynecology and has been
practicing in Palm Beach County since January 1982. Dr. Siegel was a member of
the Florida and Palm Beach County Medical Associations and was Executive
Director of Finance for the Palm Beach County Medical Society in 1986. He has
been Chief of the Department of Obstetrics and Gynecology at Wellington
Hospital since 1993. He is also on the board of directors for the nonprofit
Jupiter Theater of the Performing Arts.
William F. Spitznagel, 71, has been a Director of RSFC since its inception
through December 31, 1986 and from February 21, 1987 to present. He was
Chairman and President of Roadway Services, Inc., a motor freight company, from
1978 until his retirement in 1981. He presently serves as a consultant to that
company.
Bruce E. Wiita, M.D., 60, has been a Director of RSFC since its inception.
He is a surgeon and urologist practicing in Jupiter and Palm Beach Gardens
since 1973. He is the former Chief of Staff of the Jupiter Hospital and Chief
of Surgery of the Palm Beach Gardens Hospital and Jupiter Hospital. Currently,
he is a Director of the American Heritage Management and Development
Corporation, a real estate development company, and Chairman of the DevMed
Group Inc., a medical device manufacturing corporation.
William Wolfson, 69, has been a Director of RSFC since 1993. He has been a
certified public accountant since 1960 and in 1994 retired as senior partner in
the accounting firm of Wolfson, Milowsky, Melzer, Ettinger & Wieselthier, P.C.
DESIGNEES OF FPBB TO RSFC BOARD OF DIRECTORS
Fred A. Greene, 66, has served as a director of FPBB since 1984. He has
served as Chairman of the Board of Gee & Jenson Engineers, Architects &
Planners, Inc. since 1990 and acted as President and Chief Executive Officer of
such company since 1990.
R. Randy Guemple, 46, has served as a director of FPBB since 1997, and as
Executive Vice President, Chief Operating Officer from July 1991 to the
present. He was also Treasurer and Chief Financial Officer of FPBB until
January 21, 1998. From 1992 to 1996, Mr. Guemple was Senior Vice President,
Treasurer and Chief Financial Officer.
Daniel O. Sokoloff, M.D., 46, has served as a director of FPBB since 1996.
He has been a dermatologist since 1982.
61
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
RSFC
As of September 24, 1998, directors and executive officers of RSFC were
the beneficial owners of 3,858,346 shares (approximately 14.7%) of the RSFC
Common Stock then outstanding. The following table sets forth certain
information regarding the beneficial ownership of the RSFC Common Stock as of
September 24, 1998 (including options exercisable within 60 days) by (1) each
RSFC director remaining in office after the Merger, (2) the executive officers
of RSFC, (3) all directors and executive officers of RSFC as a group, and (4)
each person known by RSFC to be the beneficial owner of more than 5% of the
outstanding class of RSFC Common Stock. Subject to applicable community
property and similar statutes and except as otherwise noted in the footnotes
below, each of the persons named in the table has sole voting and dispositive
power with respect to the shares beneficially owned by such person.
<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER(8)
------------------------------------------ -------------------------------------
PERCENTAGE OF PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING RSFC AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK BENEFICIAL OWNERSHIP COMMON STOCK
- ---------------------------------- ----------------------- ------------------ ---------------------- --------------
<S> <C> <C> <C> <C>
George M. Apelian ................ 37,278 * 37,278 *
Paula Berliner ................... 263,337 (1)(6) 1.0 267,531(9) *
Dr. Thomas F. Carney ............. 1,433,481 5.6 1,433,481 3.1
Joseph D. Cesarotti, Sr. ......... 153,335 (1)(6) * 153,335 *
Mary Anna Fowler ................. 104,297 * 104,297 *
H. Gearl Gore .................... 142,424 (2)(3)(4) * 142,424 *
Fred A. Greene ................... -- * 125,313 *
R. Randy Guemple ................. -- * 378,253 *
Richard J. Haskins ............... 65,788 (3) * 65,788 *
Eugene W. Hughes, Jr. ............ 188,619 (1)(6) * 188,619 *
Thomas J. Langan, Jr. ............ 3,701 * 3,701 *
Lennart E. Lindahl, Jr. .......... 132,034 (2)(3)(4) * 132,034 *
Mary McCarty ..................... 288 * 288 *
Carol R. Owen .................... 301,485 (1)(6) 1.2 301,485 *
Richard C. Rathke ................ 140,599 (2)(3)(4) * 140,599 *
Roger Savage ..................... 2,425 * 2,425 *
Rudy E. Schupp ................... 119,568 (3)(5) * 119,568 *
Victor H. Siegel, M.D. ........... 267,706 (2)(3) 1.0 267,706 *
Daniel O. Sokoloff, M.D. ......... -- * 77,799(10) *
William F. Spitznagel ............ 241,868 (2)(3) 1.0 280,076 *
Bruce E. Wiita, M.D. ............. 150,325 (2)(3)(4) * 150,325 *
William Wolfson .................. 9,274 (2) * 9,274 *
All directors and executive
officers as a group
(29 persons) .................... 3,858,346 (7) 14.7 4,443,904 9.2
</TABLE>
- ----------------
<TABLE>
<S> <C>
* Less than 1%.
(1) Includes 7,150 shares issuable upon the exercise of options, at an exercise price of $1.65 per share.
(2) Includes 5,250 shares issuable upon the exercise of options, at an exercise price of $3.33 per share.
(3) Includes 12,128 shares issuable upon exercise of options, at an exercise price of $2.48 per share.
(4) Includes 27,536 shares issuable upon exercise of warrants, at an exercise price of $5.00 per share.
(5) Includes 5,524 shares issuable upon exercise of options, at an exercise price of $2.50 per share.
(6) Includes 75,647 shares issuable upon exercise of options, at an exercise price of $2.078 per share.
(7) Includes options and warrants for 616,380 shares of Common Stock. Actual Common Stock owned is 12.7% of the total
outstanding.
(8) Assumes each share of FPBB common stock is converted into 4.194 shares of RSFC common stock.
(9) Includes 1,000 shares of FPBB Common Stock held by Ms. Berliner, which shares will be converted into 4,194 shares of
RSFC Common Stock at the Effective Time.
(10) Includes 7,411 unvested RRP Plan shares as to which Dr. Sokoloff has voting rights.
</TABLE>
62
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF RSFC AND FPBB COMMON STOCK
The rights of holders of FPBB Common Stock are governed by the FPBB
Charter, the Bylaws of FPBB and the Delaware General Corporation Law (the
"DGCL"). As a result of the Merger, the rights of the holders of FPBB Common
Stock, which will be converted into shares of RSFC Common Stock, will be
governed by the RSFC Articles, the Bylaws of RSFC and the Florida Business
Corporation Act (the "FBCA").
The following is a summary of the material differences in the rights of
the shareholders of RSFC and the stockholders of FPBB. This summary does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the FPBB Charter and Bylaws, the RSFC Articles and Bylaws, the
Bank Holding Company Act, the FBCA and the DGCL.
AUTHORIZED CAPITAL STOCK
RSFC. The RSFC Articles authorize the issuance of up to 100,000,000 shares
of RSFC Common Stock, par value $0.01 per share, of which, as of June 30, 1998,
24,286,639 shares were issued and outstanding, 2,000,000 shares were reserved
for issuance under the RSFC 1997 Performance Incentive Plan, 396,425 shares
were reserved for issuance pursuant to other RSFC stock options and warrants,
and 950,000 shares were reserved for issuance pursuant to the RSFC dividend
reinvestment plan and employee stock purchase plan. Under the RSFC Articles,
the RSFC Board has the authority to divide the 20,000,000 authorized shares of
preferred stock, par value $.01 per share, into series and to fix the rights
and preferences of any series so established. Of the series of preferred stock
currently authorized: 1,000,000 shares of Series B Junior Participating
Preferred Stock (the "Series B Preferred"), no shares of which are outstanding
and 1,035,000 shares of the Series C Preferred of which no shares were
outstanding. A full description of the RSFC Common Stock and the Series C
Preferred is incorporated herein by reference from the section under the
caption "Description of Securities" in RSFC's Registration Statement on Form
S-1 (No. 33-62847), effective on November 6, 1995. For a description of the
Series B Preferred issuable in connection with the RSFC Rights Plan, see
"--Certain Anti-Takeover Provisions."
FPBB. The FPBB Charter authorizes the issuance of up to 10,000,000 shares
of FPBB Common Stock, of which, as of June 30, 1998, 5,057,746 shares were
issued and outstanding, and 450,157 shares were reserved for issuance upon the
exercise of outstanding options pursuant to FPBB's stock option plans. The FPBB
Charter authorizes the issuance of up to 1,000,000 shares of preferred stock,
par value $0.01 per share, of which, as of June 30, 1998, no shares were issued
and outstanding. Under the FPBB Charter, the FPBB Board has the authority to
divide the 1,000,000 authorized shares of preferred stock into series and to
fix the rights and preferences of any series so established. Of the 1,000,000
shares of preferred stock currently authorized, 100,000 shares have been
designated as Series A Junior Participating Preferred Stock (the "Series A
Preferred"), none of which are currently outstanding.
BOARD OF DIRECTORS
RSFC. The RSFC Bylaws currently provide that the RSFC Board will consist
of 18 members. The RSFC Articles divide the RSFC Board into three classes of as
equal size as possible, with the term of each class expiring in consecutive
years so that only one class is elected in any given year. Under the RSFC
Articles and Bylaws, directors may only be removed for cause upon the
affirmative vote of not less than 80% of the outstanding shares of RSFC Common
Stock. The RSFC Bylaws will be amended as of the Effective Time of the Merger
to increase the number of directors to 21.
FPBB. The FPBB Charter provides that the number of members of the FPBB
Board will be established from time to time exclusively by the Board pursuant
to a resolution adopted by a majority of the whole board. The FPBB Board
currently consists of eight members. The FPBB Charter divides the FPBB Board
into three classes of as equal size as possible, with the term of each class
expiring in consecutive years so that only one class is elected in any given
year. Under the FPBB Charter, directors
63
<PAGE>
may only be removed for cause upon the affirmative vote of not less than 80% of
the outstanding shares of FPBB entitled to vote generally in the election of
directors.
VOTING LIMITATIONS
RSFC. Pursuant to the RSFC Articles, holders of RSFC Common Stock are
entitled to one vote for each share held.
FPBB. Pursuant to the FPBB Charter, holders of FPBB Common Stock are
entitled to one vote for each share held, except that a record holder of any
FPBB Common Stock which is beneficially owned, directly or indirectly, by a
person who, as of any record date for the determination of FPBB stockholders
entitled to vote on any matter, beneficially owns in excess of 10% of the
then-outstanding shares of FPBB Common Stock (the "Limit") shall generally not
be permitted to vote the shares held in excess of the Limit.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
RSFC. The RSFC Bylaws provide that a special meeting of RSFC shareholders
may only be called by a majority of the directors for such purposes as
determined by the RSFC Board at any time. The RSFC Articles deny shareholders
the power to call a special meeting and prohibit actions by shareholders by
written consent without a meeting. The FBCA provides that special meetings of
shareholders can be called at the request of the holders of not less than 10%
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting, unless a greater percentage, not to exceed 50%, is
required by the corporation's articles of incorporation.
FPBB. The FPBB Charter provides that no action required or permitted to be
taken at any annual or special meeting of stockholders of FPBB may be taken
without a meeting, and the power of stockholders to act by written consent is
specifically denied. Special meetings of the FPBB stockholders may be called
only by a resolution adopted by a majority of the total number of authorized
directors, or as otherwise provided in the FPBB Bylaws. The FPBB Bylaws do not
provide otherwise.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
RSFC. The FBCA requires that plans of merger and share exchange must be
adopted by the boards of directors of each corporation and (except in certain
limited circumstances) approved by a majority of all the votes entitled to be
cast by each voting group of each corporation entitled to vote on the plan of
merger or share exchange, unless the corporation's board of directors requires,
or the articles of incorporation provide for, a greater vote. The RSFC Articles
do not require a greater vote. In addition, the FBCA provides that a
corporation may sell or otherwise dispose of all or substantially all of its
property, other than in the usual and regular course of business, if
recommended by the board of directors and if the holders of the majority of all
votes entitled to be cast on the transaction approve such transaction.
The FBCA also provides, however, that the shareholders of the corporation
surviving a merger need not approve the transaction if (i) the corporation's
articles of incorporation will not differ after the Merger (other than in
certain specified provisions) and (ii) the corporation's shareholders will hold
the same number of shares with identical designations, preferences, limitations
and relative rights immediately after the merger as they held before the
merger.
FPBB. The DGCL generally provides that a merger, consolidation, sale,
lease or exchange of all or substantially all of a corporation's assets may be
effected upon a vote of the holders of a majority of a corporation's
outstanding shares. Generally, the DGCL does not require a stockholder vote of
the surviving corporation in a merger if (i) the merger does not amend the
existing certificate of incorporation, (ii) each outstanding share of the
surviving corporation before the merger is unchanged or, in the case of the
DGCL, becomes a treasury share of the surviving corporation and (iii) in the
case
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of the DGCL, the number of shares to be issued by the surviving corporation in
the merger does not exceed 20% of the shares outstanding immediately prior to
such issuance.
AMENDMENT OF ARTICLES OF INCORPORATION AND OF BYLAWS
RSFC. Pursuant to the FBCA and the RSFC Articles, amendments to the RSFC
Articles must be recommended by the RSFC Board and approved by a majority of
votes entitled to be cast by each voting group entitled to vote on the
amendment. Under the RSFC Articles and the RSFC Bylaws, the RSFC Board may
adopt, alter, amend or repeal the RSFC Bylaws by a majority vote.
FPBB. The DGCL provides that amendments to the certificate of
incorporation must be approved by a resolution of the board of directors
declaring the advisability of the amendment, and by the affirmative vote of a
majority of the outstanding shares entitled to vote and by a majority of the
outstanding shares of each class entitled to vote separately as a class on the
amendment, except where the certificate of incorporation requires the vote of a
greater proportion of the outstanding shares or of a greater proportion of the
outstanding shares of any class of stock. If an amendment would increase or
decrease the number of authorized shares of a class, increase or decrease the
par value of the shares of a class or alter or change the powers, preferences
or other special rights of a class of outstanding shares so as to adversely
affect the class, then a majority of shares of that class also must approve the
amendment, whether or not entitled to vote thereon by the certificate of
incorporation. The DGCL provides that a provision in a corporation's
certificate of incorporation which requires a super-majority vote of the
stockholders may only be amended by such super-majority vote.
Pursuant to the DGCL and the FPBB Charter, amendments to the FPBB Charter
must be recommended by the FPBB Board and approved by at least a majority of
the then-outstanding shares of capital stock entitled to vote generally in the
election of directors, except that at least 80% of the then-outstanding shares
of capital stock entitled to vote is required to amend or repeal FPBB Charter
provisions relating to amendment of the FPBB Charter, the Limit, FPBB
stockholder action, calling of special meetings of stockholders of FPBB, the
directors of FPBB, amendment or repeal of the FPBB Bylaws, supermajority vote
requirements with respect to certain business combinations, and indemnification
of officers, directors and employees.
RIGHTS OF DISSENTING SHAREHOLDERS
RSFC. Shareholders of a Florida corporation have the right, in certain
circumstances, to dissent from certain corporate actions, including the
consummation of a plan of merger to which a Florida corporation is a party and
which requires the approval of such corporation's shareholders. However, this
right to dissent does not apply with respect to a plan of merger to holders of
a security that on the record date is either registered on a national
securities exchange or designated as a national market system security on an
inter-dealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by not fewer than 2,000 shareholders.
Shareholders who are entitled to dissent are also entitled to obtain payment in
the amount of the fair value of their shares. The holders of RSFC Common Stock
are not entitled to dissenters' rights in connection with the Merger because
RSFC Common Stock is, and was as of the RSFC Record Date, listed on the Nasdaq
National Market. See "NO DISSENTERS' RIGHTS OF APPRAISAL."
FPBB. Pursuant to Section 262 of the DGCL, a holder of capital stock of a
Delaware corporation is generally entitled to receive payment of the appraised
value of his or her shares if such stockholder dissents from a merger or
consolidation and complies with the procedures set forth in Section 262 of the
DGCL for exercising such rights. However, appraisal rights are not available in
merger or consolidation transactions to holders of: (a) shares of stock that
are, as of the record date for determining stockholders entitled to vote on the
transaction, either listed on a national securities exchange or designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc., or held of record by more
than 2,000 persons, or (b) shares of the corporation surviving a merger if the
merger did not require for its approval the vote of such
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stockholders, unless, in either case, holders of such stock are required by the
terms of the merger or consolidation to accept anything other than: (i) shares
of the surviving or resulting corporation; (ii) shares of stock of another
corporation which are so listed or designated, or held of record by not fewer
than 2,000 persons; and/or (iii) cash in lieu of fractional shares of such
stock. Appraisal rights are not available for a sale of assets or an amendment
to the certificate.
DIVIDENDS
RSFC. The FBCA provides that, subject to restrictions in a corporation's
articles of incorporation, a corporation's board of directors may authorize and
the corporation may make a distribution to its shareholders unless after giving
effect to the distribution, (i) the corporation would not be able to pay its
debts as they become due in the usual course of business, or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the RSFC Articles permit otherwise) the amount that would be
needed, if the corporation were to dissolve at the time of distribution, to
satisfy the preferential rights of shareholders upon distribution whose
preferential rights are superior to those receiving the dividend.
FPBB. The DGCL provides that a corporation, subject to any restrictions in
its certificate of incorporation, may declare and pay dividends upon its shares
of capital stock either out of its surplus (as determined under the statute)
or, in the event there is no such surplus, out of its net profits for the
fiscal year in which the dividend is declared and/or for the preceding fiscal
year. Further restrictions on dividends may apply in the event a corporation
has issued shares possessing a preference upon the distribution of assets.
CERTAIN ANTI-TAKEOVER PROVISIONS
RSFC. Section 607.0901 of the FBCA provides that the approval of the
holders of two-thirds of the voting shares of a corporation, other than the
shares owned by an Interested Shareholder (generally, any person who is the
beneficial owner of 10% or more of the outstanding voting stock of the
corporation), would be required in order to effectuate certain transactions,
including, among others, a merger, sale of assets, sale of shares and
reclassification of securities involving the corporation and an Interested
Shareholder (an "Affiliate Transaction").
The special voting requirement does not apply in any of the following five
circumstances: (i) the Affiliated Transaction is approved by a majority of the
corporation's disinterested directors; (ii) the corporation has not had more
than 300 shareholders of record at any time during the preceding three years;
(iii) the Interested Shareholder has beneficially owned 80% of the
corporation's voting shares for five years; (iv) the Interested Shareholder
beneficially owns 90% of the corporation's voting shares; or (v) all of the
following conditions are met (a) the cash and fair value of other consideration
to be paid per share to all holders of the voting shares equals the highest per
share price calculated pursuant to various methods set forth in Section
607.0901 of the FBCA, (b) the consideration to be paid in the Affiliated
Transaction is in the same form as previously paid by the Interested
Shareholder, and (c) during the portion of the three years preceding the
announcement date that the Interested Shareholder has been an Interested
Shareholder, except as approved by a majority of the disinterested directors,
there shall have been no failure to pay at the regular date therefor any full
periodic dividends, whether or not cumulative, on any outstanding shares of the
corporation, no increase in the voting shares owned by the Interested
Shareholder, and no benefit to the Interested Shareholder from loans,
guarantees or other financial assistance or tax advantages provided by the
corporation.
A corporation may "opt-out" of the provisions of Section 607.0901 by
electing to do so in its articles of incorporation. RSFC has not elected to
"opt-out" of Section 607.0901 of the FBCA.
In addition, Section 607.0902 of the FBCA provides that the voting rights
to be accorded Control Shares (as defined below) a Florida corporation that has
(i) 100 or more shareholders, (ii) its principal place of business, its
principal office, or substantial assets in Florida, and (iii) either (a) more
than 10%
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of its shareholders residing in Florida, (b) more than 10% of its shares owned
by Florida residents, or (c) 1,000 shareholders residing in Florida, must be
approved by a majority of each class of voting securities of the corporation,
excluding those shares held by interested persons, before the Control Shares
will be granted any voting rights.
"Control Shares" are defined in the FBCA to be shares acquired by a
person, either directly or indirectly, that when added to all other shares of
the issuing corporation owned by such person, would entitle such person to
exercise, either directly or indirectly, voting power within any of the
following ranges: (i) 20% or more but less than 33% of all voting power of the
corporation's voting securities, (ii) 33% of more but less than a majority all
voting power of the corporation's voting securities, or (iii) a majority or
more of all of the voting power of the corporation's voting securities. Such
provisions doe not apply to shares acquired pursuant to, among other things, an
agreement or plan of merger or share exchange effected in compliance with the
relevant provisions of the FBCA and to which the corporation is a party or an
acquisition of shares previously approved by the board of directors of the
corporation.
In addition, unless otherwise provided in a corporation's articles of
incorporation or bylaws, in the event Control Shares acquired in a
Control-Share acquisition are accorded full voting rights and the acquiring
person has acquired Control Shares with a majority or more of all voting power,
all shareholders of the issuing public corporation shall have dissenters'
rights.
FPBB. Section 203 of the DGCL ("Section 203") restricts a corporation's
ability to engage in certain transactions involving the corporation (or its
majority-owned subsidiaries) and any person holding 15% or more of such
corporation's outstanding voting stock together with the affiliates or
associates of such person (an "Interested Stockholder"). Section 203 prohibits,
for a period of three years following the date that a person became an
Interested Shareholder, the following types of transactions between the
corporation and the Interested Stockholder (unless certain conditions,
described below, are met): (i) mergers or consolidations; (ii) sales, leases,
exchanges or other transfers of 10% or more of the aggregate assets of the
corporation; (iii) issuances or transfers by the corporation of any stock of
the corporation which would have the effect of increasing the Interested
Stockholder's proportionate share of the stock of any class or series of the
corporation; (iv) any other transaction which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
which is owned by the Interested Stockholder; and (v) receipt by the Interested
Stockholder of the benefit (except proportionately as a stockholder) of loans,
advances, guarantees, or other financial benefits provided by the corporation.
The three year ban does not apply if either the proposed transaction or
the transaction by which the Interested Stockholder becomes an Interested
Stockholder is approved by the board of directors of the corporation prior to
the time such stockholder becomes an Interested Stockholder. In addition, an
Interested Stockholder may avoid the statutory restriction if, upon
consummation of the transaction whereby such stockholder becomes an Interested
Stockholder, the stockholder owns at least 85% of the outstanding voting stock
of the corporation without regard to those shares owned by the corporation's
officers and directors or certain employee stock plans. Business combinations
are also permitted within the three-year period if approved by the board of
directors and authorized at an annual or special meeting of stockholders by the
holders of at least 66-2/3% of the outstanding voting stock not owned by the
Interested Stockholder.
Delaware corporations were given the option to exclude themselves from the
coverage of Section 203 by taking board action prior to May 2, 1988.
Additionally, a Delaware corporation may exclude itself by amending its
certificate of incorporation or bylaws at any time to exempt itself from
coverage of Section 203, provided that any certificate or bylaw amendment
adopted on or after May 2, 1988 may not become effective for 12 months after
the date such amendment is adopted. In addition, any transaction is exempt from
the statutory ban if it is proposed at a time when the corporation has
proposed, and a majority of certain continuing directors of the corporation has
approved, a transaction with a party who is not an Interested Stockholder of
the corporation (or who became such with board approval) if the proposed
transaction involves (i) certain mergers or consolidations involving the
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corporation; (ii) a sale or other transfer of over 50% of the aggregate assets
of the corporation or (iii) a tender or exchange offer for 50% or more of the
outstanding voting stock of the corporation.
FPBB has not excluded itself from the coverage of Section 203.
