<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
THE COLONIAL BANCGROUP, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 6711 63-0661573
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
ONE COMMERCE STREET, SUITE 800 (334) 240-5000
MONTGOMERY, ALABAMA 36104 (Telephone No.)
(Address of principal executive offices)
</TABLE>
---------------------
W. FLAKE OAKLEY, IV
SECRETARY
POST OFFICE BOX 1108
MONTGOMERY, ALABAMA 36101-1108
(Name and address of agent for service)
COPIES TO:
<TABLE>
<C> <C>
MICHAEL D. WATERS, ESQUIRE JOHN P. GREELEY, ESQ.
MILLER, HAMILTON, SNIDER & ODOM, L.L.C. SMITH, MACKINNON, GREELEY, BOWDOIN &
ONE COMMERCE STREET, SUITE 802 EDWARDS, P.A.
P.O. BOX 19 CITRUS CENTER, SUITE 800
MONTGOMERY, ALABAMA 36101-0019 255 S. ORANGE AVENUE
FACSIMILE: (334) 265-4533 ORLANDO, FLORIDA 32801
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE(1)
<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $2.50 per
share.......................... 906,207 Not Applicable $7,443,065.70 $2,255.47
==================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(f)(2) based upon the book value as of June
30, 1997 of $9.45 per share of 787,626 shares of company acquired, including
258,459 shares subject to stock purchase warrants and employee stock
options.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON EACH SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE> 2
FIRST INDEPENDENCE BANK OF FLORIDA
16740 SAN CARLOS BOULEVARD, SW
FORT MYERS, FLORIDA 33908
(941)466-7500
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , , 1997, AT P.M.
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of First Independence Bank of Florida ("First Independence") will be
held at the office of First Independence, located at 16740 San Carlos Boulevard,
SW, Fort Myers, Florida, on , , 1997, at p.m., local time, for the
following purposes:
1. Merger. To consider and vote upon an Agreement and Plan of Merger,
dated as of May 8, 1997 and amended as of July 7, 1997, between First
Independence, The Colonial BancGroup, Inc. ("BancGroup") and Colonial Bank,
a wholly owned subsidiary of BancGroup (the "Agreement"), and the proposed
merger (the "Merger") of First Independence with and into Colonial Bank,
pursuant to the Agreement. Colonial Bank will be the surviving corporation
in the Merger. Each share of common stock of First Independence outstanding
at the time of the Merger will be converted into the right to receive
shares of BancGroup Common Stock with a market value (as calculated in
accordance with the terms of the Agreement) at the time of the Merger of
$20.71 with cash paid in lieu of fractional shares at the market value of
such fractional shares, as described more fully in the accompanying Proxy
Statement and Prospectus. The Agreement is attached to the Proxy Statement
and Prospectus as Appendix A.
2. Other Matters. To transact such other business as may properly
come before the Special Meeting or any adjournments or postponements
thereof.
The Board of Directors of First Independence has fixed the close of
business on , , 1997, as the record date for
the determination of shareholders entitled to notice of and to vote at the
Special Meeting. A holder of First Independence common stock who complies with
the provisions of applicable law relating to dissenters' rights will be entitled
to receive payment in cash of the value of only those shares held by the
shareholder (i) which are voted against the approval of the Agreement at the
Special Meeting, or (ii) with respect to which the holder thereof has given
written notice to First Independence at or prior to the Special Meeting that the
shareholder dissents from the Agreement. A copy of the dissenters' rights
provisions is attached to the enclosed Proxy Statement and Prospectus as
Appendix B.
You are cordially invited to attend the Special Meeting, but whether or not
you plan to attend, please complete and sign the enclosed form of proxy and mail
it promptly in the enclosed envelope. The proxy may be revoked at any time by
filing a written revocation with the Secretary of First Independence, by
executing a later dated proxy and delivering it to the Secretary of First
Independence, or by attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
JAMES E. COURTNEY
Chairman
<PAGE> 3
PROXY STATEMENT AND PROSPECTUS
THE COLONIAL BANCGROUP, INC.
COMMON STOCK
FIRST INDEPENDENCE BANK OF FLORIDA
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , ,
1997
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of First Independence Bank of Florida, a Florida
state bank ("First Independence"), with and into Colonial Bank, an Alabama
banking corporation ("Colonial Bank"). Colonial Bank is a wholly owned
subsidiary of The Colonial BancGroup, Inc. ("BancGroup"). This Prospectus is
being furnished to the shareholders of First Independence in connection with the
solicitation of proxies by the Board of Directors of First Independence for use
at a special meeting of the shareholders of First Independence (the "Special
Meeting") to be held on , , 1997, at p.m., local
time, at , Fort Myers, Florida, including any adjournments or
postponements thereof. At the Special Meeting, shareholders of First
Independence will consider and vote upon the matters set forth in the preceding
Notice of Special Meeting of the Shareholders, as more fully described in this
Prospectus.
The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger dated as of May 8, 1997 and amended as of July 7, 1997, by
and between BancGroup, Colonial Bank and First Independence (the "Agreement").
The Agreement provides that, subject to the approval of the Agreement by the
shareholders of First Independence at the Special Meeting and the satisfaction
(or waiver, to the extent that such waiver is permitted by law) of other
conditions contained in the Agreement, First Independence will be merged with
and into Colonial Bank and Colonial Bank will be the surviving corporation. Each
issued and outstanding share of common stock, par value $5.00 per share, of
First Independence (the "First Independence Common Stock"), will be converted
into a number of shares of the common stock, par value $2.50 per share, of
BancGroup (the "BancGroup Common Stock") which is equal to $20.71 divided by the
market value of the BancGroup Common Stock, with such market value determined by
calculating the average of the closing