In addition, the FPBB Articles also contain a "supermajority provision"
which requires the affirmative vote of not less than 80% of the outstanding
shares of FPBB Common Stock for the approval or authorization of any "business
combination" between FPBB and a Related Person, which includes a merger or
consolidation of FPBB, sale of a significant amount of the assets and certain
other types of transactions. A "Related Person" means any individual,
corporation, partnership or other person or entity which, together with their
affiliates and associates (as defined in the FPBB Articles), beneficially owns
in the aggregate 10% or more of the outstanding shares of FPBB Common Stock.
The supermajority provision is not applicable if the business combination was
approved by a majority of the entire FPBB Board prior to the acquisition by
such Related Person of the beneficial ownership of 10% or more of the
outstanding shares of FPBB Common Stock, or after such acquisition, but only so
long as such Related Person has sought and obtained the unanimous approval by
the FPBB Board of such acquisition of 10% or more of FPBB Common Stock prior to
such acquisition being consummated.
The supermajority provision is also inapplicable if certain fair price and
procedural criteria are met. The fair price criteria are designed to ensure
that the consideration received by holders of FPBB Common Stock in a business
combination will be not less than the fair value of the FPBB Common Stock or
determined pursuant to a specified formula. The procedural criteria of the fair
price provision require the approval by a majority of the FPBB Board of the
business combination, as well as the obtainment of full information by the
holders of FPBB Common Stock in the form of a proxy or information statement
regarding the proposed transaction.
The RSFC Articles contain no such supermajority provisions.
RIGHTS PLAN
RSFC. On March 29, 1995, the RSFC Board declared a dividend on the RSFC
Common Stock of one right (a "Right") for each outstanding share of RSFC Common
Stock to shareholders of record at the close of business on April 14, 1995.
Each Right entitles the registered holder to purchase from RSFC a unit
consisting of one-hundredth of a share (a "Unit") of the Series B Preferred, or
a combination of securities and assets of equivalent value, at a purchase price
of $18 per Unit, subject to adjustment. Each fractional share of Series B
Preferred is designed to be equivalent in voting and dividend rights to one
share of RSFC Common Stock. A full description and terms of the Rights are set
forth in the Rights Agreement, dated as of April 14, 1995 (the "Rights
Agreement"), between RSFC and IBJ Schroder Bank & Trust Company, as Rights
Agent.
The Rights Agreement is designed to protect shareholder interests in the
event that RSFC is confronted with coercive or unfair takeover tactics,
including offers that do not treat all shareholder interests fairly or do not
maximize the value of RSFC. Acquisition offers that reflect RSFC's fair value
and that are made to all shareholders would not be affected by the Rights
Agreement. Initially, ownership of the Rights are evidenced only by the RSFC
Common Stock certificates. The Rights will separate from the RSFC Common Stock
and a "Distribution Date" will occur upon the earlier of (i) 10 days following
a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding RSFC Common Stock (the
"Stock Acquisition Date"), or (ii) the close of business on such date as may be
fixed by the board of directors, which date shall not be more than 65 days
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 30% or more of the outstanding
RSFC Common Stock. The Rights are not exercisable until the Distribution Date
and will expire at the close of business on April 14, 2005, unless earlier
redeemed by RSFC or unless certain events have occurred. Except in the
circumstances described below, after the Distribution Date each Right will be
exercisable into one-hundredth of a
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Preferred Share (a "Preferred Share Fraction"). Each Preferred Share Fraction
carries voting and dividend rights that are intended to produce the equivalent
of one RSFC Common Stock. The voting and dividend rights of the Preferred
Shares are subject to adjustment in the event of dividends, subdivisions and
combinations with respect to the RSFC Common Stock of RSFC.
In the event that any time following the Stock Acquisition Date, (i) RSFC
is the surviving corporation in a merger with an Acquiring Person and its RSFC
Common Stock remain outstanding, (ii) a Person becomes the beneficial owner of
more than 25% of the then outstanding RSFC Common Stock other than pursuant to
a tender offer that provides fair value to all shareholders, (iii) an Acquiring
Person engages in one or more "self-dealing" transactions as set forth in the
Rights Agreement or (iv) during such time as there is an Acquiring Person an
event occurs that results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
will thereafter have the right to receive, upon exercise, RSFC Common Stock
(or, in certain circumstances, cash, property or other securities of RSFC)
having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in clauses (i), (ii), (iii) or (iv) of this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person who was involved in
the transaction giving rise to any such event will be null and void. However,
Rights are not exercisable following the occurrence of any of the events set
forth above until such time as the Rights are no longer redeemable by RSFC as
set forth below. In the event that, at any time following the Stock Acquisition
Date, (i) RSFC is acquired in a merger or other business combination
transaction in which RSFC is not the surviving corporation (other than a merger
that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of RSFC's
assets or earning power is sold or transferred, each holder of a Right (except
Rights that previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common shares of the acquiring
company having a value equal to two times the exercise price of the Right. The
events set forth in this paragraph are referred to as the "Triggering Events."
At any time until 10 days following the Stock Acquisition Date, RSFC may redeem
the Rights in whole, but not in part, at a price of $.01 per Right. That 10-day
redemption period may be extended by the board of directors so long as the
Rights are still redeemable. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem will require the concurrence of a
majority of the continuing directors. Immediately upon the action of the board
of directors ordering redemption of the Rights, with, where required, the
concurrence of the continuing directors, the Rights will terminate and the only
right of the holders of Rights will be able to receive the $.01 redemption
price.
FPBB. On January 23, 1995, FPBB declared a distribution of one preferred
share purchase right (an "FPBB Right") for each outstanding share of FPBB
Common Stock to stockholders of record at the close of business on February 3,
1995. Upon the occurrence of certain events, none of which has occurred as of
the date hereof, the FPBB Rights may become exercisable for shares of FPBB
Common Stock at a substantial discount. The description and terms of the FPBB
Rights are set forth in the FPBB Rights Agreement, a copy of which was filed as
an exhibit to FPBB's Registration Statement on Form 8-A dated January 25, 1995,
which is incorporated by reference herein. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
The FPBB Rights have certain anti-takeover effects. The FPBB Rights will
cause substantial dilution to a person or group that attempts to acquire FPBB
in a manner which causes the FPBB Rights to become discount rights unless the
offer is conditional on a substantial number of FPBB Rights being acquired. The
FPBB Rights, however, should not affect any prospective offeror willing to make
an offer at a fair price and otherwise in the best interests of FPBB and its
stockholders as determined by the FPBB Board. The Rights should not interfere
with any merger or other business combination approved by the FPBB Board since
the FPBB Board may, at its option, redeem all but not less than all the then
outstanding FPBB Rights at the redemption price set forth in the Rights
Agreement.
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CONSIDERATION OF OTHER CONSTITUENCIES
FPBB. The FPBB Charter provides that the FPBB Board, when evaluating any
offer of another party to (a) make a tender or exchange offer for any
outstanding equity securities of FPBB, (b) merge or consolidate FPBB with
another corporation, or (c) purchase or otherwise acquire all or substantially
all of the properties and assets of FPBB, may, in connection with the exercise
of its judgment in determining what is in the best interests of FPBB and its
stockholders, give due consideration to all relevant factors including, without
limitation, those factors that Directors of any subsidiary of the Corporation
may consider in evaluating any action that may result in a change or potential
change in the control of the subsidiary, and the social and economic effect of
acceptance of such offer: on the Corporation's present and future customers and
employees and those of its Subsidiaries (as defined in the FPBB Articles); on
the communities in which the Corporation and its Subsidiaries operate or are
located; on the ability of the Corporation to fulfill its corporate objective
as a savings and loan holding company under applicable laws and regulations;
and on the ability of its subsidiary savings and loan association to fulfill
the objectives of a stock form savings and loan association under applicable
statutes and regulations.
RSFC. Neither the RSFC Articles nor its Bylaws contain similar provisions.
These provisions of RSFC's Articles discussed above could delay or
frustrate the removal of incumbent directors and could make a merger, tender
offer or proxy contest involving RSFC more difficult, even if such events were
perceived by shareholders as beneficial to their interests. In addition,
certain provisions of state and federal law discussed below may also have the
effect of discouraging or prohibiting a future takeover attempt in which
shareholders of RSFC might otherwise receive a substantial premium for their
shares over then-current market prices.
DIRECTORS' LIABILITY
RSFC. The FBCA generally provides that a director is not personally liable
for monetary damages to the corporation or any other person for any statement,
vote, decision or failure to act regarding corporate management or policy,
unless: (1) the director breached or failed to perform his duties as a director
and (2) the director's breach of or failure to perform those duties
constitutes: (i) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause
to believe his conduct was unlawful; (ii) a transaction from which the director
derived an improper personal benefit, either directly or indirectly; (iii) an
unlawful distribution; (iv) in a proceeding by or in the right of the
corporation or a shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct; or (v) in a proceeding by or in the right
of someone other than the corporation or a shareholder, 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.
FPBB. The DGCL allows a corporation, through its certificate of
incorporation, to limit or eliminate the personal liability of directors to the
corporation and its stockholders for monetary damages for breach of fiduciary
duty. However, this provision excludes any limitation on liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for willful or
negligent violation of the laws governing the payment of dividends or the
purchase or redemption of stock or (iv) for any transaction from which the
director derives an improper benefit. The FPBB Charter eliminate directors'
liability for monetary damages for breach of fiduciary duty to the fullest
extent permitted by the DGCL.
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SHAREHOLDER PROPOSALS
Proposals of shareholders of RSFC presented at RSFC's 1999 Annual Meeting
of Shareholders must have been received in writing no later than December 1,
1998 for inclusion in RSFC's Proxy Statement relating to that meeting. Any such
proposals must be in compliance with SEC rules and regulations then in effect.
PROXY SOLICITATION
Proxies are being solicited from RSFC shareholders and FPBB stockholders
by and on behalf of the respective Boards of Directors of each of RSFC and
FPBB. Each of RSFC and FPBB will bear their own expenses for the solicitations,
including the costs of preparing and mailing this Joint Proxy
Statement/Prospectus to their respective shareholders. In addition to
solicitation by mail, proxies may be solicited from RSFC shareholders and FPBB
stockholders by directors, officers and regular employees of RSFC and FPBB,
respectively, in person, by telecopy or by telephone. Such directors, officers
and employees will not receive any additional compensation for such services
but may be reimbursed for reasonable expenses incurred by them in forwarding
the proxy soliciting materials to the beneficial owners of RSFC Common Stock
and FPBB Common Stock. Although there is no formal agreement to do so, RSFC and
FPBB, respectively, will reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of proxy solicitation materials to
beneficial owners of RSFC Common Stock and FPBB Common Stock held of record by
such persons.
LEGAL MATTERS
The validity of the RSFC Common Stock issuable in the Merger will be
passed upon by Morgan, Lewis & Bockius LLP, Miami, Florida.
EXPERTS
The consolidated financial statements of RSFC at December 31, 1997 and
1996, and for the two years in the period ended December 31, 1997, and the
nine-month transition period ended December 31, 1995, appearing in RSFC's
Annual Report on Form 10-K for the year ended December 31, 1997, have been
audited by Ernst & Young LLP, independent certified public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference, which is based in part on the report of other certified public
accountants Deloitte & Touche LLP. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The consolidated financial statements of FPBB incorporated in this Joint
Proxy Statement/Prospectus by reference from FPBB's Annual Report on Form 10-K
for the year ended September 30, 1997 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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ADDITIONAL PROPOSALS FOR CONSIDERATION AT THE RSFC SPECIAL MEETING
APPROVAL OF PROPOSALS 2 AND 3 REQUIRE THAT THE NUMBER OF VOTES CAST IN
FAVOR BY THE RSFC SHAREHOLDERS EXCEED THE NUMBER VOTING AGAINST.
PROPOSAL 2:
AMENDMENT TO
ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED SHARES
DESCRIPTION
The RSFC Board proposes and recommends to the shareholders an amendment to
the RSFC Articles increasing the number of authorized shares of RSFC Common
Stock from 100,000,000 shares to 500,000,000, increasing the authorized shares
of Series B Junior Participating Preferred Stock from 1,000,000 to 5,000,000
and deleting the 7% Cumulative Convertible Preferred Stock, Series C ("Series C
Preferred"), therefrom.
THE TEXT OF THE PROPOSED AMENDMENT TO THE RSFC ARTICLES IS SET FORTH ON
ANNEX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
PURPOSES AND EFFECTS
The RSFC Board determined that additional shares of RSFC Common Stock
should be authorized to provide shares available for future stock dividends,
acquisitions, public offerings and for other corporate purposes and to provide
shares available for issuance under the 1997 Performance Incentive Plan. RSFC
has no present plans for any such stock dividend, acquisition or offering but
expects to continue to review acquisition opportunities as they may become
available. Having additional shares of authorized stock available for issuance
will give RSFC greater flexibility and may result in future acquisitions or
offerings being effected without shareholder approval. Future issuances of such
shares could have the effect of diluting existing shareholders.
The number of authorized shares of the Series B Preferred is to be
increased from 1,000,000 to 5,000,000 to correspond to the increase in the
number of authorized shares of RSFC Common Stock. The Series B Preferred shares
are only issuable upon the exercise of Rights issued under the Shareholders
Rights Plan at the rate of one one-hundredth of a share of Series B Preferred
for each Right. See "COMPARISON OF RIGHTS OF HOLDERS OF RSFC AND FPBB COMMON
STOCK--Certain Anti-Takeover Provisions."
The provisions of the RSFC Articles providing the preferences, limitations
and relative rights of the Series C Preferred are being deleted because all of
the Series C Preferred shares have been redeemed. The number of shares of
Series C Preferred which had been authorized is 1,035,000. The effect of the
deletion of the provisions is to increase the number of shares of Preferred
Stock available for future designation by 1,035,000. The RSFC Board does not
have any present plans to designate another series of Preferred Stock.
THE RSFC BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE RSFC
ARTICLES.
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PROPOSAL 3: AMENDMENT TO
REPUBLIC SECURITY FINANCIAL CORPORATION
1997 PERFORMANCE INCENTIVE PLAN
PROPOSED AMENDMENT TO THE PLAN
At the RSFC Special Meeting, the shareholders will consider and act upon a
proposal to approve the amendment to the Republic Security Financial
Corporation 1997 Performance Incentive Plan (the "Plan") increasing the number
of shares of RSFC Common Stock issuable under the Plan from 2,000,000 shares to
5,000,000 shares.
The Plan provides for grants of stock options, restricted stock, stock
appreciation rights, performance units, performance shares, phantom stock and
dividend equivalents to key employees (including employees who are officers or
directors) and Non-employee Directors (as defined below). The directors
approved the amendment to the Plan because they determined that the Plan lacked
a sufficient number of shares available for future grants, in particular as a
result of an approximately 80% increase in the number of officers and employees
to result from the Merger.
THE RSFC BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
TO THE PLAN.
THE PLAN IS SET FORTH AS ANNEX F TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
DESCRIPTION OF THE PLAN
GENERAL. The aggregate number of shares of RSFC Common Stock that may be
issued or transferred under the Plan prior to the amendment is 2,000,000. If
and to the extent grants under the Plan terminate, expire or are canceled,
forfeited, exchanged or surrendered for any reason without being exercised, the
shares of RSFC Common Stock subject to such grants again will be available for
grants under the Plan.
ADMINISTRATION OF THE PLAN. The Plan is administered and interpreted by a
Committee (the "Committee") consisting of three or more persons appointed by
the RSFC Board, each of whom must be an "outside director" as defined by
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and a "non-employee director" as defined in Rule 16b-3 under the Exchange Act.
The Committee has the authority to (i) recommend the individuals to whom grants
may be made under the Plan, (ii) recommend the type, size and other terms and
conditions of each grant, (iii) recommend the time when the grants will be made
and the duration of any applicable exercise or restriction period, including
the criteria for exercisability and the acceleration of exercisability, (iv)
recommend amendments to the terms of any previously issued grant, and (v) deal
with any other matters arising under the Plan. All recommendations and
decisions of the Committee shall be subject to final approval by majority vote
of the directors of RSFC who are not employees of RSFC ("Non-employee
Directors"). The Committee has full power and authority to administer and
interpret the Plan, to make factual determinations and to recommend amendment
to such rules, regulations, agreements and instruments for implementing the
Plan and for conduct of its business as it deems necessary or advisable, in its
sole discretion.
GRANTS. Grants under the Plan may consist of (i) options intended to
qualify as incentive stock options ("ISOs") within the meaning of section 422
of the Code, (ii) "nonqualified stock options" that are not intended to so
qualify ("NQSOs"), (iii) Restricted Stock, (iv) SARs, (v) Performance Units,
(vi) Performance Shares, (vii) Phantom Stock and (viii) Dividend Equivalents.
All grants are subject to such terms and conditions set forth in the Plan as
the Committee deems appropriate and as are specified in writing by the
Committee to the Grantee (the "Grant Instrument"). The Committee must approve
the form and provisions of each Grant Instrument. Grants under the Plan need
not be uniform as among other recipients of the same type of grant.
ELIGIBILITY FOR PARTICIPATION. Grants may be made to any key employee
(including officers and directors) of RSFC and its subsidiaries and
Non-employee Directors. As of June 30, 1998, 465 employees and fifteen
Non-employee Directors were eligible for grants under the Plan.
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INDIVIDUAL LIMIT ON GRANTS. During any calendar year, no individual may be
granted Options or other grants under the Plan that, in the aggregate, may be
settled by delivery of more than 100,000 shares of RSFC Common Stock. In
addition, with respect to grants the value of which is based on the fair market
value of RSFC Common Stock and that may be settled in cash (in whole or in
part), no individual may be paid during any calendar year cash amounts relating
to such grants that exceed the greater of the fair market value (as defined in
the Plan) of the number of shares of RSFC Common Stock set forth in the
preceding sentence either at the date of grant or at the date of settlement.
Grants that may be settled solely by delivery of RSFC Common Stock will not
operate to reduce the amount or value of cash-only grants, and vice versa;
nevertheless, grants that may be settled in RSFC Common Stock or cash must not
exceed either limitation.
With respect to grants, the value of which is not based on the fair market
value of RSFC Common Stock, no individual may receive during any calendar year
cash or shares of RSFC Common Stock with a fair market value at date of
settlement that, in the aggregate, exceeds $1,000,000.
OPTIONS. The Committee fixes the option price per share at the date of
grant. The option price of any Option granted under the Plan may be equal to or
greater than the fair market value of the underlying shares of RSFC Common
Stock on the date of grant, except that the option price of an ISO granted to
an employee who owns more than 10% of the total combined voting power of all
classes of stock of RSFC, or any parent or subsidiary of RSFC, may not be less
than 110% of the fair market value of the underlying shares of RSFC Common
Stock on the date of grant. The measure of fair market value of a share of RSFC
Common Stock on a particular date is the closing sale price of a share of RSFC
Common Stock as reported on the Nasdaq National Market on that date, or if
there is not such a sale on that date, then on the last previous date on which
such a sale was reported.
The Committee determines the term of each option; provided, however, that
the exercise period may not exceed ten years from the date of grant, and the
exercise period of an ISO granted to an employee who owns more than 10% of the
total combined voting power of all classes of stock of RSFC, or any parent or
subsidiary of RSFC, may not exceed five years from the date of grant. To the
extent that the aggregate fair market value of shares of RSFC Common Stock,
determined on the date of grant, with respect to which ISOs become exercisable
for the first time by a Grantee during any calendar year exceeds $100,000, such
ISOs will be treated as NQSOs.
The exercisability of stock options will be as determined by the
Committee, in its sole discretion, and specified in the Grant Instrument. The
Committee, in its sole discretion, may accelerate the exercisability of any
Option at any time for any reason. A Grantee may exercise an Option by
delivering notice of exercise to the Committee with accompanying payment of the
option price.
A Grantee may pay the option price (i) in cash, (ii) with the approval of
the Committee, by delivering shares of RSFC Common Stock owned by the Grantee
(including RSFC Common Stock acquired in connection with the exercise of a
stock option, subject to such restrictions as the Committee deems appropriate)
and having a fair market value on the date of exercise equal to the option
price, or (iii) by such other method as the Committee may approve, including
attestation (on a form prescribed by the Committee) to ownership of shares of
RSFC Common Stock having a fair market value equal to the exercise price or
payment through a designated broker. In addition, the Committee may authorize
loans by RSFC to Grantees in connection with the exercise of an Option, upon
such terms and conditions that the Committee, in its sole discretion, deems
appropriate. The Grantee must pay the option price and the amount of any
withholding tax due at the time of exercise. Shares of the RSFC Common Stock
will not be issued upon exercise of an Option until the option price is fully
paid and any required withholding is made.
If a Grantee ceases to be an employee of RSFC or its subsidiaries for any
reason other than disability, death, retirement, or termination by RSFC (or
ceases to be a member of the RSFC Board), the Grantee's Option will terminate
at the close of business on the Grantee's last day of employment or service as
a director. If a Grantee ceases to be an employee of RSFC because the Grantee
is disabled
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(within the meaning of section 22(e)(3) of the Code) or the Grantee dies or
retires, any Option that is otherwise exercisable by the Grantee, will
terminate unless exercised within one year after the date on which the Grantee
ceases to be an employee or a director. If a Grantee ceases to be an employee
of RSFC because the Grantee's employment is terminated by RSFC, any Option that
is otherwise exercisable by the Grantee shall terminate unless exercised within
90 days after the date on which the Grantee ceases to be an employee. In all
cases described above, such Options will terminate within any shorter period of
time as may be specified by the Committee, but in any event no later than the
date of expiration of the Option term. Any of the Grantee's Options that are
not otherwise exercisable as of the date on which the Grantee ceases to be
employed by RSFC (or ceases to be a director) shall terminate as of such date.
RESTRICTED STOCK. The Committee may make grants of Restricted Stock. The
Committee, in its sole discretion, may determine that RSFC not issue any
certificates for shares subject to a Restricted Stock Grant or that RSFC retain
possession of any certificates for shares issued pursuant to a Restricted Stock
Grant, until all restrictions have lapsed. Shares may be issued for
consideration or for no consideration, as the Committee determines. The number
of shares of RSFC Common Stock granted to each Grantee shall be determined by
the Committee. Grants of Restricted Stock will be made subject to such
restrictions and conditions as the Committee may determine in its sole
discretion. The Grant Instrument may provide for a period during which the
grant will remain subject to certain restrictions, including restrictions on
transferability (the "Restriction Period"). During the Restriction Period the
Grantee will have the right to receive any dividends or other distributions
paid thereon, subject to any restrictions deemed appropriate by the Committee.
Unless the Committee otherwise determines, during the Restriction Period a
Grantee will not have the right to vote the shares subject to the Restricted
Stock Grant. The Grantee may not sell, assign, transfer, pledge or otherwise
dispose of such shares except by will or the laws of descent and distribution.
If the Grantee ceases to be employed by RSFC during the Restriction Period (or
ceases to be a member of the RSFC Board) or if other specified conditions are
not met, the Restricted Stock Grant will terminate with respect to all shares
as to which the restrictions have not lapsed and those shares must be returned
to RSFC.
STOCK APPRECIATION RIGHTS. The Committee may grant SARs separately or in
tandem with any Option. An SAR entitles the Grantee, upon exercise, to receive
the amount by which the fair market value of RSFC Common Stock on the date of
exercise exceeds the exercise price established by the Committee for the SAR.
Such appreciation may be paid in cash, in shares of RSFC Common Stock or a
combination of the two, as determined by the Committee. The exercise price of
an SAR will be the exercise price of the related Option or, if none, the fair
market value of a share of RSFC Common Stock on the date of grant of the SAR,
unless the Committee determines otherwise. When a Grantee exercises an SAR, the
related Option, if any, will terminate to the extent of an equal number of
shares of RSFC Common Stock. Similarly, upon exercise of the related Option, if
any, the SARs relating to RSFC Common Stock covered by such exercise will
terminate.
PERFORMANCE UNIT AND PERFORMANCE SHARES. The Committee may grant
Performance Units or Performance Shares, which will represent the right of the
Grantee to receive an amount based on the value of the Performance Units/Shares
if certain performance goals are met. A Performance Unit will have a value
based on such measurements or criteria as the Committee determines. A
Performance Share will have a value equal to the fair market value of a share
of RSFC Common Stock. Such awards will be contingent upon the attainment of
such performance goals over a period to be determined by the Committee (the
"Performance Period"). The performance goals to be achieved during a
Performance Period and the measure of whether and to what degree such goals
have been attained will also be determined by the Committee. If the Grantee
ceases to be employed by RSFC during the Performance Period or if other
specified conditions are not met, the Performance Unit/Share Grant will be
forfeited at the close of business on the Grantee's last day of employment. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate. If the Grantee ceases to be employed by
RSFC after the expiration of a Performance Period but prior to payment, payment
will be made to the Grantee or the successor grantee, if applicable.
Non-employee Directors are not eligible to receive Performance Units or
Performance Shares.
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PHANTOM STOCK. The Committee may grant Phantom Stock to a Grantee in such
amounts and upon such terms, and at any time and from time to time, as
determined by the Committee. The initial value of the Phantom Stock will be
determined by the Committee at the time of grant and may be greater than, equal
to or less than the fair market value of a share of RSFC Common Stock. The
Committee may grant dividend equivalents in connection with Phantom Stock
granted under the Plan. Such dividends may be paid currently or accrued as
contingent cash obligations and may be payable in cash or shares of RSFC Common
Stock, upon such terms as the Committee may establish, including the
achievement of specific performance goals.
The Committee will determine whether the Phantom Stock will be paid in the
form of cash, shares of RSFC Common Stock or a combination of the two. Cash
payments will be in an amount equal to the fair market value on the payment
date of the number of shares of RSFC Common Stock equal to the number of shares
of Phantom Stock with respect to which payment is made. The number of shares of
RSFC Common Stock distributed in settlement of a Phantom Stock Grant will equal
the number of shares of Phantom Stock with respect to which settlement is made.
Payment will be made in accordance with the terms and at such times as
determined by the Committee at the time of grant. If the Grantee ceases to be
employed by RSFC (or a member of the RSFC Board) prior to becoming vested or
otherwise entitled to payment, the Grantee's Phantom Stock shall be forfeited
at the close of business on the Grantee's last day of employment or service as
a director. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
DIVIDEND EQUIVALENTS. The Committee may grant Dividend Equivalents to a
Grantee in such number and upon such other terms, including in either case the
achievement of specific performance goals, and at any time and from time to
time, as may be determined by the Committee. Each Dividend Equivalent will
represent the right to receive an amount in cash, or shares of RSFC Common
Stock having a fair market value, equal to the amount of dividends paid on one
share of RSFC Common Stock during such period as may be established by the
Committee.
Dividend Equivalents may be paid currently or accrued as contingent cash
obligations, upon such terms as the Committee may establish. The Committee will
determine whether Dividend Equivalents will be paid in the form of cash, shares
of RSFC Common Stock or a combination of the two. The number of any shares of
RSFC Common Stock payable in satisfaction of Dividend Equivalents will be
determined by dividing the amount credited to the Grantee with respect to such
Dividend Equivalents by the fair market value of a share of RSFC Common Stock
on the day instructions are given to RSFC's Chief Financial Officer or transfer
agent to issue or purchase such shares. Payment shall be made at such times as
determined by the Committee at the time of grant. If the Grantee ceases to be
employed by RSFC (or ceases to be a member of the RSFC Board) prior to becoming
entitled to payment, the Grantee's Dividend Equivalents shall be forfeited at
the close of business on the Grantee's last day of employment or service as a
director. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
RESTRICTIONS ON TRANSFERABILITY OF GRANTS. No grants under the Plan may be
transferred, except by will or the laws of descent and distribution. However,
if permitted by the Committee, grants other than ISOs may be transferred
pursuant to a domestic relations order, within the meaning of the Code or of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
Notwithstanding the foregoing, the Committee may provide in a Grant Instrument
that a Grantee may transfer NQSOs to family members or other persons or
entities according to such terms as the Committee may determine; provided that
the Grantee receives no consideration for the transfer of the NQSO and the
transferred NQSO continues to be subject to the same terms and conditions as
were applicable to the NQSO immediately before the transfer.
AMENDMENT, TERM AND TERMINATION OF THE PLAN. The Committee may amend or
terminate the Plan at any time; provided, however, that the Committee may not
amend the Plan without shareholder approval if such approval is required by
Section 162(m) of the Code or the rules of any stock exchange on which the RSFC
Common Stock is listed. The Plan became effective on June 27, 1997 and will
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terminate on June 26, 2007, unless terminated earlier by the Committee or
extended by the Committee with approval of the shareholders. No award may be
made under the Plan after its termination, but awards made prior thereto may
extend beyond the date of termination.
ADJUSTMENT PROVISIONS. If there is any change in the number or kind of
shares of RSFC Common Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of shares,
(ii) by reason of a merger, reorganization or consolidation in which RSFC is
the surviving corporation, (iii) by reason of a reclassification or change in
par value, or (iv) by reason of any other extraordinary or unusual event
affecting the outstanding RSFC Common Stock as a class without RSFC's receipt
of consideration, or if the value of outstanding shares of RSFC Common Stock is
substantially reduced as a result of a spinoff or RSFC's payment of an
extraordinary dividend or distribution, the maximum number of shares of RSFC
Common Stock available for grants, the maximum number of shares of RSFC Common
Stock that any individual participating in the Plan may be granted in any year,
the number of shares covered by outstanding grants, the kind of shares issued
under the Plan, and the price per share or the applicable market value of such
grants may be appropriately adjusted by the Committee to reflect any increase
or decrease in the number of, or change in the kind or value of, issued shares
of RSFC Common Stock to preclude, to the extent practicable, the enlargement or
dilution of rights and benefits under such grants; provided, however, that any
fractional shares resulting from such adjustment will be eliminated. If and to
the extent that any such change in the number or kind of shares of RSFC Common
Stock outstanding is effected solely by application of a mathematical formula
(E.G., a 2-for-1 stock split), the adjustment described above will be
automatic, without action by the Committee.
SECTION 162(M). Under Section 162(m) of the Code, RSFC may be precluded
from claiming a federal income tax deduction for total remuneration in excess
of $1,000,000 paid to the chief executive officer or to any of the other four
most highly compensated officers in any one year. An exception exists, however,
for "performance-based compensation," including amounts received upon the
exercise of stock options (the exercise price for which is at or above the fair
market value of the underlying shares at the date of grant) or stock
appreciation rights, if such options or stock appreciation rights are granted
pursuant to a plan approved by shareholders that meets certain requirements.
The Plan, when approved by shareholders, is intended to make grants of stock
options and stock appreciation rights thereunder meet the requirements of
"performance-based compensation."
"Performance-based compensation" also includes remuneration paid upon the
attainment of performance goals if specified requirements are met. Section
162(m) of the Code requires that a compensation committee consisting of two or
more "outside directors" establish performance goals that must be met before
such remuneration may be awarded. The committee also must certify that the
performance goals have actually been met before payment of the remuneration.
Finally, the business criteria on which performance goals may be based must be
disclosed to and approved by the shareholders.
The Plan provides that any grant to a Grantee who is a "covered employee"
within the meaning of Section 162(m), the exercisability or settlement of which
is subject to the achievement of performance goals, will qualify as "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code and the regulations thereunder. The Committee will specify the performance
goals in writing, prior to (or within 90 days after commencement of ) the
applicable performance period.
FEDERAL INCOME TAX CONSEQUENCES. There are no federal income tax
consequences to Grantees or to RSFC upon the grant of an NQSO under the Plan.
Upon the exercise of NQSOs, a Grantee will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the shares
of RSFC Common Stock at the time of exercise over the exercise price of the
NQSO, and RSFC generally will be entitled to a corresponding federal income tax
deduction. Upon the sale of shares of RSFC Common Stock acquired by exercise of
an NQSO, a Grantee will have a capital gain or loss (long-term or short-term
depending upon the length of time the shares of RSFC Common Stock were held) in
an amount equal to the difference between the amount realized upon the sale and
the
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Grantee's adjusted tax basis in the shares of RSFC Common Stock (the exercise
price plus the amount of ordinary income recognized by the Grantee at the time
of exercise of the NQSO).
A Grantee of an ISO will not recognize taxable income upon either the
grant or exercise of the ISO. A Grantee who disposes of the shares of RSFC
Common Stock acquired upon exercise of an ISO after two years from the date the
ISO was granted and after one year from the date such shares were transferred
to him will recognize long-term capital gain or loss in the amount of the
difference between the amount realized on the sale and the option price (or the
Grantee's other tax basis in the shares), and RSFC will not be entitled to any
tax deduction by reason of the grant or exercise of the ISO, or the Grantee's
disposition of the shares. As a general rule, if a Grantee disposes of the
shares of RSFC Common Stock acquired upon exercise of an ISO before satisfying
both holding period requirements (a "disqualifying disposition"), his or her
gain recognized on such a disposition will be taxed as ordinary income to the
extent of the difference between the fair market value of such shares on the
date of exercise and the option price, and RSFC will be entitled to a deduction
in that amount. The gain, if any, in excess of the amount recognized as
ordinary income on such a disqualifying disposition will be long-term or
short-term capital gain, depending upon the length of time the Grantee held his
or her shares of RSFC Common Stock prior to the disposition.
A Grantee normally will not recognize taxable income upon receiving a
Restricted Stock Grant, and RSFC will not be entitled to a deduction, until
such RSFC Common Stock is transferable by the Grantee or is no longer subject
to a substantial risk of forfeiture for federal income tax purposes, whichever
occurs earlier. When the RSFC Common Stock either is transferable or is no
longer subject to a substantial risk of forfeiture, the Grantee will recognize
ordinary compensation income in an amount equal to the fair market value of the
RSFC Common Stock subject to the Restricted Stock Grant (less any amounts paid
for such shares) at that time, and RSFC will be entitled to a deduction in the
same amount. A Grantee may, however, elect to recognize ordinary compensation
income in the year the Restricted Stock Grant is awarded in an amount equal to
the fair market value of the RSFC Common Stock (less any amounts paid for such
shares) at that time, determined without regard to the restrictions. In such
event, RSFC will be entitled to a deduction in the same year. Any gain or loss
recognized by the Grantee upon subsequent disposition of the RSFC Common Stock
will be capital gain or loss. If, after making the election, any RSFC Common
Stock subject to a Restricted Stock Grant is forfeited, or if the market value
declines during the Restriction Period, the Grantee is not entitled to any tax
deduction or tax refund.
A Grantee will not recognize any income upon the grant of an SAR. Upon the
exercise of an SAR, a Grantee will recognize ordinary compensation income in an
amount equal to the difference between the exercise price of shares and the
fair market value of the shares on the date of exercise, and RSFC will be
entitled to a corresponding deduction.
A Grantee of Performance Units, Performance Shares or Phantom Stock will
not have taxable income at the time of the grant, and RSFC will not be entitled
to a deduction at such time. A Grantee will have ordinary income at the time
the grant is paid, in the amount of such payment, and RSFC will have a
corresponding deduction.
A Grantee of Dividend Equivalents will recognize ordinary compensation
income when paid, in the amount of such payment, and RSFC will have a
corresponding deduction.
Local and state tax authorities may also tax incentive compensation
awarded under the Plan.
TAX WITHHOLDING. RSFC will have the right to deduct from all grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such grants. In the case
of Options and other grants paid in RSFC Common Stock, RSFC may require the
Grantee or other person receiving such shares to pay to RSFC the amount of any
such taxes that RSFC is required to withhold with respect to such grants, or
RSFC may deduct from other wages paid by RSFC the amount of any withholding
taxes due with respect to such grants. If the Committee so
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permits, a Grantee may elect to satisfy RSFC's income tax withholding
obligation with respect to an Option, SAR, Restricted Stock, Performance Units,
Performance Shares, Phantom Stock or Dividend Equivalents, any of which is paid
in RSFC Common Stock, by having shares withheld having a fair market value up
to an amount that does not exceed the Grantee's maximum marginal tax rate for
federal (including FICA), state and local tax liabilities. The election must be
in a form and manner prescribed by the Committee and shall be subject to the
prior approval of the Committee.
NEW PLAN BENEFITS. Because grants are made from time to time by the
Committee to those persons whom the Committee determines in its discretion
should receive grants, the benefits and amounts that may be received in the
future by persons eligible to participate in the Plan are not presently
determinable.
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----------------
ANNEXES
TO
JOINT PROXY STATEMENT/PROSPECTUS
----------------
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
REPUBLIC SECURITY FINANCIAL CORPORATION
AND
FIRST PALM BEACH BANCORP, INC.
DATED AS OF MAY 27, 1998
(AS AMENDED, AS OF AUGUST 17, 1998)
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I
THE MERGER
1.1 The Merger ......................................... A-5
1.2 Effective Time ..................................... A-5
1.3 Effects of the Merger .............................. A-5
1.4 Conversion of Company Common Stock ................. A-5
1.5 Stock Options ...................................... A-6
1.6 Parent Common Stock ................................ A-7
1.7 Articles of Incorporation .......................... A-7
1.8 By-Laws ............................................ A-7
1.9 Directors and Officers ............................. A-7
1.10 Tax Consequences; Accounting Treatment ............. A-7
1.11 Bank Plan of Merger and Merger Agreement ........... A-7
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available .................... A-8
2.2 Exchange of Shares ................................. A-8
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules ............................... A-9
3.2 Standards .......................................... A-10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Organization ............................. A-10
4.2 Capitalization ..................................... A-11
4.3 Authority; No Violation ............................ A-12
4.4 Consents and Approvals ............................. A-12
4.5 Reports ............................................ A-13
4.6 Financial Statements ............................... A-13
4.7 Broker's Fees ...................................... A-13
4.8 Absence of Certain Changes or Events ............... A-13
4.9 Legal Proceedings .................................. A-14
4.10 Taxes .............................................. A-14
4.11 Employees .......................................... A-14
4.12 SEC Reports ........................................ A-15
4.13 Company Information ................................ A-15
4.14 Compliance with Applicable Law ..................... A-15
4.15 Certain Contracts .................................. A-16
4.16 Agreements with Regulatory Agencies ................ A-16
4.17 Environmental Matters .............................. A-16
4.18 Opinion ............................................ A-17
4.19 Approvals .......................................... A-17
4.20 Loan Portfolio ..................................... A-17
4.21 Property ........................................... A-18
4.22 Accounting for the Merger; Reorganization .......... A-18
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
5.1 Corporate Organization ................................................ A-18
5.2 Capitalization ........................................................ A-19
5.3 Authority; No Violation ............................................... A-19
5.4 Consents and Approvals ................................................ A-20
5.5 Reports ............................................................... A-20
5.6 Financial Statements .................................................. A-20
5.7 Broker's Fees ......................................................... A-21
5.8 Absence of Certain Changes or Events .................................. A-21
5.9 Legal Proceedings ..................................................... A-21
5.10 Taxes ................................................................. A-21
5.11 Employees ............................................................. A-21
5.12 SEC Reports ........................................................... A-22
5.13 Parent Information .................................................... A-22
5.14 Compliance with Applicable Law ........................................ A-22
5.15 Ownership of Company Common Stock; Affiliates and Associates .......... A-23
5.16 Agreements with Regulatory Agencies ................................... A-23
5.17 Environmental Matters ................................................. A-23
5.18 Opinion ............................................................... A-23
5.19 Approvals ............................................................. A-24
5.20 Loan Portfolio ........................................................ A-24
5.21 Property .............................................................. A-24
5.22 Accounting for the Merger; Reorganization ............................. A-24
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of the Company .............................................. A-24
6.2 Covenants of Parent ................................................... A-26
6.3 Conduct of Parent's Business .......................................... A-27
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters .................................................... A-27
7.2 Access to Information ................................................. A-28
7.3 Stockholder Meetings .................................................. A-28
7.4 Legal Conditions to Merger ............................................ A-28
7.5 Affiliates ............................................................ A-28
7.6 Stock Exchange Listing ................................................ A-29
7.7 Employee Benefit Plans; Existing Agreements ........................... A-29
7.8 Indemnification ....................................................... A-29
7.9 Additional Agreements ................................................. A-31
7.10 Coordination of Dividends ............................................. A-31
7.11 Assumption of Indemnification Obligations ............................. A-31
7.12 Parent Rights Agreement ............................................... A-31
7.13 Amendment of Company Option Plans ..................................... A-31
7.14 Stock Option Agreement ................................................ A-31
7.15 Directorships ......................................................... A-31
</TABLE>
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<TABLE>
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ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger .......... A-32
8.2 Conditions to Obligations of Parent ................................. A-32
8.3 Conditions to Obligations of the Company ............................ A-33
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination ......................................................... A-34
9.2 Effect of Termination ............................................... A-36
9.3 Amendment ........................................................... A-37
9.4 Extension; Waiver ................................................... A-37
ARTICLE X
GENERAL PROVISIONS
10.1 Closing ............................................................. A-37
10.2 Nonsurvival of Representations, Warranties and Agreements ........... A-37
10.3 Expenses ............................................................ A-37
10.4 Notices ............................................................. A-37
10.5 Interpretation ...................................................... A-38
10.6 Counterparts ........................................................ A-38
10.7 Entire Agreement .................................................... A-38
10.8 Governing Law ....................................................... A-38
10.9 Enforcement of Agreement ............................................ A-38
10.10 Severability ........................................................ A-38
10.11 Publicity ........................................................... A-39
10.12 Assignment; No Third Party Beneficiaries ............................ A-39
</TABLE>
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AGREEMENT AND PLAN OF MERGER
(AS AMENDED, AS OF AUGUST 17, 1998)
AGREEMENT AND PLAN OF MERGER, dated as of May 27, 1998, between Republic
Security Financial Corporation, a Florida corporation ("Parent"), and First
Palm Beach Bancorp, Inc., a Delaware corporation (the "Company"). (Parent and
the Company are sometimes collectively referred to herein as the "Constituent
Corporations".)
WHEREAS, the Boards of Directors of Parent and the Company have determined
that it is in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided for
herein in which the Company will, subject to the terms and conditions set forth
herein, merge (the "Merger") with and into Parent and the merger (the "Bank
Merger") of First Bank of Florida into Republic Security Bank; and
WHEREAS, as soon as practicable after the execution and delivery of this
Agreement, Republic Security Bank, a Florida chartered stock commercial bank
and a wholly owned subsidiary of Parent ("Parent Bank", and sometimes referred
to herein as the "Surviving Bank"), and First Bank of Florida, a federally
chartered stock savings bank and a wholly owned subsidiary of the Company (the
"Company Bank"), will enter into a Subsidiary Agreement and Plan of Merger (the
"Plan of Merger") providing for the merger (the "Bank Merger") of the Company
Bank with and into Parent Bank, and it is intended that the Subsidiary Merger
be consummated immediately following the consummation of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL") and the
Florida Business Corporation Act ("FBCA"), at the Effective Time (as defined in
Section 1.2 hereof), the Company shall merge with and into Parent. Parent shall
be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of the State of Florida. The name of the Surviving Corporation shall
continue to be Republic Security Financial Corporation. Upon consummation of
the Merger, the separate corporate existence of the Company shall terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective on 10:00 a.m. on the
Closing Date as set forth in the certificate of merger (the "Certificate of
Merger") which shall be filed with the Secretary of State of the State of
Delaware (the "Delaware Secretary") and Articles of Merger which will be filed
with the Florida Secretary of State (the "Florida Secretary") on the Closing
Date (as defined in Section 10.1 hereof). The term "Effective Time" shall be
the date and time when the Merger becomes effective, as set forth in the
Certificate of Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL and as
provided in the FBCA.
1.4 CONVERSION OF COMPANY COMMON STOCK. (a) At the Effective Time,
subject to Section 2.2(e) and Section 9.1(g) hereof, each share of the common
stock, par value $0.01 per share, of the Company (the "Company Common Stock")
issued and outstanding immediately prior to the Effective
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Time (other than (i) shares of Company Common Stock held in the Company's
treasury, (ii) shares of Company Common Stock held directly or indirectly by
Parent or the Company or any of their respective Subsidiaries (as defined
below) (except for Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(b) hereof), and (iii) unallocated shares of Company
Common Stock held in the Company Bank's Recognition and Retention Plan for
Officers and Employees and the Company Bank's Recognition and Retention Plan
for Outside Directors (collectively, the "Unallocated RRP Shares")), together
with the rights (the "Company Rights") attached thereto issued pursuant to the
Rights Agreement, dated as of January 23, 1995, between the Company and Mellon
Bank, N.A., as Rights Agent (the "Company Rights Agreement"), shall, by virtue
of this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for 4.194 shares (the "Exchange Ratio") of the
common stock, par value $.01 per share, of Parent ("Parent Common Stock")
(together with the number of Parent Rights (as defined in Section 5.2 hereof)
associated therewith). All of the shares of Company Common Stock converted into
Parent Common Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist, and each
certificate (each a "Certificate") previously representing any such shares of
Company Common Stock shall thereafter only represent the right to receive (i)
the number of whole shares of Parent Common Stock and (ii) the cash in lieu of
fractional shares into which the shares of Company Common Stock represented by
such Certificate have been converted pursuant to this Section 1.4(a) and
Section 2.2(e) hereof. Certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole shares of
Parent Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2 hereof, without any interest thereon. If, between the date of
this Agreement and the Effective Time, the shares of Parent Common Stock shall
be changed into a different number or class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares
or readjustment, or a stock dividend thereon shall be declared with a record
date within said period, the Exchange Ratio shall be adjusted accordingly.
(b) At the Effective Time, (i) all shares of Company Common Stock that are
owned by the Company as treasury stock, (ii) all shares of Company Common Stock
that are owned directly or indirectly by Parent or the Company or any of their
respective Subsidiaries (other than shares of Company Common Stock (x) held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity for the benefit of third parties (any
such shares, and shares of Parent Common Stock which are similarly held,
whether held directly or indirectly by Parent or the Company, as the case may
be, being referred to herein as "Trust Account Shares") and (y) held by Parent
or the Company or any of their respective Subsidiaries in respect of a debt
previously contracted (any such shares of Company Common Stock, and shares of
Parent Common Stock which are similarly held, whether held directly or
indirectly by Parent or the Company, being referred to herein as "DPC Shares"))
and (iii) all Unallocated RRP Shares shall be cancelled and shall cease to
exist and no stock of Parent or other consideration shall be delivered in
exchange therefor. All shares of Parent Common Stock that are owned by the
Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Parent.
1.5 STOCK OPTIONS. (a) At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock (each a "Company Option")
which is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Company Common Stock and shall be
converted automatically into an option to purchase shares of Parent Common
Stock in an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company's 1993 Incentive Stock Option
Plan and the Company's 1993 Stock Option Plan for Outside Directors
(collectively, the "Company Option Plans"), the agreements evidencing grants
thereunder and any other agreements between the Company and an optionee
regarding Company Options):
(1) the number of shares of Parent Common Stock to be subject to the new
option shall be equal to the product of the number of shares of Company
Common Stock subject to the original
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option and the Exchange Ratio, provided that any fractional shares of
Parent Common Stock resulting from such multiplication shall be rounded
down to the nearest whole share; and
(2) the exercise price per share of Parent Common Stock under the new
option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code and, to the extent it is
not so consistent, such Section 424(a) shall override anything to the contrary
contained herein. The duration and other terms of the new option shall be the
same as the original option except that all references to the Company shall be
deemed to be references to Parent.
(b) Prior to the Effective Time, Parent shall reserve for issuance the
number of shares of Parent Common Stock necessary to satisfy Parent's
obligations under this Section 1.5. Promptly after the Effective Time (but in
no event later than five business days thereafter), Parent shall file with the
Securities and Exchange Commission (the "SEC") a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Parent Common Stock subject to options to
acquire Parent Common Stock issued pursuant to Section 1.5(a) hereof, and shall
use its best efforts to maintain the current status of the prospectus contained
therein, as well as comply with applicable state securities or "blue sky" laws,
for so long as such options remain outstanding.
1.6 PARENT COMMON STOCK. Except for shares of Parent Common Stock owned by
the Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares), which shall be converted into treasury stock of Parent as contemplated
by Section 1.4 hereof, the shares of Parent Common Stock issued and outstanding
immediately prior to the Effective Time shall be unaffected by the Merger and
such shares shall remain issued and outstanding.
1.7 ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of Parent, as in effect at the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation.
1.8 BY-LAWS. At the Effective Time, the By-Laws of Parent, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 DIRECTORS AND OFFICERS. Except as provided in Section 7.15 hereof, the
directors and officers of Parent immediately prior to the Effective Time shall
be the directors and officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
1.10 TAX CONSEQUENCES; ACCOUNTING TREATMENT. It is intended that the
Merger shall (i) constitute a reorganization within the meaning of Section
368(a) of the Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code , and (ii) be
accounted for as a "pooling-of-interests" under GAAP (as defined herein).
1.11 BANK PLAN OF MERGER AND MERGER AGREEMENT. As promptly as practicable
following the execution of this Agreement, each of Parent and the Company shall
cause Parent Bank and the Company Bank, respectively, to enter into the Plan of
Merger in accordance with the requirements of Section 658.42, Florida Statutes,
and in form and substance usually acceptable to both Parent and the Company,
and to submit the Plan of Merger to the Florida Department of Banking and
Finance (the "Department") for approval. Subject to and in accordance with the
terms and conditions of this Agreement, at the Closing, each of Parent and the
Company shall cause Parent Bank and the Company Bank to again execute the Plan
of Merger, if it differs in any respect from the counterpart thereof
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<PAGE>
theretofore filed with the Department, and to execute certified copies of the
resolutions approving the Plan of Merger by the shareholders of each bank. The
Plan of Merger and certified resolutions shall be delivered for filing with the
Department. The Plan of Merger shall provide that the Company Bank shall be
merged with and into Parent Bank (which shall be the resulting bank in the Bank
Merger) at 3:00 p.m. on the afternoon of the Effective Date. Upon effectiveness
of the Bank Merger, all of the issued and outstanding shares of the common
stock of the Company Bank shall be extinguished and cancelled, and Parent shall
be issued a number of shares of the common stock of Parent Bank in such amount
as agreed on or before such date by Parent and Parent Bank. The shares of
common stock of Parent Bank issued and outstanding immediately prior to
effectiveness of the Bank Merger shall remain issued and outstanding and
unaffected by the Bank Merger.
ARTICLE II
EXCHANGE OF SHARES
2.1 PARENT TO MAKE SHARES AVAILABLE. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with a bank or trust
company (which may be a Subsidiary of Parent) (the "Exchange Agent") selected
by Parent and reasonably satisfactory to the Company, for the benefit of the
holders of Certificates, for exchange in accordance with this Article II,
certificates representing the shares of Parent Common Stock and the cash in
lieu of fractional shares (such cash and certificates for shares of Parent
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for
outstanding shares of Company Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, and in no event more than three business days thereafter, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates a
form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing the shares of Parent Common Stock and the cash in lieu of
fractional shares into which the shares of Company Common Stock represented by
such Certificate or Certificates shall have been converted pursuant to this
Agreement. The Company shall have the right to review both the letter of
transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. Upon surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
Parent Common Stock to which such holder of Company Common Stock shall have
become entitled pursuant to the provisions of Article I hereof and (y) a check
representing the amount of cash in lieu of fractional shares, if any, which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued
on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the Effective Time
with respect to Parent Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II,
the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Parent Common Stock represented by such
Certificate.
(c) If any certificate representing shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied
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<PAGE>
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of Parent Common Stock in any
name other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of Parent Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. In lieu of the issuance of any such fractional share, Parent shall pay
to each former stockholder of the Company who otherwise would be entitled to
receive a fractional share of Parent Common Stock an amount in cash determined
by multiplying (i) the average of the last reported sale prices per share of
Parent Common Stock on the Nasdaq Stock Market's National Market (the
"NASDAQ/NMS") as reported by THE WALL STREET JOURNAL for the ten trading days
immediately preceding the date on which the Effective Time shall occur by (ii)
the fraction of a share of Parent Common Stock which such holder would
otherwise be entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for six months after the Effective Time shall be
paid to Parent. Any stockholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of their shares of Parent Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the Parent Common Stock deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Parent, the Company, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Company Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 DISCLOSURE SCHEDULES. Prior to the execution and delivery of this
Agreement, the Company has delivered to Parent, and Parent has delivered to the
Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Parent, the "Parent Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained
in a provision hereof or as an
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exception to one or more of such party's representations or warranties
contained in Article IV, in the case of the Company, or Article V, in the case
of Parent, or to one or more of such party's covenants contained in Article VI;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary (a) no such item is required to be set forth in the Disclosure
Schedule as an exception to a representation or warranty if its absence would
not result in the related representation or warranty being deemed untrue or
incorrect under the standard established by Section 3.2, and (b) the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or material fact, event or
circumstance or that such item has had or would have a Material Adverse Effect
(as defined herein) with respect to either the Company or Parent, respectively.
3.2 STANDARDS. (a) No representation or warranty of the Company contained
in Article IV or of Parent contained in Article V shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached a representation or warranty for any purpose under this
Agreement, in any case as a consequence of the existence or absence of any
fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in Article
IV, in the case of the Company, or Article V, in the case of Parent, has had a
Material Adverse Effect with respect to the Company or Parent, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Parent or the Company, as the case may be, a material adverse
effect on (i) the business, results of operations or financial condition of
such party and its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (w) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (x) any change in GAAP (as defined herein)
or regulatory accounting principles applicable to banks, thrifts or their
holding companies generally, (y) any action or omission of the Company or
Parent or any Subsidiary of either of them taken with the prior written consent
of the other party hereto, or (z) any expenses incurred by such party in
connection with this Agreement or the transactions contemplated hereby or (ii)
the ability of such party and its Subsidiaries to consummate the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, and except as disclosed in the Company Disclosure
Schedule, the Company hereby represents and warrants to Parent as follows:
4.1 CORPORATE ORGANIZATION. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The Company is duly registered as a
unitary savings and loan holding company under the Home Owners' Loan Act, as
amended (the "HOLA"). The Certificate of Incorporation and By-laws of the
Company, copies of which have previously been made available to Parent, are
true and correct copies of such documents as in effect as of the date of this
Agreement. As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation, partnership or other organization,
whether incorporated or unincorporated, which is consolidated with such party
for financial reporting purposes.
(b) The Company Bank is a stock savings bank duly organized, validly
existing and in good standing under the laws of the United States of America.
The deposit accounts of the Company Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Savings
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Association Insurance Fund to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due. Each of the Company's other Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the Company's
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. Except as set forth on Section 4.1(b) of the Company
Disclosure Schedule, the certificate of incorporation, by-laws and similar
governing documents of each Subsidiary of the Company, copies of which have
previously been made available to Parent, are true and correct copies of such
documents as in effect as of the date of this Agreement.
(c) The minute books of the Company and each of its Subsidiaries contain
true and correct records of all meetings and other corporate actions held or
taken since December 31, 1995 of their respective stockholders and Boards of
Directors (including committees of their respective Boards of Directors).
4.2 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock"). As
of May 27, 1998, there were 5,076,996 shares of Company Common Stock
outstanding and 419,379 shares of Company Common Stock held by the Company as
treasury stock. As of May 27, 1998, there were (i) no shares of Company Common
Stock reserved for issuance upon exercise of outstanding stock options or
otherwise except for (x) 435,907 shares of Company Common Stock reserved for
issuance pursuant to the Company Option Plans and described in Section 4.2(a)
of the Company Disclosure Schedule and (y) 1,010,322 shares of Company Common
Stock reserved for issuance upon exercise of the option (the "Option") to be
issued to Parent pursuant to the Stock Option Agreement to be entered into on
the date hereof, between Parent and Company (the "Stock Option Agreement") and
(ii) no shares of Company Preferred Stock issued or outstanding, held in the
Company's treasury or reserved for issuance upon exercise of outstanding stock
options or otherwise, except for 100,000 shares designated as Series A Junior
Participating Preferred Stock reserved for issuance upon exercise of the
Company Rights. All of the issued and outstanding shares of Company Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as referred to above or reflected in
Section 4.2(a) of the Company Disclosure Schedule, and except for the Stock
Option Agreement, the Company does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Company Common
Stock or Company Preferred Stock or any other equity security of the Company or
any securities representing the right to purchase or otherwise receive any
shares of Company Common Stock or any other equity security of the Company. The
names of the optionees, the date of each option to purchase Company Common
Stock granted, the number of shares subject to each such option, the expiration
date of each such option, and the price at which each such option may be
exercised under the Company Option Plans are set forth in Section 4.2(a) of the
Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets forth a true
and correct list of all of the Subsidiaries of the Company. Except as set forth
in Section 4.2(b) of the Company Disclosure Schedule, the Company owns,
directly or indirectly, all of the issued and outstanding shares of the capital
stock of each of such Subsidiaries, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No Subsidiary of the Company has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock
or any other equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary. Assuming compliance by Parent with
Section 1.5 hereof, and except as provided in Section
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4.2(b) of the Company Disclosure Schedule, at the Effective Time, there will
not be any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character by which the Company or any of its Subsidiaries
will be bound calling for the purchase or issuance of any shares of the capital
stock of the Company or any of its Subsidiaries.
4.3 AUTHORITY; NO VIOLATION. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company. The Board of
Directors of the Company has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company's stockholders for approval at
a meeting of such stockholders and, except for the adoption of this Agreement
by the requisite vote of the Company's stockholders, no other corporate
proceedings on the part of the Company are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Except as set forth in Section 4.3(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby,
nor compliance by the Company with any of the terms or provisions hereof, will
(i) violate any provision of the Certificate of Incorporation or By-Laws of the
Company or the certificate of incorporation, by-laws or similar governing
documents of any of its Subsidiaries, or (ii) assuming that the consents and
approvals referred to in Section 4.4 hereof are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries, or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
4.4 CONSENTS AND APPROVALS. Except for (a) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of
1956, as amended (the "BHC Act"), the Home Owners' Loan Act (the "HOLA") and
the Bank Merger Act and approval of such applications and notices, (b) the
approval of the Department pursuant to /section//section/ 655.412, 658.41-.45
Florida Statutes (the "State Banking Approval"), (c) the filing with the SEC of
a joint proxy statement in definitive form relating to the meetings of the
Company's stockholders and Parent's stockholders to be held in connection with
this Agreement and the transactions contemplated hereby (the "Proxy Statement")
and the filing and declaration of effectiveness of the registration statement
on Form S-4 (the "S-4") in which the Proxy Statement will be included as a
prospectus, (d) the approval of this Agreement by the requisite vote of the
stockholders of the Company, (e) the filing of the Certificate of Merger with
the Delaware Secretary pursuant to the DGCL and the filing of the Articles of
Merger with the Florida Secretary, (f) approval for quotation of the Parent
Common Stock to be issued in the Merger on the NASDAQ/NMS, and (g) such
filings, authorizations or approvals as may be set forth in Section 4.4 of the
Company Disclosure Schedule, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or
with any third
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party are necessary in connection with (1) the execution and delivery by the
Company of this Agreement and (2) the consummation by the Company of the Merger
and the other transactions contemplated hereby.
4.5 REPORTS. The Company and each of its Subsidiaries have timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1995 with (i) the OTS, (ii) the FDIC, (iii) the Department (each a
"State Regulator") and (iv) any other self-regulatory organization ("SRO")
(collectively with the Federal Reserve Board, the "Regulatory Agencies"), and
have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of the Company and its Subsidiaries, and except as set
forth in Section 4.5 of the Company Disclosure Schedule, no Regulatory Agency
has initiated any proceeding or, to the knowledge of the Company, investigation
into the business or operations of the Company or any of its Subsidiaries since
December 31, 1995. There is no unresolved violation, criticism, or exception by
any Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries.
4.6 FINANCIAL STATEMENTS. The Company has previously made available to
Parent copies of (a) the consolidated statements of financial condition of the
Company and its Subsidiaries as of September 30, for the fiscal years 1996 and
1997, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the fiscal years 1995 through 1997,
inclusive, as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1997 filed with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied
by the audit report of Deloitte & Touche LLP, independent public accountants
with respect to the Company, and (b) the unaudited consolidated statements of
financial condition of the Company and its Subsidiaries as of March 31, 1998
and March 31, 1997 and the related unaudited consolidated statements of
operations, cash flows and changes in stockholders' equity for the six-month
periods then ended as reported in the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1998 filed with the SEC under the Exchange Act.
The September 30, 1997 consolidated statement of financial condition of the
Company (including the related notes, where applicable) fairly presents the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof, and the other financial statements referred to in this Section
4.6 (including the related notes, where applicable) fairly present, and the
financial statements to be filed with the SEC after the date hereof will fairly
present (subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of the Company and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the SEC
after the date hereof will comply, with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed with the SEC after the date
hereof will be, prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of the Company and its
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
4.7 BROKER'S FEES. Neither the Company nor any Subsidiary of the Company
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement,
except that the Company has engaged, and will pay a fee or commission to,
Keefe, Bruyette & Woods, Inc. ("KBW") in accordance with the terms of a letter
agreement between KBW and the Company, a true and correct copy of which has
been previously made available by the Company to Parent.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as may be set forth
in Section 4.8(a) of the Company Disclosure Schedule, or as disclosed in any
Company Report (as defined in Section 4.12) filed
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with the SEC prior to the date of this Agreement, since September 30, 1997,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material
Adverse Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company Disclosure
Schedule or as disclosed in any Company Report filed with the SEC prior to the
date of this Agreement, since September 30, 1997, the Company and its
Subsidiaries have carried on their respective businesses in the ordinary course
consistent with their past practices.
(c) Except as set forth in Section 4.8(c) of the Company Disclosure
Schedule, since March 31, 1998, neither the Company nor any of its Subsidiaries
has (i) increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer, employee, or director
from the amount thereof in effect as of March 31, 1998 (which amounts have been
previously disclosed to Parent), granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay, or
paid any bonus (except for salary increases and bonus payments made in the
ordinary course of business consistent with past practices), (ii) suffered any
strike, work stoppage, slow-down, or other labor disturbance, (iii) been a
party to a collective bargaining agreement, contract or other agreement or
understanding with a labor union or organization, or (iv) had any union
organizing activities.
4.9 LEGAL PROCEEDINGS. (a) Except as set forth in Section 4.9(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any, and there are no pending or, to the Company's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as set forth in Section 4.9(b) of the Company Disclosure
Schedule, there is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company, any of its Subsidiaries or the assets of
the Company or any of its Subsidiaries.
4.10 TAXES. (a) Except as set forth in Section 4.10(a) of the Company
Disclosure Schedule, each of the Company and its Subsidiaries has (i) duly and
timely filed (including applicable extensions granted without penalty) all
material Tax Returns (as hereinafter defined) required to be filed at or prior
to the Effective Time, and such Tax Returns are true and correct in all
material respects, and (ii) paid in full or made adequate provision in the
financial statements of the Company (in accordance with GAAP) for all material
Taxes (as hereinafter defined) shown to be due on such Tax Returns. Except as
set forth in Section 4.10(a) of the Company Disclosure Schedule, (i) as of the
date hereof neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, and (ii) as of the date hereof,
with respect to each taxable period of the Company and its Subsidiaries, the
federal and state income Tax Returns of the Company and its Subsidiaries have
been audited by the Internal Revenue Service or appropriate state tax
authorities or the time for assessing and collecting income Tax with respect to
such taxable period has closed and such taxable period is not subject to
review.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) with respect to Taxes.
4.11 EMPLOYEES. (a) Section 4.11(a) of the Company Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan,
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"welfare" plan, fund or program (within the meaning of section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"));
"pension" plan, fund or program (within the meaning of section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to (the
"Plans") by the Company, any of its Subsidiaries or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), all of which together with
the Company would be deemed a "single employer" within the meaning of Section
4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any employee or former employee of the Company,
any Subsidiary or any ERISA Affiliate.
(b) The Company has heretofore made available to Parent with respect to
each of the Plans true and correct copies of each of the following documents if
applicable: (i) the Plan document; (ii) the actuarial report for such Plan for
each of the last two years, (iii) the most recent determination letter from the
Internal Revenue Service for such Plan and (iv) the most recent summary plan
description and related summaries of material modifications.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule: each of the Plans is in compliance with the applicable provisions of
the Code and ERISA; each of the Plans intended to be "qualified" within the
meaning of section 401(a) of the Code has received a favorable determination
letter from the IRS; no Plan has an accumulated or waived funding deficiency
within the meaning of section 412 of the Code; neither the Company nor any
ERISA Affiliate has incurred, directly or indirectly, any liability to or on
account of a Plan pursuant to Title IV of ERISA (other than PBGC premiums); to
the knowledge of the Company no proceedings have been instituted to terminate
any Plan that is subject to Title IV of ERISA; no "reportable event," as such
term is defined in section 4043(c) of ERISA, has occurred with respect to any
Plan (other than a reportable event with respect to which the thirty day notice
period has been waived); and no condition exists that presents a material risk
to the Company of incurring a liability to or on account of a Plan pursuant to
Title IV of ERISA; no Plan is a multiemployer plan (within the meaning of
section 4001(a)(3) of ERISA and no Plan is a multiple employer plan as defined
in Section 413 of the Code; and there are no pending, or to the knowledge of
the Company, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
4.12 SEC REPORTS. The Company has previously made available to Parent a
true and correct copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since December 31, 1995
by the Company with the SEC pursuant to the Securities Act or the Exchange Act
(the "Company Reports") and (b) communication mailed by the Company to its
stockholders since December 31, 1995, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify
information as of an earlier date. The Company has timely filed all Company
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all Company Reports
complied with the published rules and regulations of the SEC with respect
thereto.
4.13 COMPANY INFORMATION. The information relating to the Company and its
Subsidiaries which is provided to Parent by the Company for inclusion in the
Proxy Statement and the S-4, or in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading.
4.14 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any
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Governmental Entity relating to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has received notice of any
violations of any of the above.
4.15 CERTAIN CONTRACTS. (a) Except as set forth in Section 4.15(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to or bound by any contract (whether written or oral) (i) with respect
to the employment of any directors or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement, will (either
alone or upon the occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise) becoming due, or
the acceleration or vesting of any rights to any payment or benefits, from
Parent, the Company, the Surviving Corporation or any of their respective
Subsidiaries to any director or consultant thereof, (iii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Company Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 90 days or less notice involving the payment of
more than $250,000 per annum, or (v) which materially restricts the conduct of
any line of business by the Company or any of its Subsidiaries. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.15(a), whether or not set forth in Section 4.15(a) of the Company Disclosure
Schedule, is referred to herein as a "Company Contract". The Company has
previously delivered or made available to Parent true and correct copies of
each Company Contract.
(b) Except as set forth in Section 4.15(b) of the Company Disclosure
Schedule, (i) each Company Contract described in clause (iii) of Section
4.15(a) is valid and binding and in full force and effect, (ii) the Company and
each of its Subsidiaries has performed all obligations required to be performed
by it to date under each Company Contract described in clause (iii) of Section
4.15(a), (iii) no event or condition exists which constitutes or, after notice
or lapse of time or both, would constitute, a default on the part of the
Company or any of its Subsidiaries under any Company Contract described in
clause (iii) of Section 4.15(a), and (iv) no other party to any Company
Contract described in clause (iii) of Section 4.15(a) is, to the knowledge of
the Company, in default in any respect thereunder.
4.16 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in Section
4.16 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth on Section 4.16
of the Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory
Agency or other Governmental Entity that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has the Company or any of its Subsidiaries been
advised by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
4.17 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.17 of the
Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and, to the knowledge of the
Company, each of the Participation Facilities and the Loan Properties (each as
hereinafter defined), are in compliance with all applicable federal, state and
local laws, including common law, regulations and ordinances, and with all
applicable decrees, orders and contractual obligations relating to pollution or
the discharge of, or exposure to, Hazardous Materials (as hereinafter defined)
in the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of the Company, threatened, before any Governmental Entity or other
forum in which the Company, any of its Subsidiaries, any Participation Facility
or any Loan Property, has been or, with respect to threatened
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proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any Environmental Laws, or (y) relating to
the release, threatened release or exposure to any Hazardous Material whether
or not occurring at or on a site owned, leased or operated by the Company or
any of its Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of the Company, during the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property,
there has been no release of Hazardous Materials in, on, under or affecting any
such property. To the knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property,
there was no release of Hazardous Materials in, on, under or affecting any such
property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this Section 4.17: (x)
"Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, (y)
"Loan Property" means any property in which the Company or any of its
Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (z) "Participation
Facility" means any facility in which the Company or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
4.18 OPINION. Prior to the execution of this Agreement, the Company has
received an opinion from KBW to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Exchange Ratio is
fair to the stockholders of the Company from a financial point of view. Such
opinion has not been amended or rescinded as of the date of this Agreement.
4.19 APPROVALS. As of the date of this Agreement, the Company knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
should not be obtained.
4.20 LOAN PORTFOLIO. (a) Except as set forth in Section 4.20 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any written or oral (i) loan agreement, note or borrowing
arrangement (including, without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) (collectively, "Loans"),
other than Loans the unpaid principal balance of which does not exceed
$250,000, under the terms of which the obligor was, as of April 30, 1998, over
90 days delinquent in payment of principal or interest or in default of any
other provision, or (ii) Loan with any director, executive officer or five
percent or greater stockholder of the Company or any of its Subsidiaries, or to
the knowledge of the Company, any person, corporation or enterprise
controlling, controlled by or under common control with any of the foregoing.
Section 4.20 of the Company Disclosure Schedule sets forth (i) all of the Loans
in original principal amount in excess of $250,000 of the Company or any of its
Subsidiaries that as of April 30, 1998, were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized",
"Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar
import, together with the principal amount of and accrued and unpaid interest
on each such Loan and the identity of the borrower thereunder, (ii) by category
of Loan (i.e., commercial, consumer, etc.), all of the other Loans of the
Company and its Subsidiaries that as of April 30, 1998, were classified as
such, together with the aggregate principal amount of and accrued and unpaid
interest on such Loans by category and (iii) each asset of the Company that as
of April 30, 1998, was classified as "Other Real Estate Owned" and the book
value thereof.
(b) Each Loan in original principal amount in excess of $250,000 (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii)
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to the extent secured, has been secured by valid liens and security interests
which have been perfected and (iii) is the legal, valid and binding obligation
of the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
4.21 PROPERTY. Each of the Company and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Company as of March 31,
1998 or acquired after such date, except (i) liens for taxes not yet due and
payable or contested in good faith by appropriate proceedings, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of business,
(iii) such imperfections of title, easements and encumbrances, if any, as do
not interfere with the use of the respective property as such property is used
on the date of this Agreement, (iv) for dispositions and encumbrances of, or
on, such properties or assets in the ordinary course of business or (v)
mechanics', materialmen's, workmen's, repairmen's, warehousemen's, carrier's
and other similar liens and encumbrances arising in the ordinary course of
business. All leases pursuant to which the Company or any Subsidiary of the
Company, as lessee, leases real or personal property are valid and enforceable
in accordance with their respective terms and neither the Company nor any of
its Subsidiaries nor, to the knowledge of the Company, any other party thereto,
is in default thereunder.
4.22 ACCOUNTING FOR THE MERGER; REORGANIZATION. The Company has no reason
to believe that the Merger will fail to qualify (i) for pooling-of-interests
treatment under GAAP or (ii) as a reorganization under Section 368(a) of the
Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Subject to Article III, Parent hereby represents and warrants to the
Company as follows:
5.1 CORPORATE ORGANIZATION. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. Parent is duly registered as a bank
holding company under the BHC Act. The Articles of Incorporation and By-laws of
Parent, copies of which have previously been made available to the Company, are
true and correct copies of such documents as in effect as of the date of this
Agreement.
(b) Parent Bank is a bank duly organized, validly existing and in good
standing under the laws of the State of Florida. The deposit accounts of the
Parent Bank are insured by the FDIC through the Bank Insurance Fund and the
Savings Association Insurance Fund to the fullest extent permitted by law, and
all premiums and assessments required in connection therewith have been paid
when due. Each of Parent's other Subsidiaries which is a "Significant
Subsidiary" (each a "Significant Subsidiary" and together the "Significant
Subsidiaries") as such term is defined in Regulation S-X promulgated by the SEC
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of Parent has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary. The articles of incorporation and by-laws of the Parent Bank, copies
of which have previously been made available to the Company, are true and
correct copies of such documents as in effect as of the date of this Agreement.
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(c) The minute books of Parent and each of its Significant Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1995 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
5.2 CAPITALIZATION. (a) As of the date of this Agreement, the authorized
capital stock of Parent consists of 100,000,000 shares of Parent Common Stock
and 10,000,000 shares of preferred stock, par value $0.01 per share ("Parent
Preferred Stock"). As of May 27, 1998, there were 24,288,036 shares of Parent
Common Stock and no shares of Parent Preferred Stock issued and outstanding,
and no shares of Parent Common Stock held in Parent's treasury. As of the date
of this Agreement, no shares of Parent Common Stock or Parent Preferred Stock
were reserved for issuance, except that (i) 1,190,017 shares of Parent Common
Stock were reserved for issuance upon the exercise of stock options and
warrants pursuant to the stock option plans listed in Section 5.11 of the
Parent Disclosure Schedule (collectively, the "Parent Stock Plans"), (ii)
1,000,000 shares of Parent Series B Preferred Stock were reserved for issuance
upon exercise of the rights (the "Parent Rights") distributed to holders of
Parent Common Stock pursuant to the Rights Agreement, dated as of April 14,
1995, between Parent and IBJ Schroder Bank and Trust Company, as Rights Agent
(the "Parent Rights Agreement") and (iii) 1,040,000 shares of Parent Common
Stock were reserved for issuance upon consummation of the transaction
contemplated by the Agreement and Plan of Merger, dated as of March 26, 1998,
by and between Parent and Unifirst Federal Savings Bank (the "Unifirst Merger
Agreement"). All of the issued and outstanding shares of Parent Common Stock
and Parent Preferred Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of this Agreement,
except as referred to above or reflected in Section 5.2(a) of the Parent
Disclosure Schedule, Parent does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Parent Common
Stock or Parent Preferred Stock or any other equity securities of Parent or any
securities representing the right to purchase or otherwise receive any shares
of Parent Common Stock or Parent Preferred Stock. The shares of Parent Common
Stock to be issued pursuant to the Merger will be duly authorized and validly
issued and, at the Effective Time, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 5.2(b) of the Parent Disclosure Schedule sets forth a true and
correct list of all of the Parent Subsidiaries as of the date of this
Agreement. Except as set forth in Section 5.2(b) of the Parent Disclosure
Schedule, as of the date of this Agreement, Parent owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of each
of the Subsidiaries of Parent, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, no Subsidiary of Parent has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character with any party that is not a direct or indirect
Subsidiary of Parent calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.
5.3 AUTHORITY; NO VIOLATION. (a) Parent has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Parent. The Board of Directors of
Parent has directed that this Agreement and the transactions contemplated
hereby be submitted to Parent's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of Parent's stockholders, no other corporate proceedings on the part of
Parent are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and (assuming due authorization, execution and
delivery by the Company) this Agreement constitutes a valid and binding
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obligation of Parent, enforceable against Parent in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Parent Disclosure
Schedule, neither the execution and delivery of this Agreement by Parent, nor
the consummation by Parent of the transactions contemplated hereby, nor
compliance by Parent with any of the terms or provisions hereof, will (i)
violate any provision of the Articles of Incorporation or By-Laws of Parent, or
the articles of incorporation or by-laws or similar governing documents of any
of its Subsidiaries or (ii) assuming that the consents and approvals referred
to in Section 5.4 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Parent or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of Parent or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected.
5.4 CONSENTS AND APPROVALS. Except for (a) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, the
HOLA and the Bank Merger Act, and approval of such applications and notices,
(b) the State Banking Approval, (c) the filing with the SEC of the Proxy
Statement and the filing and declaration of effectiveness of the S-4, (d) the
approval of this Agreement by the requisite vote of the stockholders of Parent,
(e) the filing of the Certificate of Merger with the Delaware Secretary and the
Articles of Merger with the Florida Secretary, (f) such filings and approvals
as are required to be made or obtained under the securities or "Blue Sky" laws
of various states in connection with the issuance of the shares of Parent
Common Stock pursuant to this Agreement, (g) approval for quotation of the
Parent Common Stock to be issued in the Merger on the NASDAQ/NMS, and (h) such
filings, authorizations or approvals as may be set forth in Section 5.4 of the
Parent Disclosure Schedule, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary in connection with (1) the execution and delivery by Parent of this
Agreement and (2) the consummation by Parent of the Merger and the other
transactions contemplated hereby.
5.5 REPORTS. Parent and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since December
31, 1995 with any Regulatory Agency, and have paid all fees and assessments due
and payable in connection therewith. Except for normal examinations conducted
by a Regulatory Agency in the regular course of the business of Parent and its
Subsidiaries, and except as set forth in Section 5.5 of Parent Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the
knowledge of Parent, investigation into the business or operations of Parent or
any of its Subsidiaries since December 31, 1995. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of Parent or any of its
Subsidiaries.
5.6 FINANCIAL STATEMENTS. Parent has previously made available to the
Company copies of (a) the consolidated statements of financial condition of
Parent and its Subsidiaries as of December 31 for the fiscal years 1996 and
1997 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years 1995 through 1997,
inclusive, as reported in Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 filed with the SEC under the Exchange Act, in each
case accompanied by the audit report of Ernst & Young LLP, independent public
accountants with respect to Parent, and (b) the unaudited consolidated
statements of financial condition of Parent and its Subsidiaries as of March
31, 1998 and March 31, 1997 and the related unaudited
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consolidated statements of income, changes in shareholders' equity and cash
flows for the three-month periods then ended as reported in Parent's Quarterly
Report on Form 10-Q for the period ended March 31, 1998 filed with the SEC
under the Exchange Act. The December 31, 1997 consolidated balance sheet of
Parent (including the related notes, where applicable) fairly presents the
consolidated financial position of Parent and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 5.6
(including the related notes, where applicable) fairly present and the
financial statements to be filed with the SEC after the date hereof will fairly
present (subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of Parent and its Subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) complies, and the financial statements to
be filed with the SEC after the date hereof will comply, with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed with the
SEC after the date hereof will be, prepared in accordance with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of Parent and its Significant Subsidiaries have
been, and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements.
5.7 BROKER'S FEES. Neither Parent nor any Subsidiary of Parent, nor any of
their respective officers or directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that Parent has engaged, and will pay a fee or commission to, Sandler, O'Neill
& Partners, L.P., ("Sandler O'Neill").
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as may be set forth in
Section 5.8 of the Parent Disclosure Schedule, or as disclosed in any Parent
Report (as defined in Section 5.12) filed with the SEC prior to the date of
this Agreement, since December 31, 1997, there has been no change or
development or combination of changes or developments which, individually or in
the aggregate, has had a Material Adverse Effect on Parent.
5.9 LEGAL PROCEEDINGS. (a) Except as set forth in Section 5.9(a) of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any and there are no pending or, to Parent's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent or any
of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Parent, any of its Subsidiaries or the assets of
Parent or any of its Subsidiaries.
5.10 TAXES. Except as set forth in Section 5.10 of the Parent Disclosure
Schedule, each of Parent and its Subsidiaries has (i) duly and timely filed
(including applicable extensions granted without penalty) all material Tax
Returns required to be filed at or prior to the Effective Time, and such Tax
Returns are true and correct in all material respects, and (ii) paid in full or
made adequate provision in the financial statements of Parent (in accordance
with GAAP) for all material Taxes shown to be due on such Tax Returns. Except
as set forth in Section 5.10 of the Parent Disclosure Schedule, (i) as of the
date hereof, neither Parent nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, and (ii) as of the date hereof,
with respect to each taxable period of Parent and its Subsidiaries, the federal
and state income Tax Returns of Parent and its Subsidiaries have been audited
by the Internal Revenue Service or appropriate state tax authorities or the
time for assessing and collecting income Tax with respect to such taxable
period has closed and such taxable period is not subject to review.
5.11 EMPLOYEES. (a) Section 5.11(a) of the Parent Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan,
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"welfare" plan, fund or program (within the meaning of section 3(1) of the
ERISA); "pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed
to as of the date of this Agreement (the "Parent Plans") by Parent, any of its
Subsidiaries or by any trade or business, whether or not incorporated (a
"Parent ERISA Affiliate"), all of which together with Parent would be deemed a
"single employer" within the meaning of Section 4001 of ERISA, for the benefit
of any employee or former employee of Parent, any Subsidiary or any Parent
ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Parent Disclosure
Schedule: each of the Parent Plans is in compliance with the applicable
provisions of the Code and ERISA; each of the Parent Plans intended to be
"qualified" within the meaning of section 401(a) of the Code has received a
favorable determination letter from the IRS; no Parent Plan has an accumulated
or waived funding deficiency within the meaning of section 412 of the Code;
neither Parent nor any Parent ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Parent Plan pursuant to Title
IV of ERISA (other than PBGC premiums); to the knowledge of Parent no
proceedings have been instituted to terminate any Parent Plan that is subject
to Title IV of ERISA; no "reportable event," as such term is defined in section
4043(c) of ERISA, has occurred with respect to any Parent Plan (other than a
reportable event with respect to which the thirty day notice period has been
waived); and no condition exists that presents a material risk to Parent of
incurring a liability to or on account of a Parent Plan pursuant to Title IV of
ERISA; no Parent Plan is a multiemployer plan (within the meaning of section
4001(a)(3) of ERISA and no Parent Plan is a multiple employer plan as defined
in Section 413 of the Code; and there are no pending, or, to the knowledge of
Parent, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Parent Plans or any trusts
related thereto.
5.12 SEC REPORTS Parent has previously made available to the Company a
true and correct copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since December 31, 1995
by Parent with the SEC pursuant to the Securities Act or the Exchange Act (the
"Parent Reports") and (b) communication mailed by Parent to its stockholders
since December 31, 1995, and no such registration statement, prospectus,
report, schedule, proxy statement or communication contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading, except that
information as of a later date shall be deemed to modify information as of an
earlier date. Parent has timely filed all Parent Reports and other documents
required to be filed by it under the Securities Act and the Exchange Act, and,
as of their respective dates, all Parent Reports complied with the published
rules and regulations of the SEC with respect thereto.
5.13 PARENT INFORMATION. The information relating to Parent and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any
other document filed with any other regulatory agency in connection herewith,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to the Company or any of its
Subsidiaries) will comply with the provisions of the Exchange Act and the rules
and regulations thereunder. The S-4 will comply with the provisions of the
Securities Act and the rules and regulations thereunder.
5.14 COMPLIANCE WITH APPLICABLE LAW. Parent and each of its Subsidiaries
holds, and has at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to Parent or any of its
Subsidiaries and neither Parent nor any of its Subsidiaries knows of, or has
received notice of violation of, any violations of any of the above.
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5.15 OWNERSHIP OF COMPANY COMMON STOCK; AFFILIATES AND ASSOCIATES. (a)
Neither Parent nor any of its affiliates or associates (as such terms are
defined under the Exchange Act) (i) beneficially owns, directly or indirectly,
or (ii) is a party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of capital
stock of the Company (other than Trust Account Shares and DPC Shares); and
(b) Neither Parent nor any of its Subsidiaries is an "affiliate" (as such
term is defined in DGCL /section/203(c)(1)) or an "associate" (as such term is
defined in DGCL /section/203(c)(2)) of the Company or an "Interested
Stockholder" (as such term is defined in Article Eighth of the Company's
Certificate of Incorporation).
5.16 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in Section
5.16 of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth in Section 5.16
of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any
Regulatory Agency or other Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Parent or any of its
Subsidiaries been advised by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any Parent Regulatory Agreement.
5.17 ENVIRONMENTAL MATTERS. Except as set forth in Section 5.17 of the
Parent Disclosure Schedule:
(a) Each of Parent and its Subsidiaries and, to the knowledge of Parent,
each of the Participation Facilities and the Loan Properties (each as
hereinafter defined), are in compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Parent, threatened, before any Governmental Entity or other forum
in which Parent, any of its Subsidiaries, any Participation Facility or any
Loan Property, has been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Parent or any of its
Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of Parent during the period of (x) Parent's or any of
its Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Parent's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property. To the
knowledge of Parent, prior to the period of (x) Parent's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Parent's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there was no release of Hazardous
Materials in, on, under or affecting any such property, Participation Facility
or Loan Property; and
(d) The following definitions apply for purposes of this Section 5.17: (x)
"Loan Property" means any property in which Parent or any of its Subsidiaries
holds a security interest, and, where required by the context, said term means
the owner or operator of such property; and (y) "Participation Facility" means
any facility in which Parent or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such property.
5.18 OPINION. Prior to the execution of this Agreement, Parent has
received an opinion from Sandler O'Neill to the effect that as of the date
thereof and based upon and subject to the matters set
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forth therein, the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to Parent. Such opinion has not been amended or
rescinded as of the date of this Agreement.
5.19 APPROVALS. As of the date of this Agreement, Parent knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
should not be obtained.
5.20 LOAN PORTFOLIO. (a) Except as set forth in Section 5.20 of Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to
any written or oral (i) Loan, other than Loans the unpaid principal balance of
which does not exceed $250,000, under the terms of which the obligor was, as of
April 30, 1998, over 90 days delinquent in payment of principal or interest or
in default of any other provision, or (ii) Loan with any director, executive
officer or five percent or greater stockholder of Parent or any of its
Subsidiaries, or to the knowledge of Parent, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 5.20 of Parent Disclosure Schedule sets forth (i) all of the
Loans in original principal amount in excess of $250,000 of Parent or any of
its Subsidiaries that as of April 30, 1998, were classified by any bank
examiner (whether regulatory or internal) as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of
Parent and its Subsidiaries that as of April 30, 1998, were classified as such,
together with the aggregate principal amount of and accrued and unpaid interest
on such Loans by category and (iii) each asset of Parent that as of April 30,
1998, was classified as "Other Real Estate Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess of $250,000 (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
5.21 PROPERTY. Each of Parent and its Subsidiaries has good and marketable
title free and clear of all liens, encumbrances, mortgages, pledges, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, tangible or intangible, and which are reflected on the consolidated
statement of financial condition of Parent as of March 31, 1998 or acquired
after such date, except (i) liens for taxes not yet due and payable or
contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of business, (iii)
such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is used on
the date of this Agreement, (iv) for dispositions and encumbrances of, or on,
such properties or assets in the ordinary course of business or (v) mechanics',
materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other
similar liens and encumbrances arising in the ordinary course of business. All
leases pursuant to which Parent or any Subsidiary of Parent, as lessee, leases
real or personal property are valid and enforceable in accordance with their
respective terms and neither Parent nor any of its Subsidiaries nor, to the
knowledge of Parent, any other party thereto is in default thereunder.
5.22 ACCOUNTING FOR THE MERGER; REORGANIZATION. As of the date of this
Agreement, Parent has no reason to believe that the Merger will fail to qualify
(i) for pooling-of-interests treatment under GAAP or (ii) as a reorganization
under Section 368(a) of the Code.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement
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or the Stock Option Agreement or with the prior written consent of Parent, the
Company and its Subsidiaries shall carry on their respective businesses in the
ordinary course consistent with past practice. Without limiting the generality
of the foregoing, and except as set forth in Section 6.1 of the Company
Disclosure Schedule or as otherwise contemplated by this Agreement or the Stock
Option Agreement or consented to in writing by Parent, the Company shall not,
and shall not permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any dividends on, or
make other distributions in respect of, any of its capital stock, other than
normal quarterly dividends not in excess of $0.175 per share of Company Common
Stock;
(b) (i) repurchase, redeem or otherwise acquire (except for the
acquisition of Trust Account Shares and DPC Shares, as such terms are defined
in Section 1.4(b) hereof) any shares of the capital stock of the Company or any
Subsidiary of the Company, or any securities convertible into or exercisable
for any shares of the capital stock of the Company or any Subsidiary of the
Company,(ii) split, combine or reclassify any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing,
except, in the case of clauses (ii) and (iii), for the issuance of Company
Common Stock upon the exercise or fulfillment of rights or options issued or
existing pursuant to the Company Option Plans or any employee benefit plans,
programs or arrangements, all to the extent outstanding and in existence on the
date of this Agreement and in accordance with their present terms;
(c) amend its Certificate of Incorporation, By-laws or other similar
governing documents;
(d) authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or, subject to the fiduciary duties of the Board
of Directors of the Company, recommend or endorse any takeover proposal, or
participate in any discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such inquiry or proposal or
otherwise facilitate any effort or attempt to make or implement a takeover
proposal; PROVIDED, HOWEVER, that the Company may communicate information about
any such takeover proposal to its stockholders if, in the judgment of the
Company's Board of Directors, based upon the advice of outside counsel, such
communication is required under applicable law. The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than Parent with
respect to any of the foregoing. The Company will take all actions necessary or
advisable to inform the appropriate individuals or entities referred to in the
first sentence hereof of the obligations undertaken in this Section 6.1(d). The
Company will notify Parent immediately if any such inquiries or takeover
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company, and the Company will promptly inform Parent in writing of all of the
relevant details with respect to the foregoing. As used in this Agreement,
"takeover proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company or
any Subsidiary of the Company or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of,
the Company or any Subsidiary of the Company other than the transactions
contemplated or permitted by this Agreement;
(d) make any capital expenditures other than those which (i) are made in
the ordinary course of business or are necessary to maintain existing assets in
good repair and (ii) in any event are in an amount of no more than $500,000 in
the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any
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corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets, which would be material,
individually or in the aggregate, to the Company, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practices;
(h) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth
in Article VIII not being satisfied;
(i) change its methods of accounting in effect at March 31, 1998, except
as required by changes in GAAP or regulatory accounting principles as concurred
to by the Company's independent auditors;
(j) (i) except as set forth in Section 7.13 hereof, as required by
applicable law or as required to maintain qualification pursuant to the Code,
adopt, amend, or terminate any employee benefit plan (including, without
limitation, any Plan) or any agreement, arrangement, plan or policy between the
Company or any Subsidiary of the Company and one or more of its current or
former directors, officers or employees or (ii) except for normal increases in
the ordinary course of business consistent with past practice or except as
required by applicable law, increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required
by any Plan or agreement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares);
PROVIDED, HOWEVER, that nothing contained herein shall prohibit the Company
from (x) paying retention bonuses as described in Section 6.1(j) of the Company
Disclosure Schedule, or (y) paying, on or immediately prior to the Closing
Date, discretionary bonuses in respect of fiscal 1998 in a manner consistent
with past practice and in an aggregate amount not to exceed $300,000;
(k) take or cause to be taken any action which would disqualify the Merger
as a "pooling-of-interests" for accounting purposes or a reorganization under
Section 368(a) of the Code;
(l) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements;
(m) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(n) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries;
(o) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or lease
for goods, services or office space to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date; or
(p) agree to do any of the foregoing.
6.2 COVENANTS OF PARENT. Except as set forth in Section 6.2 of the Parent
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by the Company, Parent shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of Parent, declare or pay any dividends on or make
any other distributions in respect of any of its capital stock other than its
current quarterly dividends; provided, however, that nothing contained herein
shall prohibit Parent from increasing the quarterly cash dividend on the Parent
Common Stock in a manner consistent with past practice;
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(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth
in Article VIII not being satisfied;
(c) take any action or enter into any agreement that could reasonably be
expected to jeopardize or delay the receipt of any Requisite Regulatory
Approval (as defined in Section 8.1(c));
(d) change its methods of accounting in effect at March 31, 1998, except
in accordance with changes in GAAP or regulatory accounting principles as
concurred to by Parent's independent auditors;
(e) take or cause to be taken any action which would disqualify the Merger
as a "pooling-of-interests" for accounting purposes or a reorganization under
Section 368(a) of the Code; or
(f) agree to do any of the foregoing.
6.3 CONDUCT OF PARENT'S BUSINESS. Parent shall, and Parent shall cause the
Parent Banks to, conduct its business in substantially the same manner as
heretofore conducted.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 REGULATORY MATTERS. (a) Parent and the Company shall promptly prepare
and file with the SEC the Proxy Statement and Parent shall promptly prepare and
file with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. Each of the Company and Parent shall use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and each of the Company and Parent shall
thereafter mail the Proxy Statement to its respective stockholders. Parent
shall also use its reasonable best efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) Parent and the Company shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
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(d) Parent and the Company shall promptly furnish each other with copies
of written communications received by Parent or the Company, as the case may
be, or any of their respective Subsidiaries, Affiliates or Associates (as such
terms are defined in Rule 12b-2 under the Exchange Act as in effect on the date
of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2 ACCESS TO INFORMATION. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each party shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, it shall, and shall cause its Subsidiaries to, make available to the
other party all information concerning its business, properties and personnel
as the other party may reasonably request. Neither party nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) All information furnished to Parent pursuant to Section 7.2(a) shall
be subject to, and Parent shall hold all such information in confidence in
accordance with, the provisions of the confidentiality agreement, (the
"Confidentiality Agreement"), between Parent and the Company. The Company shall
have the same obligations to Parent under the Confidentiality Agreement with
respect to information furnished to the Company pursuant to Section 7.2(a) as
if the Company were the receiving party under such agreement.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 STOCKHOLDER MEETINGS. The Company and Parent each shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders to be held as soon as is reasonably practicable after the date on
which the S-4 becomes effective for the purpose of voting upon the approval and
adoption of this Agreement and the consummation of the transactions
contemplated hereby. The Company and Parent each will, through its Board of
Directors, subject, in the case of the Company, to the fiduciary duties of such
board, recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be submitted to
its stockholders in connection with this Agreement. The Company and Parent
shall coordinate and cooperate with respect to the foregoing matters, with a
view towards, among other things, holding the respective meetings of each
party's stockholders on the same day.
7.4 LEGAL CONDITIONS TO MERGER. Each of Parent and the Company shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger or the Bank Merger and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by the Company or Parent or any of their respective
Subsidiaries in connection with the Merger or the Bank Merger and the other
transactions contemplated by this Agreement, and to comply with the terms and
conditions of such consent, authorization, order or approval.
7.5 AFFILIATES. (a) Each of Parent and the Company shall use its
reasonable best efforts to cause each director, executive officer and other
person who is an "affiliate" (for purposes of Rule 145 under the Securities Act
and for purposes of qualifying the Merger for "pooling-of-interests" accounting
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treatment) of such party to deliver to the other party, as soon as practicable
after the date of this Agreement, a written agreement, in the form of Exhibit
7.5(a) hereto (in the case of affiliates of Parent) or Exhibit 7.5(b) hereto
(in the case of affiliates of the Company).
(b) Parent shall publish, not later than 15 days after the end of the
first full calendar month following the month in which the Effective Time
occurs, financial results covering at least 30 days of post-Merger combined
operations as contemplated by SEC Accounting Series Release No. 135.
7.6 STOCK EXCHANGE LISTING. Parent shall use its reasonable best efforts
to cause the shares of Parent Common Stock to be issued in the Merger to be
approved for quotation on the NASDAQ/NMS, subject to official notice of
issuance, as of the Effective Time.
7.7 EMPLOYEE BENEFIT PLANS; EXISTING AGREEMENTS. (a) As of the Effective
Time, the employees of the Company and its Subsidiaries (the "Company
Employees") shall be eligible to participate in the employee benefit plans of
Parent and its Subsidiaries in which similarly situated employees of Parent or
Parent Bank participate, to the same extent as similarly situated employees of
Parent or Parent Bank (it being understood that inclusion of Company Employees
in such employee benefit plans may occur at different times with respect to
different plans).
(b) With respect to each Parent Plan, for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual of pension
benefits), service with the Company (or predecessor employers to the extent the
Company provides past service credit) shall be treated as service with Parent;
provided, however, that such service shall not be recognized to the extent that
such recognition would result in a duplication of benefits. Such service also
shall apply for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting condition
limitations. Each Parent Plan shall waive pre-existing condition limitations to
the same extent waived under the applicable Plan. Company Employees shall be
given credit for amounts paid under a corresponding benefit plan during the
same period for purposes of applying deductibles, copayments and out-of-pocket
maximums as though such amounts had been paid in accordance with the terms and
conditions of the Parent Plan.
(c) As of the Effective Time, Parent shall assume and honor and shall
cause the appropriate Subsidiaries of Parent to assume and to honor in
accordance with their terms all employment, severance and other compensation
agreements, plans and arrangements existing prior to the execution of this
Agreement which are between the Company or any of its Subsidiaries and any
director, officer or employee thereof and which have been disclosed in the
Company Disclosure Schedule. Parent acknowledges and agrees that (i) the Merger
constitutes a "Change of Control" for all purposes pursuant to such agreements
and arrangements and (ii) in light of Parent's plans relating to management
assignments and responsibilities with respect to the business of Parent from
and after the Effective Time, each director, officer or employee who is a party
to, or is otherwise subject to, any such agreement or arrangement will, upon
consummation of the Merger, have "Good Reason" to terminate employment
thereunder. The provisions of this Section 7.7(c) are intended to be for the
benefit of, and shall be enforceable by, each such director, officer or
employee.
(d) Parent agrees that, during the three-month period following the
Effective Time, no Company Employee shall be terminated for "cause" (as defined
in the Company Option Plans) unless such Company Employee has been given
written notice of such termination at least ten business days prior to the date
of termination. This Section 7.7(d) is intended to be for the benefit of, and
shall be enforceable by, each such Company Employee.
7.8 INDEMNIFICATION. (a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director, officer or employee of the Company or any of its Subsidiaries
(the "Indemnified Parties") is, or is threatened to
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be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of the Company, any of the Subsidiaries of the Company or any of their
respective predecessors or affiliates or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto. It is understood
and agreed that after the Effective Time, Parent shall indemnify and hold
harmless, as and to the extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Parent; PROVIDED, HOWEVER, that
(1) Parent shall have the right to assume the defense thereof and upon such
assumption Parent shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Parent
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are issues which raise conflicts of interest
between Parent and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Parent, and
Parent shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) Parent shall in all cases be obligated pursuant to
this paragraph to pay for only one firm of counsel for all Indemnified Parties,
(3) Parent shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and (4)
Parent shall have no obligation hereunder to any Indemnified Party when and if
a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim Indemnification under
this Section 7.8, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Parent thereof, provided that the failure
to so notify shall not affect the obligations of Parent under this Section 7.8
except to the extent such failure to notify materially prejudices Parent.
Parent's obligations under this Section 7.8 shall continue in full force and
effect without time limit from and after the Effective Time.
(b) Parent shall cause the persons serving as officers and directors of
the Company immediately prior to the Effective Time to be covered for a period
of three years from the Effective Time by the directors' and officers'
liability insurance policy maintained by the Company (provided that Parent may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective Time
which were committed by such officers and directors in their capacity as such;
PROVIDED, HOWEVER, that in no event shall Parent be required to expend on an
annual basis more than 200% of the current amount expended by the Company (the
"Insurance Amount") to maintain or procure insurance coverage, and further
provided that if Parent is unable to maintain or obtain the insurance called
for by this Section 7.8(b), Parent shall use all reasonable efforts to obtain
as much comparable insurance as is available for the Insurance Amount.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
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7.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or the Plan Merger or to vest the Surviving Corporation or the
Surviving Bank with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger or the Bank
Merger, the proper officers and directors of each party to this Agreement and
their respective Subsidiaries shall take all such necessary action as may be
reasonably requested by Parent.
7.10 COORDINATION OF DIVIDENDS. After the date of this Agreement each of
Parent and the Company shall coordinate with the other the declaration of any
dividends in respect of the Parent Common Stock and the Company Common Stock
and the record dates and payments dates relating thereto, it being the
intention of the parties that the holders of Parent Common Stock or Company
Common Stock shall not receive more than one dividend, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Parent Common Stock and/or Company Common Stock and any shares of Parent Common
Stock any holder of Company Common Stock receives in exchange therefor in the
Merger.
7.11 ASSUMPTION OF INDEMNIFICATION OBLIGATIONS. As of the Effective Time,
Parent shall assume all of the Company's obligations under Section 9.9 of the
Agreement and Plan of Merger, dated as of May 31, 1995, by and between the
Company and PBS Financial Corp. (the "PBS Merger Agreement"). If Parent or any
of its successors or assigns consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or transfers all or substantially all of its assets to
any person, then and in each case, proper provision shall be made so that the
successors and assigns of Parent assume the obligations set forth in Section
9.9 of the PBS Merger Agreement.
7.12 PARENT RIGHTS AGREEMENT. Parent agrees that Parent Rights shall be
issued with respect to each share of Parent Common Stock issued pursuant to the
terms hereof regardless of whether there has occurred a "Distribution Date"
under the terms of the Parent Rights Agreement prior to the Effective Time, and
Parent shall take all action necessary or advisable to enable the holder of
each share of Parent Common Stock issued pursuant to this Agreement to obtain
the benefit of such Parent Rights notwithstanding their prior distribution,
including, without limitation, amendment of the Parent Rights Agreement.
7.13 AMENDMENT OF COMPANY OPTION PLANS. With respect to any Company Option
which provides the holder thereof with the right to surrender such Company
Option in exchange for a cash payment under certain circumstances following a
"Change of Control" (as defined in the Company Option Plans), the Company shall
use its reasonable best efforts to obtain, as soon as practicable following the
date of this Agreement, the consent of such option holder to an amendment of
the Company Option Plan under which such Company Option was granted providing
for the replacement of such cash-out right with a right to surrender all or
part of such Company Option in exchange for a number of shares of Company
Common Stock having an aggregate value equal to the excess of (x) the aggregate
Fair Market Value (as defined in the Company Option Plans), as of the date of
surrender of such Company Option, of the shares of Company Common Stock
underlying the portion of such Company Option being surrendered over (y) the
aggregate exercise price of such portion of the Company Option.
7.14 STOCK OPTION AGREEMENT. Concurrently with the execution and delivery
of this Agreement, Parent and the Company agree to execute and deliver the
Stock Option Agreement in the form attached hereto as Annex A.
7.15 DIRECTORSHIPS. Parent shall cause its Board of Directors to be
expanded by three members and shall appoint those persons selected by the
Company from among those persons currently serving on the Company's Board of
Directors (such persons, and any substitute person as provided in the last
sentence of this paragraph, the "Nominees") to fill the vacancies on Parent's
Board of Directors created by such increase at the Effective Time. In the event
any Nominee shall be appointed or elected to a
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class of directors of Parent the term of which class of directors expires prior
to December 31, 2000, Parent shall include such person on the list of nominees
for director presented by the Board of Directors of Parent and for which said
Board shall solicit proxies at the annual meeting of stockholders of Parent
following the Effective Time at which directors are elected for such class. In
the event that any Nominee is unable to serve as a director of Parent as a
result of death, illness, resignation or any other reason, Parent shall elect
another member of the Company's Board of Directors as a substitute nominee in
accordance with this Section 7.15.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVALS. This Agreement shall have been approved and
adopted by the requisite votes of the holders of the outstanding shares of
Company Common Stock and Parent Common Stock under applicable law.
(b) LISTING OF SHARES. The shares of Parent Common Stock which shall be
issued to the stockholders of the Company upon consummation of the Merger shall
have been authorized for quotation on the NASDAQ/NMS, subject to official
notice of issuance.
(c) OTHER APPROVALS. All regulatory approvals required to consummate the
transactions contemplated hereby (including the Merger) shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired (all such approvals and the
expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been issued
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or the Bank Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger or the Bank Merger.
8.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligation of Parent to
effect the Merger is also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) Subject to Section 3.2, the
representations and warranties of the Company set forth in this Agreement
(other than those set forth in Section 4.2 and Section 4.10) shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; and (ii) the representations
and warranties of the Company set forth in Section 4.2 and Section 4.10 of this
Agreement shall be true and correct in all material respects (without giving
effect to Section 3.2 of this Agreement) as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date. Parent shall have received a certificate signed on behalf of the Company
by the Chief Executive Officer and the Chief Financial Officer of the Company
to the foregoing effect.
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(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(c) NO PENDING GOVERNMENTAL ACTIONS. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) FEDERAL TAX OPINION. Parent shall have received an opinion from
Morgan, Lewis & Bockius LLP, counsel to Parent ("Parent's Counsel"), in form
and substance reasonably satisfactory to Parent, dated the Effective Time,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(ii) No gain or loss will be recognized by the stockholders of the
Company who exchange all of their Company Common Stock solely for Parent
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in Parent Common Stock); and
(iii) The aggregate tax basis of the Parent Common Stock received by
stockholders who exchange all of their Company Common Stock solely for
Parent Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
In rendering such opinion, Parent's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form and
substance to such counsel.
(e) POOLING OF INTERESTS. Parent shall have received a letter from Ernst &
Young LLP addressed to Parent, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) Subject to Section 3.2, the
representations and warranties of Parent set forth in this Agreement (other
than those set forth in Section 5.2 and Section 5.10) shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; and (ii) the representations and warranties
of Parent set forth in Section 5.2 and Section 5.10 of this Agreement shall be
true and correct in all material respects (without giving effect to Section 3.2
of this Agreement) as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. The Company shall
have received a certificate signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received
a certificate signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of Parent to such effect.
(c) NO PENDING GOVERNMENTAL ACTIONS. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
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(d) FEDERAL TAX OPINION. The Company shall have received an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP (the "Company's Counsel"), in form and
substance reasonably satisfactory to the Company, dated the Effective Time,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(ii) No gain or loss will be recognized by the stockholders of the
Company who exchange all of their Company Common Stock solely for Parent
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in Parent Common Stock); and
(iii) The aggregate tax basis of the Parent Common Stock received by
stockholders who exchange all of their Company Common Stock solely for
Parent Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
In rendering such opinion, the Company's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form and
substance to such counsel.
(e) POOLING OF INTERESTS. The Company shall have received a letter from
Ernst & Young LLP addressed to Parent, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of both the Company and Parent:
(a) by mutual consent of the Company and Parent in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either Parent or the Company upon written notice to the other party
(i) 60 days after the date on which any request or application for a Requisite
Regulatory Approval shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 9.1(b)(i)
if such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either Parent or the Company if the Merger shall not have been
consummated on or before March 31, 1999, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(d) by either Parent or the Company (provided that the terminating party
shall not be in material breach of any of its obligations under Section 7.3) if
any approval of the stockholders of either of the
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<PAGE>
Company or Parent required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of such stockholders or at any adjournment or postponement
thereof;
(e) by either Parent or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within thirty days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; PROVIDED, HOWEVER, that neither
party shall have the right to terminate this Agreement pursuant to this Section
9.1(e) unless the breach of representation or warranty, together with all other
such breaches, would entitle the party receiving such representation not to
consummate the transactions contemplated hereby under Section 8.2(a) (in the
case of a breach of representation or warranty by the Company) or Section
8.3(a) (in the case of a breach of representation or warranty by Parent);
(f) by either Parent or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach shall not have been cured within thirty days
following receipt by the breaching party of written notice of such breach from
the other party hereto, or which breach, by its nature, cannot be cured prior
to the Closing; or
(g) by the Company at any time during the ten-day period commencing two
days after the Determination Date (as defined below), if either (x) both of the
following conditions are satisfied:
(1) the Average Closing Price (as defined below) shall be less than the
product of 0.85 and the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing Price by the
Starting Price (such number being referred to herein as the "Parent Ratio")
shall be less than (ii) the number obtained by dividing the Index Price on
the Determination Date by the Index Price on the Starting Date and
subtracting 0.15 from such quotient (such number being referred to herein
as the "Index Ratio");
or (y) the Average Closing Price shall be less than the product of 0.75 and the
Starting Price;
subject to the following four sentences. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Parent which notice shall specify which of clauses (x)
or (y) is applicable (or if both would be applicable, which clause is being
invoked); provided that such notice of election to terminate may be withdrawn
at any time within the aforementioned ten-day period. During the five-day
period commencing with its receipt of such notice, Parent shall have the
option, in the case of a termination invoked under clause (x), of adjusting the
Exchange Ratio to equal the lesser of (i) a number equal to a quotient (rounded
to the nearest one-ten-thousandth), the numerator of which is the product of
0.85, the Starting Price and the Exchange Ratio (as then in effect) and the
denominator of which is the Average Closing Price, and (ii) a number equal to a
quotient (rounded to the nearest one-ten-thousandth), the numerator of which is
the Index Ratio multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the Parent Ratio. During such five-day period, Parent
shall have the option, in the case of a termination invoked under clause (y),
to elect to increase the Exchange Ratio to equal a number equal to a quotient
(rounded to the nearest one-ten-thousandth), the numerator of which is the
product of 0.75, the Starting Price and the Exchange Ratio (as then in effect)
and the denominator of which is the Average Closing Price. If Parent makes an
election contemplated by either of the two preceding sentences, within such
five-day period it shall give prompt written notice to the Company of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 9.1(g) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be
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<PAGE>
deemed to refer to the Exchange Ratio as adjusted pursuant to this Section
9.1(g). For purposes of this Section 9.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the last reported sale prices
per share of Parent Common Stock as reported on the NASDAQ/NMS (as reported in
THE WALL STREET JOURNAL or, if not reported therein, in another mutually agreed
upon authoritative source) for the 20 consecutive trading days on the
NASDAQ/NMS ending at the close of trading on the Determination Date.
"Determination Date" means the fifth business day prior to the date on
which the last of the Requisite Regulatory Approvals shall be received, without
regard to any requisite waiting periods in respect thereof.
"Index Group" means the group of each of the 13 bank holding companies
listed below, the common stock of all of which shall be publicly traded and as
to which there shall not have been, since the Starting Date and before the
Determination Date, an announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization
as of the Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or any such announcement is made with respect to
any such company, such company will be removed from the Index Group, and the
weights (which have been determined based on the number of outstanding shares
of common stock) redistributed proportionately for purposes of determining the
Index Price. The 13 bank holding companies and the weights attributed to them
are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANY WEIGHTING
- -------------------------------------------- ----------
<S> <C>
CNB Bancshares, Inc. ....................... 8.32%
BancorpSouth, Inc. ......................... 18.19%
Commerce Bancorp, Inc. ..................... 7.32%
Provident Bankshares Corporation ........... 9.97%
United Bankshares, Inc. .................... 12.23%
Hancock Holding Company .................... 4.44%
F&M National Corporation ................... 8.32%
Carolina First Corporation ................. 7.21%
MainStreet BankGroup Incorporated .......... 5.43%
BT Financial Corporation ................... 5.09%
Triangle Bancorp, Inc. ..................... 5.33%
National City Bancshares, Inc. ............. 4.38%
United National Bancorp .................... 3.78%
</TABLE>
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
companies comprising the Index Group.
"Starting Date" means May 26, 1998.
"Starting Price" shall mean the last reported sale price per share of
Parent Common Stock on the Starting Date, as reported by the NASDAQ/NMS (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source).
If any company belonging to the Index Group or Parent declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or Parent
shall be appropriately adjusted for the purposes of applying this Section
9.1(g).
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Parent or the Company as provided in Section 9.1, this Agreement
shall forthwith become void and have no effect except (i) Sections 7.2(b), 9.2
and 10.3 shall survive any termination of this Agreement and (ii) that
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<PAGE>
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of
its willful breach of any provision of this Agreement.
9.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of either
the Company or Parent; provided, however, that after any approval of the
transactions contemplated by this Agreement by the Company's stockholders,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Company stockholders hereunder other than
as contemplated by this Agreement. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time, each of
the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
first day which is (a) the last business day of month and (b) at least two
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VIII hereof (other
than those conditions which relate to actions to be taken at the Closing)(the
"Closing Date"), at the offices of Morgan, Lewis & Bockius LLP, Miami, Florida,
unless another time, date or place is agreed to in writing by the parties
hereto.
10.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective
Time.
10.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to: Republic Security Financial Corporation
4400 Congress Avenue
West Palm Beach, Florida 33407
facsimile: (561) 881-9225
Attention: Chief Executive Officer
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<PAGE>
with a copy to: Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
Miami, Florida 33131
facsimile: (305) 579-0321
Attn: John S. Fletcher, Esq.
and
(b) if to the Company, to: First Palm Beach Bancorp, Inc.
450 South Australian Avenue
West Palm Beach, Florida 33402-2326
facsimile: (561) 650-2336
Attention: Chief Executive Officer
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
facsimile: (212) 735-2000
Attn: William S. Rubenstein, Esq.
10.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to May 27, 1998. No provision of this Agreement shall be construed to
require the Company, Parent or any of their respective Subsidiaries or
affiliates to take any action that would violate any applicable law, rule or
regulation.
10.6 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.7 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein), together with the Confidentiality Agreement,
the Bank Merger Agreement and the Stock Option Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
10.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida, without regard to any
applicable conflicts of law.
10.9 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in 7.2(b) of this
Agreement were 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 Section 7.2(b) of this
Agreement and to enforce specifically the terms and provisions thereof 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.
10.10 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
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<PAGE>
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.
10.11 PUBLICITY. Except as otherwise required by law or the rules of the
NASDAQ/NMS, so long as this Agreement is in effect, neither Parent nor the
Company shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
10.12 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
REPUBLIC SECURITY FINANCIAL CORPORATION
By /s/ Rudy E. Schupp
--------------------------------------
Name: Rudy E. Schupp
Title: Chairman and CEO
FIRST PALM BEACH BANCORP, INC.
By /s/ Louis O. Davis, Jr.
--------------------------------------
Name: Louis O. Davis, Jr.
Title: President and CEO
A-39
<PAGE>
ANNEX B
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN
AND TO RESALE RESTRICTIONS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated May 27, 1998, by and
between REPUBLIC SECURITY FINANCIAL CORPORATION, a Florida corporation (the
"Parent"), and FIRST PALM BEACH BANCORP, INC., a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Parent and the Board of Directors
of the Company have approved an Agreement and Plan of Merger dated as of even
date herewith (the "Merger Agreement") providing, among other things, for the
merger of the Company with and into the Parent;
WHEREAS, as a condition and inducement to the Parent's entering into the
Merger Agreement, the Parent has required that the Company agree, and the
Company has agreed, to grant to the Parent the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises contained herein and in
the Merger Agreement, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used but not defined herein shall have
the same meanings as in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
the Company hereby grants to the Parent an option (the "Option") to purchase up
to 1,009,725 fully paid and nonassessable, authorized and unissued shares of
the Company's common stock ("Company Common Stock") at a price of $40.50 per
share (the "Purchase Price") payable in cash as provided in Section 4 hereof;
PROVIDED, HOWEVER, that in no event shall the number of shares of Company
Common Stock for which this Option is exercisable exceed 19.9% of the Company's
issued and outstanding shares of Company Common Stock (without giving effect to
any shares subject to or issued pursuant to the Option). The number of shares
of Company Common Stock that may be received upon the exercise of the Option
and the Purchase Price are subject to adjustment as herein set forth.
3. EXERCISE OF OPTION.
(a) The Parent may exercise the Option, in whole or in part, and from time
to time, if, but only if, both an Extension Event (as hereinafter defined) and
a Purchase Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined), provided
that the Parent shall have sent the written notice of such exercise (as
provided in subsection (e) of this Section 3) within 90 days following such
Purchase Event. Each of the following shall be an "Exercise Termination Event":
(i) the Effective Time of the Merger; (ii) termination of the Merger Agreement
in accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Extension Event, except a termination by Parent pursuant
to Section 9.1(f) of the Merger Agreement (unless the breach by the Company
giving rise to such right of termination is non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Extension Event or is a termination by
Parent pursuant to Section 9.1(f) of the Merger Agreement (unless the breach by
the Company giving rise to such right of termination is non-volitional).
Notwithstanding the foregoing, if the Option cannot be exercised on such day
because of any injunction, order or similar restraint issued by a Governmental
Entity of competent
B-1
<PAGE>
jurisdiction, the Option shall expire on the 10th business day after such
injunction, order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be. Any exercise of the Option shall be
subject to compliance with applicable law.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) The Company or any Company Subsidiary, without having received prior
written consent from the Parent, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or
understanding with any Person (other than the Parent or any Parent
Subsidiary) to (A) effect a merger or consolidation or similar transaction
involving the Company or any Company Subsidiary (other than internal
mergers, reorganizing actions, consolidations or dissolutions involving
only existing Company Subsidiaries), (B) purchase, lease or otherwise
acquire all or a substantial portion of the assets of the Company or any
Company Subsidiary or (C) purchase or otherwise acquire (including by way
of merger, consolidation, share exchange or similar transaction) beneficial
ownership of securities representing 20% or more of the voting power of the
Company or any Company Subsidiary (any such transaction in clause (A), (B)
or (C) hereof, an "Acquisition Transaction"); PROVIDED, HOWEVER, that in no
event shall (i) any merger, consolidation, purchase or similar transaction
involving only the Company and one or more of its Subsidiaries, or
involving only any two or more of such Subsidiaries, or (ii) any merger,
consolidation or similar transaction as to which the common stockholders of
the Company immediately prior thereto own in the aggregate at least 60% of
the common stock of the surviving corporation or its publicly held parent
corporation immediately following consummation thereof to be deemed to be
an Acquisition Transaction, provided that any such transaction is not
entered into in violation of the terms of the Merger Agreement; or
(ii) any Person (other than the Parent or any Parent Subsidiary or any
Person acting in concert with the Parent; or the Company or any Company
Subsidiary acting in a fiduciary capacity) shall have acquired Beneficial
Ownership of 20% or more of the voting power of the Company or any Company
Subsidiary.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event of the type specified in clauses (b)(i) and (b)(ii)
above;
(ii) any Person (other than the Parent or any Parent Subsidiary) shall
have "commenced" (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase shares of
Company Common Stock such that, upon consummation of such offer, such
Person would have Beneficial Ownership (as defined below) or the right to
acquire Beneficial Ownership of 20% or more of the voting power of the
Company or any Company Subsidiary;
(iii) any Person (other than the Parent or any Parent Subsidiary; or the
Company or any Company Subsidiary in a fiduciary capacity) shall have
publicly announced its willingness, or shall have publicly announced a bona
fide proposal, or publicly disclosed an intention to make a bona fide
proposal, (x) to make an offer described in clause (ii) above or (y) to
engage in an Acquisition Transaction; or
(iv) the Company's Board of Directors shall have withdrawn, modified or
changed in a manner adverse to the Parent the recommendation of the
Company's Board of Directors with respect to the Merger, the Merger
Agreement or the transactions contemplated thereby.
(d) As used herein, the terms "Beneficial Ownership," "Beneficially Own"
and "Beneficial Owner" shall have the meanings ascribed to them in Rule 13d-3
under the Exchange Act.
B-2
<PAGE>
(e) In the event that the Parent wishes to exercise the Option, it shall
deliver to the Company a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 calendar days from the
Notice Date for the closing of such purchase (the "Closing Date").
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, the Parent shall (i)
pay to the Company the aggregate Purchase Price for the shares of Company
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by the Company
and (ii) present and surrender this Agreement to the Company at its principal
executive offices.
(b) At such closing, simultaneously with the delivery of cash as provided
in Section 4(a), the Company shall deliver to the Parent a certificate or
certificates representing the number of shares of Company Common Stock
purchased by the Parent, registered in the name of the Parent or a nominee
designated in writing by the Parent and, if the Option should be exercised in
part only, a new Option evidencing the rights of the holder thereof to purchase
the balance of the shares purchasable hereunder, and the Parent shall deliver
to the Company a letter agreeing that the Parent shall not offer to sell,
pledge or otherwise dispose of such shares in violation of applicable law or
the provisions of this Option Agreement.
(c) If at the time of issuance of any Company Common Stock pursuant to any
exercise of the Option, the Company shall have issued any share purchase rights
or similar securities to holders of Company Common Stock, then each such share
of Company Common Stock shall also represent rights with terms substantially
the same as and at least as favorable to the Parent as those issued to other
holders of Company Common Stock.
(d) Certificates for Company Common Stock delivered at any closing
hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
, a copy of which is on file at the principal office of ,
and to resale restrictions arising under the Securities Act of 1933 and any
applicable state securities laws. A copy of such agreement will be provided
to the holder hereof without charge upon receipt by of a written
request therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the Parent shall have
delivered to the Company an opinion of counsel, in form and substance
reasonably satisfactory to the Company and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and any applicable
state securities laws.
5. AUTHORIZATION, ETC.
(a) The Company hereby represents and warrants to the Parent that:
(i) the Company has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors of the Company, and no other corporate proceedings
are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered; and
(iv) the Company has taken all necessary corporate action to authorize
and reserve and, subject to Section 11(i), permit it to issue and, at all
times from the date hereof through the date of
B-3
<PAGE>
the exercise in full or the expiration or termination of the Option, shall
have reserved for issuance upon exercise of the Option, that number of
shares of Company Common Stock equal to the maximum number of shares of
Company Common Stock at any time and from time to time issuable hereunder,
all of which, upon issuance pursuant hereto, shall be duly authorized,
validly issued, fully paid and nonassessable, and shall be delivered free
and clear of all claims, liens, encumbrances, restrictions (other than
federal and state securities restrictions and other than as set forth in
Section C of Article Fourth of the Company's Certificate of Incorporation)
and security interests and not subject to any preemptive rights.
(b) The Parent hereby represents and warrants to the Company that:
(i) the Parent has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by the Parent and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered; and
(iv) any Company Common Stock or other securities acquired by the Parent
upon exercise of the Option will not be taken with a view to the public
distribution thereof and will not be transferred or otherwise disposed of
except in compliance with the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in Company Common Stock by reason of stock dividends, split-ups,
recapitalizations or the like, the type and number of shares subject to the
Option, and the Purchase Price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Company Common Stock
are issued after the date of this Option Agreement (other than pursuant to an
event described in the preceding sentence or pursuant to this Option
Agreement), the number of shares of Company Common Stock subject to the Option
shall be adjusted so that, after such issuance, it equals at least 19.9% of the
number of shares of Company Common Stock then issued and outstanding (without
considering any shares subject to or issued pursuant to the Option).
7. REPURCHASE.
(a) Subject to Section 11(i), at the request of the Parent given prior to
an Exercise Termination Event, at any time commencing upon the occurrence of a
Repurchase Event (as defined below), the Company (or any successor entity
thereof) shall repurchase the Option from the Parent together with all (but not
less than all, subject to Section 10) shares of Company Common Stock purchased
by the Parent pursuant thereto with respect to which the Parent then has
Beneficial Ownership, at a price (on a per share basis, the "Per Share
Repurchase Price") equal to the sum of:
(i) The aggregate Purchase Price paid by the Parent for any shares of
Company Common Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer Price" for
shares of Company Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made for
shares of Company Common Stock or (y) the highest closing mean of the `bid'
and the `ask' price per share of Company Common Stock reported on the
Nasdaq National Market for any day within the six-month period immediately
preceding the date the Parent gives notice of the required repurchase under
this Section 7) and (B) the Purchase Price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6),
multiplied by the number of shares of Company Common Stock with respect to
which the Option has not been exercised, but only if the Market/Tender
Offer Price is greater than such Purchase Price; and
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(iii) The difference between the Market/Tender Offer Price and the
Purchase Price paid by the Parent for any shares of Company Common Stock
purchased pursuant to the exercise of the Option, multiplied by the number
of shares so purchased, but only if the Market/Tender Offer Price is
greater than such Purchase Price; PROVIDED, HOWEVER, that if the sum of
clauses (i), (ii) and (iii) is greater than an amount (the "Maximum
Repurchase Price") equal to the sum of (x) $15,000,000 and (y) the amount
set forth in (i) above, then such price shall be deemed to be the Maximum
Repurchase Price for all purposes hereunder.
(b) In the event the Parent exercises its rights under this Section 7, the
Company shall, within 10 business days thereafter, pay the required amount to
the Parent by wire transfer of immediately available funds to an account
designated by the Parent and the Parent shall surrender to the Company the
Option and the certificates evidencing the shares of Company Common Stock
purchased thereunder with respect to which the Parent then has Beneficial
Ownership, and the Parent shall warrant that it has sole record ownership and
Beneficial Ownership of such shares and that the same are free and clear of all
liens, claims, charges, restrictions and encumbrances of any kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by the Parent and reasonably
acceptable to the Company.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving the Company or any purchase, lease or other acquisition
of all or a substantial portion of the assets of the Company, other than any
such transaction which would not constitute an Acquisition Transaction pursuant
to the provisos to Section 3(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Company Common Stock, provided that no such event shall constitute a Repurchase
Event unless an Extension Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that the Company's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Extension Event
shall have occurred prior to the occurrence of an Exercise Termination Event.
8. REPURCHASE AT OPTION OF THE COMPANY AND RIGHT OF FIRST REFUSAL.
(a) Except to the extent that the Parent shall have previously exercised
its rights under Section 7, at the request of the Company during the six-month
period commencing following the first occurrence of an Exercise Termination
Event, the Company may repurchase from the Parent and the Parent shall sell to
the Company all (but not less than all, subject to Section 10) of the Company
Common Stock acquired by the Parent pursuant hereto and with respect to which
the Parent has Beneficial Ownership at the time of such repurchase at a price
per share equal to the greater of (i) 110% of the Market/Tender Offer Price,
(ii) the Per Share Repurchase Price or (iii) the quotient obtained by dividing
(x) the sum of (A) the aggregate Purchase Price paid for the shares so
repurchased plus (B) interest on the aggregate Purchase Price paid for the
shares so repurchased from the date of purchase to the date of repurchase at
the highest rate of interest announced by the Parent as its prime or base
lending or reference rate during such period, less any dividends received on
the shares so repurchased, plus (C) the Parent's reasonable out-of-pocket
expenses incurred in connection with the transactions contemplated by the
Merger Agreement, including, without limitation, legal, accounting and
investment banking fees by (y) the number of shares so repurchased. Any
repurchase under this Section 8(a) shall be consummated in accordance with
Section 7(b).
(b) If at any time after the occurrence of a Purchase Event and prior to
the expiration of the Option the Parent shall desire to sell, assign, transfer
or otherwise dispose of the Option or all or any of the shares of Company
Common Stock acquired by it pursuant to the Option, it shall give the Company
written notice of the proposed transaction (an "Offeror's Notice"), identifying
the proposed transferee, and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer
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by the Parent to the Company, which may be accepted within 10 business days of
the receipt of such Offeror's Notice, on the same terms and conditions and at
the same price at which the Parent is proposing to transfer the Option or such
shares to a third party. The purchase of the Option or any such shares by the
Company shall be closed within 10 business days of the date of the acceptance
of the offer and the purchase price shall be paid to the Parent by wire
transfer of immediately available funds to an account designated by the Parent.
In the event of the failure or refusal of the Company to purchase the Option or
all the shares covered by the Offeror's Notice or if any Governmental Entity
disapproves the Company's proposed purchase of the Option or such shares, the
Parent may, within 60 days from the date of the Offeror's Notice, sell all, but
not less than all, of the Option or such shares to such third party at no less
than the price specified and on terms no more favorable to the purchaser than
those set forth in the Offeror's Notice. The requirements of this Section 8(b)
shall not apply to (A) any disposition as a result of which the proposed
transferee would Beneficially Own not more than 2% of the voting power of the
Company, (B) any disposition of Company Common Stock by a Person to whom the
Parent has sold shares of Company Common Stock issued upon exercise of the
Option or (C) any sale by means of a public offering registered under the
Securities Act.
9. REGISTRATION RIGHTS. Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, the Company shall, if requested
by any holder or Beneficial Owner of shares of Company Common Stock issued upon
exercise of the Option (except any Beneficial Owner or holder who acquired all
of such Beneficial Owner's or holder's shares in a transaction exempt from the
requirements of Section 8(b) by reason of clause (A) thereof) (each a
"Holder"), delivered within six months of such Purchase Event, as expeditiously
as possible file a registration statement on a form for general use under the
Securities Act if necessary in order to permit the sale or other disposition of
the shares of Company Common Stock that have been acquired upon exercise of the
Option in accordance with the intended method of sale or other disposition
requested by any such Holder (it being understood and agreed that any such sale
or other disposition shall be effected on a widely distributed basis so that,
upon consummation thereof, no purchaser or transferee shall Beneficially Own
more than 2% of the shares of Company Common Stock then outstanding). Each such
Holder shall provide all information reasonably requested by the Company for
inclusion in any registration statement to be filed hereunder. The Company
shall use its best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180
days from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other dispositions. The
registration effected under this Section 9 shall be at the Company's expense
except for underwriting commissions and the fees and disbursements of such
Holders' counsel attributable to the registration of such Company Common Stock.
In no event shall the Company be required to effect more than two registrations
hereunder. The filing of the registration statement hereunder may be delayed
for such period of time as may reasonably be required to facilitate any public
distribution by the Company of Company Common Stock or if a special audit of
the Company would otherwise be required in connection therewith. The foregoing
notwithstanding, if at the time of any request by any Holder for registration
of Option Shares as provided above the Company is in registration with respect
to an underwritten public offering by the Company of shares of Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters or, if none, the sole underwriter or underwriters, of such
offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by the Company, the
number of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; PROVIDED, HOWEVER, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and the Company in the aggregate; and
PROVIDED FURTHER, HOWEVER, that if such reduction occurs, then the Company
shall file a registration statement for the balance as promptly as practicable
thereafter as to which no reduction pursuant to this Section 9 shall be
permitted or occur and the Holder shall thereafter be entitled to one
additional registration and the six-month period referred to in the first
sentence of this Section 9 shall be increased to 12 months. If requested by any
such Holder in connection with such registration, the Company shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating
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itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for parties
similarly situated. Upon receiving any request for registration under this
Section 9 from any Holder, the Company agrees to send a copy thereof to any
other Person known to the Company to be entitled to registration rights under
this Section 9, in each case by promptly mailing the same, postage prepaid, to
the address of record of the Persons entitled to receive such copies, and each
such other Person, whether or not known by the Company to be entitled thereto,
shall be permitted to include shares of Company Common Stock with respect to
which such Person is entitled to such registration rights in such registration
requested by such Holder, to the extent reasonably practicable.
10. SEVERABILITY. Any term, provision, covenant or restriction contained
in this Option Agreement held by a Governmental Entity of competent
jurisdiction to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this Option
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Option Agreement that is found to be so broad as
to be unenforceable shall be interpreted to be as broad as is enforceable. If
for any reason such Governmental Entity determines that applicable law will not
permit the Parent or any other Person to acquire, or the Company to repurchase
or purchase, the full number of shares of Company Common Stock provided in
Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is the express
intention of the parties hereto to allow the Parent or such other Person to
acquire, or the Company to repurchase or purchase, such lesser number of shares
as may be permissible, without any amendment or modification hereof.
11. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
(b) ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Option Agreement and the Merger Agreement contain the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral.
(c) SUCCESSORS; NO THIRD-PARTY BENEFICIARIES. The terms and conditions of
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(d) ASSIGNMENT. Other than as provided in Sections 8 and 9 hereof, neither
of the parties hereto may sell, transfer, assign or otherwise dispose of any of
its rights or obligations under this Option Agreement or the Option created
hereunder to any other Person (whether by operation of law or otherwise),
without the express written consent of the other party.
(e) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 10.4 of the Merger Agreement (which is incorporated
herein by reference).
(f) COUNTERPARTS. This Option Agreement may be executed in counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
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(g) SPECIFIC PERFORMANCE. The parties hereto agree that if for any reason
the Parent or the Company shall have failed to perform its obligations under
this Option Agreement, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Option Agreement.
(h) GOVERNING LAW. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and entirely to be performed within such state. Nothing in this
Option Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of applicable law, rule or regulation.
(i) REGULATORY APPROVALS; SECTION 16(B). If, in connection with (A) the
exercise of the Option under Section 3 or a sale by the Parent to a third party
under Section 8, (B) a repurchase by the Company under Section 7 or a
repurchase or purchase by the Company under Section 8, prior notification to or
approval of any Governmental Entity is required, then the required notice or
application for approval shall be promptly filed and expeditiously processed
and periods of time that otherwise would run pursuant to such Sections shall
run instead from the date on which any such required notification period has
expired or been terminated or such approval has been obtained, and in either
event, any requisite waiting period shall have passed. In the case of clause
(A) of this subsection (i), such filing shall be made by the Parent and in the
case of clause (B) of this subsection (i), such filing shall be made by the
Company provided that each of the Parent and the Company shall use its best
efforts to make all filings with, and to obtain consents of, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated hereby. Periods of time that otherwise would run pursuant to
Sections 3, 7 or 8 shall also be extended to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act.
(j) NO BREACH OF MERGER AGREEMENT. Nothing contained in this Option
Agreement shall, and performance by any party hereto of any of its obligations
under this Option Agreement in accordance with their terms shall not,
constitute a breach of any of the provisions of the Merger Agreement.
(k) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision, but
only by delivery of a written instrument executed by such party. This Option
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
REPUBLIC SECURITY FINANCIAL CORPORATION
By /s/ Rudy E. Schupp
--------------------------------------
Name: Rudy E. Schupp
Title: Chairman and CEO
FIRST PALM BEACH BANCORP, INC.
By /s/ Louis O. Davis, Jr.
--------------------------------------
Name: Louis O. Davis, Jr.
Title: President and CEO
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ANNEX C
[LETTERHEAD OF SANDLER O'NEILL & PARTNERS, L.P.]
September 25, 1998
Board of Directors
Republic Security Financial Corporation
4400 Congress Avenue
West Palm Beach, FL 33402-4298
Ladies and Gentlemen:
Republic Security Financial Corporation ("Republic") and First Palm Beach
Bancorp, Inc. ("First Palm Beach") have entered into an Agreement and Plan of
Merger, dated as May 27, 1998 (the "Agreement"), pursuant to which First Palm
Beach will be merged with and into Republic (the "Merger"). Upon consummation
of the Merger, each share of First Palm Beach common stock, par value $0.01 per
share, issued and outstanding immediately prior to the Merger (together with
the rights attached thereto issued pursuant to the Rights Agreement dated as of
January 23, 1995 between First Palm Beach and Mellon Bank, N.A., as Rights
Agent), other than certain shares specified in the Agreement, will be converted
into the right to receive 4.194 shares (the "Exchange Ratio") of the common
stock, par value $0.01 per share (together with the rights attached thereto to
be issued pursuant to the Rights Agreement dated as of April 14, 1995 between
Republic and IBJ Schroder Bank and Trust Company, as Rights Agent), of
Republic. The terms and conditions of the Merger are more fully set forth in
the Agreement. You have requested our opinion as to the fairness of the
Exchange Ratio to the holders of shares of Republic common stock from a
financial point of view.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other
corporate transactions. In connection with this opinion, we have reviewed,
among other things: (i) the Agreement and exhibits thereto; (ii) the Stock
Option Agreement, dated as of May 27, 1998, by and between Republic and First
Palm Beach; (iii) certain publicly available financial statements of Republic
and other historical financial information provided by Republic that we deemed
relevant; (iv) certain publicly available financial statements of First Palm
Beach and other historical financial information provided by First Palm Beach
that we deemed relevant; (v) certain financial analyses and forecasts of
Republic prepared by and reviewed with management of Republic and the views of
senior management of Republic regarding Republic's past and current business
operations, results thereof, financial condition and future prospects,
including the pro forma impact of Republic's acquisition of Unifirst Federal
Savings Bank; (vi) certain financial analyses and forecasts of First Palm Beach
prepared by and reviewed with management of First Palm Beach and the views of
senior management of First Palm Beach regarding First Palm Beach's past and
current business operations, results thereof, financial condition and future
prospects; (vii) the pro forma impact of the Merger on Republic; (viii) the
publicly reported historical price and trading activity for Republic and First
Palm Beach's common stock, including a comparison of certain financial and
stock market information for Republic and First Palm Beach with similar
publicly available information for certain other companies the securities of
which are publicly traded; (ix) the financial terms of recent business
combinations in the savings institution industry, to the extent publicly
available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant.
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In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability for the accuracy or completeness thereof. We
did not make an independent evaluation or appraisal of the specific assets, the
collateral securing assets or the liabilities (contingent or otherwise) of
Republic or First Palm Beach or any of their subsidiaries, or the
collectibility of any such assets, nor have we been furnished with any such
evaluations or appraisals. With respect to the financial projections reviewed
with management, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
respective managements of the respective future financial performances of
Republic and First Palm Beach and that such performances will be achieved, and
we express no opinion as to such financial projections or the assumptions on
which they are based. We have also assumed that there has been no material
change in Republic's or First Palm Beach's assets, financial condition, results
of operations, business or prospects since the date of the last financial
statements made available to us. We have assumed in all respects material to
our analysis that Republic and First Palm Beach will remain as going concerns
for all periods relevant to our analyses, that all of the representations and
warranties contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements, that the
conditions precedent in the Agreement are not waived and that the Merger will
be accounted for as a pooling of interests.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect
this opinion. We have not undertaken to update, revise or reaffirm this opinion
or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to what the value of Republic common stock will
be when issued to First Palm Beach's shareholders pursuant to the Agreement or
the prices at which Republic's or First Palm Beach's common stock will trade at
any time.
We have acted as Republic's financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion.
In the ordinary course of our business, we may actively trade the debt and
equity securities of Republic and First Palm Beach for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Our opinion is directed to the Board of Directors of Republic in
connection with its consideration of the Merger and is not to be quoted or
referred to, in whole or in part, in a registration statement, prospectus,
proxy statement or in any other document, nor shall this opinion be used for
any other purposes, without Sandler O'Neill's prior written consent; PROVIDED,
HOWEVER, that we hereby consent to the inclusion of this opinion as an appendix
to Republic's and First Palm Beach's Joint Proxy Statement/Prospectus dated
the date hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair to the holders of shares of Republic
common stock from a financial point of view.
Very truly yours,
Sandler O'Neill & Partners, L.P.
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<PAGE>
ANNEX D
KEEFE, BRUYETTE & WOODS, INC.
SPECIALISTS IN FINANCIAL SERVICES
TWO WORLD TRADE CENTER 85TH FLOOR NEW YORK, NY 10048
TOLL FREE TELEPHONE
1-800-966-1559 212-323-8300
September 25, 1998
The Board of Directors
First Palm Beach Bancorp, Inc.
450 South Australian Avenue
West Palm Beach, FL 33402-2326
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common stockholders of First Palm Beach
Bancorp, Inc. ("FFPB") of the exchange ratio in the proposed merger ("the
Merger") of FFPB with and into Republic Security Financial Corporation ("RSFC")
pursuant to the Agreement and Plan of Merger ("Agreement") dated as of May 27,
1998 between FFPB and RSFC. It is our understanding that the Merger will be
structured as a pooling of interests under generally accepted accounting
principles and will be a tax-free reorganization under the Internal Revenue
Code.
As is more specifically set forth in the Merger Agreement, upon
consummation of the Merger, each outstanding share of the common stock of FFPB,
par value $.01 per share ("FFPB Common Stock"), will be converted into and
exchanged for 4.194 (the "Exchange Ratio") shares of RSFC ("RSFC Common
Stock"), $.01 par value per share.
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), as part of its
investment banking business, is continually engaged in the valuation of bank
holding companies and banks, thrift holding companies and thrifts and their
securities in connection with mergers and acquisitions, underwriting, private
placements, competitive bidding processes, market making as a NASD market
maker, and valuations for various other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, trade the securities of RSFC or FFPB,
for our own account, and for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities. To the extent
we have any such positions as of the date of this opinion it has been disclosed
to FFPB. KBW has served as financial advisor to FFPB in the negotiation of the
Merger Agreement and in rendering this fairness opinion and will receive a fee
from FFPB for those services.
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of RSFC and FFPB
and the Merger, including among other things, the following:
i. Reviewed the Merger Agreement;
ii. Reviewed certain historical financial and other information
concerning FFPB for the four years ending September 30, 1997, including
FFPB's Annual Report to Stockholders and Annual Reports on Forms 10-K, and
interim quarterly reports on Form 10-Q;
iii. Reviewed certain historical financial and other information
concerning RSFC for the three years ending December 31, 1997, including
RSFC's Annual Report to Stockholders and Annual Reports on Forms 10-K, and
interim quarterly reports on Form 10-Q;
D-1
<PAGE>
iv. Reviewed and studied the historical stock prices and trading volumes
of the common stock of both FFPB and RSFC;
v. Held discussions with senior management of FFPB and RSFC with respect
to their past and current financial performance, financial condition and
future prospects;
vi. Reviewed certain internal financial data, projections and other
information of FFPB and RSFC, including financial projections prepared by
management;
vii. Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared FFPB and RSFC from a financial point of view with
certain of these institutions;
viii. Reviewed the financial terms of certain recent business
combinations in the banking industry that we deemed comparable or otherwise
relevant to our inquiry; and
ix. Conducted such other financial studies, analyses and investigations
and reviewed such other information as we deemed appropriate to enable us
to render our opinion.
In conducting our review and arriving at our opinion, we have relied upon
the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We have relied upon the management of FFPB and RSFC as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us, and we
have assumed that such forecasts and projections reflect the best currently
available estimates and judgments of such managements and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such managements. We are not experts in the independent
verification of the adequacy of allowances for loan and lease losses and we
have assumed that the current and projected aggregate reserves for loan and
lease losses for FFPB and RSFC are adequate to cover such losses. We did not
make or obtain any independent evaluations or appraisals of any assets or
liabilities of FFPB, RSFC, or any of their respective subsidiaries nor did we
verify any of FFPB's or RSFC's books or records or review any individual loan
or credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and financial position and results of operations of FFPB and
RSFC; (ii) the assets and liabilities of FFPB and RSFC; and (iii) the nature
and terms of certain other merger transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made
available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
FFPB and its stockholders.
Very truly yours,
/s/ KEEFE, BRUYETTE & WOODS, INC.
---------------------------------
Keefe, Bruyette & Woods, Inc.
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<PAGE>
ANNEX E
TEXT OF PROPOSED AMENDMENT TO RSFC'S ARTICLES OF INCORPORATION
The Articles of Incorporation of this corporation are to be amended as
follows:
1. Article IV thereof is amended in its entirety to read as follows:
The aggregate number of shares the corporation shall have authority to
issue is 520,000,000 shares, consisting of 500,000,000 shares of Common
Stock, par value $.01 per share, and 20,000,000 shares of Preferred Stock,
par value $.01 per share. The Preferred Stock consists of 5,000,000 shares
of Series B Junior Participating Preferred Stock and 15,000,000 shares
authorized for designation into series.
2. Article V. Section 6. Cumulative Convertible Preferred Stock, Series C
is deleted in its entirety.
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ANNEX F
REPUBLIC SECURITY FINANCIAL CORPORATION
1997 PERFORMANCE INCENTIVE PLAN
The purpose of the Republic Security Financial Corporation 1997
Performance Incentive Plan (the "Plan") is to encourage designated directors,
officers and employees of Republic Security Financial Corporation (the
"Company") and its subsidiaries to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and aligning the
economic interests of the participants with those of the shareholders.
1. ADMINISTRATION
(a) COMMITTEE. The Plan shall be administered and interpreted by a
committee (the "Committee") appointed by the Board of Directors of the Company
(the "Board"). The Committee shall consist of three or more persons appointed
by the Board, all of whom shall be "outside directors" as defined under section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and
related Treasury regulations, and "non-employee directors" as defined under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") ("Non-employee Directors").
(b) COMMITTEE AUTHORITY. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii)determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued Grant and (v) deal with any other matters
arising under the Plan.
(c) COMMITTEE DETERMINATIONS. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
2. GRANTS
Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options"), restricted stock as described in Section 6 ("Restricted Stock"),
stock appreciation rights as described in Section 7 ("SARs"), performance units
as described in Section 8 ("Performance Units"), performance shares as
described in Section 8 ("Performance Shares"), phantom stock as described in
Section 9 ("Phantom Stock"), and dividend equivalents as described in Section
10 ("Dividend Equivalents") (hereinafter collectively referred to as "Grants").
All Grants shall be subject to the terms and conditions set forth herein and to
such other terms and conditions consistent with this Plan as the Committee
deems appropriate and as are specified in writing by the Committee to the
individual in a grant instrument (the "Grant Instrument") or an amendment to
the Grant Instrument. The Committee shall approve the form and provisions of
each Grant Instrument. Grants under a particular Section of the Plan need not
be uniform as among the grantees.
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3. SHARES SUBJECT TO THE PLAN
(a) SHARES AUTHORIZED. Subject to the adjustment specified in Section 3(c)
below, the aggregate number of shares of common stock of the Company ("Common
Stock") that may be issued or transferred under the Plan is 2,000,000. The
shares may be authorized but unissued shares of Common Stock or reacquired
shares of Common Stock, including shares purchased by the Company on the open
market for purposes of the Plan. If and to the extent Options or SARs granted
under the Plan terminate, expire, or are canceled, forfeited, exchanged or
surrendered without having been exercised or if any shares of Restricted Stock,
Performance Units, Performance Shares or Phantom Stock are forfeited, the
shares (if any) subject to such Grants shall again be available for purposes of
the Plan.
(b) INDIVIDUAL LIMIT. During any calendar year, no individual may be
granted Options or other Grants under the Plan that, in the aggregate, may be
settled by delivery of more than 100,000 shares of Common Stock, subject to
adjustment as provided in Section 3(c). In addition, with respect to Grants the
value of which is based on the Fair Market Value of Common Stock and that may
be settled in cash (in whole or in part), no individual may be paid during any
calendar year cash amounts relating to such Grants that exceed the greater of
the Fair Market Value (as defined in Section 5(b)(iii)) of the number of shares
of Common Stock set forth in the preceding sentence either at the date of grant
or at the date of settlement. This provision sets forth two separate
limitations, so that Grants that may be settled solely by delivery of Common
Stock will not operate to reduce the amount or value of cash-only Grants, and
vice versa; nevertheless, Grants that may be settled in Common Stock or cash
must not exceed either limitation.
With respect to Grants, the value of which is not based on the Fair Market
Value of Common Stock, no individual may receive during any calendar year cash
or shares of Common Stock with a Fair Market Value at date of settlement that,
in the aggregate, exceeds $1,000,000.
(c) ADJUSTMENTS. If there is any change in the number or kind of shares of
Common Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Common Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Common Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Common
Stock available for Grants, the maximum number of shares of Common Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants may
be appropriately adjusted by the Committee to reflect any increase or decrease
in the number of, or change in the kind or value of, issued shares of Common
Stock to preclude, to the extent practicable, the enlargement or dilution of
rights and benefits under such Grants; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated. Any adjustments
determined by the Committee shall be final, binding and conclusive. If and to
the extent that any such change in the number or kind of shares of Common Stock
outstanding is effected solely by application of a mathematical formula (e.g.,
a 2-for-1 stock split), the adjustment described in this Section 3(c) shall be
made and shall occur automatically by application of such formula, without
further action by the Committee.
4. ELIGIBILITY FOR PARTICIPATION
(a) ELIGIBLE PERSONS. All directors, officers and employees of the Company
and its subsidiaries ("Participants"), including Non-employee Directors of the
Company, shall be eligible to participate in the Plan.
(b) SELECTION OF GRANTEES. The Committee shall select the Participants to
receive Grants and shall determine the number of shares of Common Stock subject
to a particular Grant, and/or shall establish
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such other terms and conditions applicable to such Grant, in such manner as the
Committee determines. Participants who receive Grants under this Plan shall
hereinafter be referred to as "Grantees."
5. GRANTING OF OPTIONS
(a) NUMBER OF SHARES. The Committee shall determine the number of shares
of Common Stock that will be subject to each Grant of Options.
(b) TYPE OF OPTION AND PRICE.
(i) The Committee may grant Incentive Stock Options that are intended to
qualify as "incentive stock options" within the meaning of section 422 of the
Code or Nonqualified Stock Options that are not intended so to qualify or any
combination of Incentive Stock Options and Nonqualified Stock Options, all in
accordance with the terms and conditions set forth herein. Non-employee
Directors shall not be eligible to receive Incentive Stock Options.
(ii) The purchase price (the "Exercise Price") of Common Stock subject to
an Option shall be determined by the Committee and may be equal to or greater
than the Fair Market Value (as defined below) of a share of Common Stock on the
date the Option is granted; provided, however, that an Incentive Stock Option
may not be granted to a Participant who, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary of the Company,
unless the Exercise Price per share is not less than 110% of the Fair Market
Value of Common Stock on the date of grant.
(iii) The Fair Market Value per share shall be the closing sale price of a
share of Common Stock on the NASDAQ National Market (or such other exchange on
which the Common Stock may hereafter be listed), or if there is no such sale on
the relevant date, then on the last previous day on which a sale was reported.
(c) OPTION TERM. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to a Participant who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or
subsidiary of the Company, may not have a term that exceeds five years from the
date of grant.
(d) EXERCISABILITY OF OPTIONS. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.
(i) Except as provided below, an Option may only be exercised while the
Grantee is employed by the Company or a member of the Board of Directors. In
the event that a Grantee ceases to be so employed (or a member of the Board of
Directors) for any reason other than a "disability," death, retirement, or
termination by the Company (or, in the case of a Non-employee Director who is
nominated for reelection, failure to be reelected by the shareholders), any
Option held by the Grantee shall terminate at the close of business on the
Grantee's last day of employment (or service as a director).
(ii) In the event the Grantee ceases to be employed by the Company because
the Grantee is "disabled," or the Grantee dies or retires in accordance with
the Company's retirement policies, any Nonqualified Stock Option or any
Incentive Stock Option in the case of the Grantee's death, which is otherwise
exercisable by the Grantee shall terminate unless exercised within two years
after the date on which the Grantee ceases to be employed by the Company (or
within such shorter period of time as
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may be specified by the Committee), but in any event no later than the date of
expiration of the Option term. Any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
(iii) In the event the Grantee ceases to be employed by the Company
because the Grantee is "disabled," any Incentive Stock Option that is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such shorter period of time as may be specified by the Committee), but
in any event no later than the date of expiration of the Option term. Any of
the Grantee's Options that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by the Company shall terminate as of
such date.
(iv) In the event the Grantee ceases to be employed by the Company because
the Grantee retires in accordance with the Company's retirement policies or
because the Grantee's employment is terminated by the Company, with or without
cause (or, in the case of a Non-employee Director, because of the Grantee's
failure to be reelected as a director by the shareholders), any Option that is
otherwise exercisable by the Grantee shall terminate unless exercised within 90
days after the date on which the Grantee ceases to be employed by the Company
(or within such shorter period of time as may be specified by the Committee),
but in any event no later than the date of expiration of the Option term. Any
of the Grantee's Options that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by the Company or a member of the Board
of Directors shall terminate as of such date.
(v) For purposes of this Section 5(e) and Sections 6, 7 and 8:
(A) The term "Company" shall mean the Company and its subsidiary
corporations.
(B) "Disability" or "disabled" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(f) EXERCISE OF OPTIONS. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Common Stock owned by the
Grantee (including Common Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including attestation
(on a form prescribed by the Committee) to ownership of shares of Common Stock
having a Fair Market Value on the date of exercise equal to the Exercise Price,
or payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. In addition, the Committee may
authorize loans by the Company to Grantees in connection with the exercise of
an Option, upon such terms and conditions that the Committee, in its sole
discretion, deems appropriate. Shares of Common Stock used to exercise an
Option shall have been held by the Grantee for the requisite period of time to
avoid adverse accounting consequences to the Company with respect to the
Option. The Grantee shall pay the Exercise Price and the amount of any
withholding tax due (pursuant to Section 11) at the time of exercise. Shares of
Common Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required withholding is made.
(g) LIMITS ON INCENTIVE STOCK OPTIONS. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option.
(h) DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with Options granted under the Plan. Such dividends may be paid
currently or accrued as contingent cash
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obligations and may be payable in cash or shares of Common Stock, upon such
terms as the Committee may establish, including the achievement of specific
performance goals.
6. RESTRICTED STOCK GRANTS
The Committee may issue or transfer shares of Common Stock to a Grantee
under a Grant of Restricted Stock, upon such terms as the Committee deems
appropriate. The following provisions are applicable to Restricted Stock:
(a) GENERAL REQUIREMENTS. Shares of Common Stock issued or transferred
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate including, without limitation,
restrictions based upon the achievement of specific performance goals. The
period of time during which the Restricted Stock will remain subject to
restrictions will be designated in the Grant Instrument as the "Restriction
Period."
(b) NUMBER OF SHARES. The Committee shall determine the number of shares
of Common Stock to be issued or transferred pursuant to a Restricted Stock
Grant and the restrictions applicable to such shares.
(c) REQUIREMENT OF EMPLOYMENT. If the Grantee ceases to be employed by the
Company during the Restriction Period (or, in the case of a Non-employee
Director, ceases to be a member of the Board of Directors), or if other
specified conditions are not met, the Restricted Stock Grant shall terminate as
to all shares covered by the Grant as to which the restrictions have not lapsed
at the close of business on the Grantee's last day of employment, and those
shares of Common Stock must be immediately returned to the Company. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 12(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions
on such shares have lapsed. The Committee may determine that the Company will
not issue certificates for shares of Restricted Stock until all restrictions on
such shares have lapsed, or that the Company will retain possession of
certificates for shares of Restricted Stock until all restrictions on such
shares have lapsed.
(e) RIGHT TO VOTE AND TO RECEIVE DIVIDENDS. Unless the Committee
determines otherwise, during the Restriction Period the Grantee shall not have
the right to vote shares of Restricted Stock. During the Restriction Period the
Grantee shall have the right to receive any dividends or other distributions
paid on such shares, subject to any restrictions deemed appropriate by the
Committee. Such dividends may be paid currently, accrued as contingent cash
obligations, or converted into additional shares of Restricted Stock, upon such
terms as the Committee may establish, including the achievement of specific
performance goals.
(f) LAPSE OF RESTRICTIONS. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Stock Grants, that the restrictions
shall lapse without regard to any Restriction Period.
7. STOCK APPRECIATION RIGHTS
(a) GENERAL REQUIREMENTS. The Committee may grant SARs to a Grantee
separately or in tandem with any Option (for all or a portion of the applicable
Option). Tandem SARs may be granted either at
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the time the Option is granted or at any time thereafter while the Option
remains outstanding; provided, however, that, in the case of an Incentive Stock
Option, SARs may be granted only at the time of grant of the Incentive Stock
Option. The Committee shall establish the base amount of the SAR at the time
the SAR is granted. Unless the Committee determines otherwise, the base amount
of each SAR shall be equal to the per share Exercise Price of the related
Option or, if there is no related Option, the Fair Market Value of a share of
Common Stock as of the date of grant of the SAR.
(b) TANDEM SARS. In the case of tandem SARs, the number of SARs granted to
a Grantee that shall be exercisable during a specified period shall not exceed
the number of shares of Common Stock that the Grantee may purchase upon the
exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Common Stock covered by such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Common Stock.
(c) EXERCISABILITY. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument;
provided, however, that the term of the SAR shall not exceed ten years. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by the Company (or, in the case of a Non-employee Director, ceases to
be a member of the Board of Directors) or during the applicable period after
termination of employment (or Board of Directors' service) as described in
Section 5(e) for Options. For purposes of the preceding sentence, the rules
applicable to a tandem SAR shall be the rules applicable under Section 5(e) to
the Option to which it relates, and the rules applicable to any other SAR shall
be the rules applicable under Section 5(e) and a Nonqualified Stock Option. A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable.
(d) VALUE OF SARS. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Common Stock or
a combination thereof. The stock appreciation for an SAR is the amount by which
the Fair Market Value of the underlying Common Stock on the date of exercise of
the SAR exceeds the base amount of the SAR as described in subsection (a).
(e) FORM OF PAYMENT. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, shares of Common
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Common Stock
to be received, shares of Common Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Common Stock are to be
received upon exercise of an SAR, cash shall be delivered in lieu of any
fractional share.
8. PERFORMANCE UNITS AND PERFORMANCE SHARES
(a) GENERAL REQUIREMENTS. The Committee may grant Performance Units or
Performance Shares to a Grantee (other than Non-employee Directors). Each
Performance Unit/Share shall represent the right of the Grantee to receive an
amount based on the value of the Performance Unit/Share, if performance goals
established by the Committee are met. A Performance Unit shall have a value
based on such measurements or criteria as the Committee determines. A
Performance Share shall have a value equal to the Fair Market Value of a share
of Common Stock. The Committee shall determine the number of Performance
Units/Shares to be granted and the requirements applicable to such Units/
Shares.
(b) PERFORMANCE PERIOD AND PERFORMANCE GOALS. When Performance
Units/Shares are granted, the Committee shall establish the performance period
during which performance shall be measured (the "Performance Period"),
performance goals applicable to the Units/Shares ("Performance Goals") and such
other conditions of the Grant as the Committee deems appropriate.
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(c) PAYMENT WITH RESPECT TO PERFORMANCE UNITS/SHARES. At the end of each
Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Units/Shares are met,
the value of the Performance Units (if applicable) and the amount, if any, to
be paid with respect to the number of Performance Units/Shares that have been
earned. Payments with respect to Performance Units/Shares shall be made in
cash, in Common Stock, or in a combination of the two, as determined by the
Committee.
(d) REQUIREMENT OF EMPLOYMENT. If the Grantee ceases to be employed by the
Company during a Performance Period, or if other conditions established by the
Committee are not met, the Grantee's Performance Units/Shares shall be
forfeited at the close of business on the Grantee's last day of employment. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate. If the Grantee ceases to be employed by
the Company after the expiration of a Performance Period but prior to payment,
payment shall be made to the Grantee or the Successor Grantee, if applicable.
9. PHANTOM STOCK
(a) GENERAL REQUIREMENTS. The Committee may grant Phantom Stock to a
Grantee in such amounts and upon such terms, and at any time and from time to
time, as shall be determined by the Committee.
(b) VALUE OF PHANTOM STOCK. The Committee shall establish the initial
value of the Phantom Stock at the time of grant which may be greater than,
equal to or less than the Fair Market Value of a share of Common Stock.
(c) DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with Phantom Stock granted under the Plan. Such dividends may be
paid currently or accrued as contingent cash obligations and may be payable in
cash or shares of Common Stock, upon such terms as the Committee may establish,
including the achievement of specific performance goals.
(d) FORM AND TIMING OF PAYMENT. The Committee shall determine whether the
Phantom Stock shall be paid in the form of cash, shares of Common Stock or a
combination of the two, in such proportion as the Committee deems appropriate.
Cash payments shall be in an amount equal to the Fair Market Value on the
payment date of the number of shares of Common Stock equal to the number of
shares of Phantom Stock with respect to which payment is made. The number of
shares of Common Stock distributed in settlement of a Phantom Stock Grant shall
equal the number of shares of Phantom Stock with respect to which settlement is
made. Payment shall be made in accordance with the terms and at such times as
determined by the Committee at the time of grant.
(e) REQUIREMENT OF EMPLOYMENT. If the Grantee ceases to be employed by the
Company (or, in the case of a Non-employee Director, ceases to be a member of
the Board of Directors) prior to becoming vested or otherwise entitled to
payment, the Grantee's Phantom Stock shall be forfeited at the close of
business on the Grantee's last day of employment. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
10. DIVIDEND EQUIVALENTS
(a) GENERAL REQUIREMENTS. The Committee may grant Dividend Equivalents to
a Grantee in such number and upon such other terms, including in either case
the achievement of specific performance goals, and at any time and from time to
time, as shall be determined by the Committee. Each Dividend Equivalent shall
represent the right to receive an amount in cash, or shares of Common Stock
having a Fair Market Value, equal to the amount of dividends paid on one share
of Common Stock during such period as may be established by the Committee.
(b) FORM AND TIMING OF PAYMENT. Dividend Equivalents may be paid currently
or accrued as contingent cash obligations, upon such terms as the Committee may
establish. The Committee shall
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determine whether Dividend Equivalents shall be paid in the form of cash,
shares of Common Stock or a combination of the two, in such proportion as the
Committee deems appropriate. The number of any shares of Common Stock payable
in satisfaction of Dividend Equivalents shall be determined by dividing the
amount credited to the Grantee with respect to such Dividend Equivalents by the
Fair Market Value on the day instructions are given to the Company's Chief
Executive Officer or transfer agent to issue or purchase such shares. Cash
shall be delivered in lieu of any fractional shares. Payment shall be made at
such times as determined by the Committee at the time of grant.
(c) REQUIREMENT OF EMPLOYMENT. If the Grantee ceases to be employed by the
Company (or, in the case of a Non-employee Director, ceases to be a member of
the Board of Directors) prior to becoming entitled to payment, the Grantee's
Dividend Equivalents shall be forfeited at the close of business on the
Grantee's last day of employment. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
11. WITHHOLDING OF TAXES
(a) REQUIRED WITHHOLDING. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such Grants. In the case
of Options and other Grants paid in Common Stock, the Company may require the
Grantee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Grants, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Grants.
(b) ELECTION TO WITHHOLD SHARES. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option, SAR, Restricted Stock, Performance Units, Performance
Shares, Phantom Stock or Dividend Equivalents, any of which is paid in Common
Stock, by having shares withheld having a Fair Market Value up to an amount
that does not exceed the Grantee's maximum marginal tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
12. TRANSFERABILITY OF GRANTS
(a) NONTRANSFERABILITY OF GRANTS. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder). When a Grantee dies, the personal representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights which have not been extinguished by the Grantee's death. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable
laws of descent and distribution.
(b) TRANSFER OF NONQUALIFIED STOCK OPTIONS. Notwithstanding the foregoing,
the Committee may provide in a Grant Instrument that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and
conditions as were applicable to the Option immediately before the transfer.
13. GRANTS SUBJECT TO CODE SECTION 162(M)
(a) PERFORMANCE BASED GRANTS. Any Grant to a Grantee who is a "covered
employee" within the meaning of Code Section 162(m), the exercisability or
settlement of which is subject to the achievement
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of performance goals, shall qualify as "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. The performance goals for such a Grant shall consist of one or more
of the business criteria set forth in Section 13(b), below, and a targeted
level or levels of performance with respect to such criteria, as specified by
the Committee in writing prior to (or within 90 days after commencement of) the
applicable performance period. Performance goals shall be objective and shall
otherwise meet the requirements of Section 162(m)(4)(C) of the Code and
regulations thereunder. Performance goals may differ for such Grants to
different Grantees. The Committee shall specify the weighting to be given to
each performance goal for purposes of determining the final amount payable with
respect to any such Grant. The Committee may, in its discretion, reduce the
amount of a payout otherwise to be made in connection with such a Grant, but
may not exercise discretion to increase such amount. All determinations by the
Committee as to the achievement of performance goals shall be certified in
writing prior to payment under the Plan, in the form of minutes of a meeting of
the Committee or otherwise.
(b) BUSINESS CRITERIA. Unless and until the Committee proposes for
shareholder approval and the Company's shareholders approve a change in the
general business criteria set forth in this Section, the attainment of which
may determine the amount and/or vesting with respect to Grants, the business
criteria to be used for purposes of establishing performance goals for such
Grants shall be selected from among the following alternatives, each of which
may be based on absolute standards or peer industry group comparatives and may
be applied at various organizational levels (e.g., corporate, business unit,
branch):
<TABLE>
<S> <C>
(i) Total shareholder return
(ii) Common Stock price
(iii) Earnings per share
(iv) Dividend payout percentages
(v) Book values
(vi) Return on equity
(vii) Return on capital
(viii) Expense ratios
(ix) Regulatory ratings
(x) Loan production and loan portfolio amounts and mix
(xi) Non-performing assets levels or percentages
(xii) Efficiency ratios
(xiii) Deposit levels or mix
(xiv) CRA achievements
(xv) Employee performance as measured by "shoppers"
(xvi) Customer satisfaction as measured by surveys
(xvii) Market share
(xviii) Personal performance
(xix) Productivity measures
(xx) Completion of key projects
</TABLE>
In the event that Code Section 162(m) or applicable tax and/or securities
laws change to permit Committee discretion to alter the governing performance
measures without disclosing to shareholders and obtaining shareholder approval
of such changes and without thereby exposing the Company to potentially adverse
tax or other legal consequences, the Committee shall have sole discretion to
make such changes without obtaining shareholder approval.
14. DEFERRALS
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Grantee by virtue of the exercise of any Option or SAR, the lapse or waiver of
restrictions applicable to Restricted Stock, the satisfaction of any
requirements or objectives with respect to Performance Units/Shares or the
vesting or satisfaction of
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any terms applicable to Phantom Stock or Dividend Equivalents. If any such
deferral election is permitted or required, the Committee shall, in its sole
discretion, establish rules and procedures for such deferrals.
15. REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES
No Common Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Common Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition
of such shares of Common Stock as the Committee shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Common Stock issued or transferred under the Plan will be subject to such
stop-transfer orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend
be placed thereon.
16. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Committee may amend or terminate the Plan at any time;
provided, however, that the Committee shall not amend the Plan without
shareholder approval if such approval is required by Section 162(m) of the Code
or the rules of any stock exchange on which Common Stock is listed.
(b) TERMINATION OF PLAN. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Committee or is extended by the Committee with the
approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 22(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 22(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) GOVERNING DOCUMENT. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
17. FUNDING OF THE PLAN
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
18. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Participant or other person to any
claim or right to be granted a Grant under this Plan, and no Grant shall
entitle any Participant or other person to any future Grant. Neither this Plan
nor any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other
employment rights.
19. NO FRACTIONAL SHARES
No fractional shares of Common Stock shall be issued or delivered pursuant
to the Plan or any Grant. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
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<PAGE>
20. HEADINGS
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
21. EFFECTIVE DATE OF THE PLAN
This Plan shall be effective on the date of its approval by the
shareholders of the Company.
22. MISCELLANEOUS
(a) GRANTS IN CONNECTION WITH CORPORATE TRANSACTIONS AND OTHERWISE.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of any bank or
corporation, or assets thereof, including Grants to employees thereof who
become Participants, or for other proper corporate purposes, or (ii) limit the
right of the Company to grant stock options or make other awards outside of
this Plan. Without limiting the foregoing, the Committee may make a Grant to an
employee of another corporation who becomes a Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation. The terms and conditions of the substitute grants may vary from
the terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the
substitute grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Options and SARs and
the obligations of the Company to issue or transfer shares of Common Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In
particular, and without otherwise limiting the provisions of this Section
21(b), no Grantee subject to section 16 of the Exchange Act may exercise any
Option or SAR except in accordance with applicable requirements of Rule 16b-3
or its successors under the Exchange Act. The Committee may revoke any Grant if
it is contrary to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Committee may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this Section.
(c) GOVERNING LAW. The validity, construction, interpretation and effect
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Florida.
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[REPUBLIC SECURITY [FIRST PALM BEACH
FINANCIAL CORPORATION LOGO] BANCORP, INC. LOGO]
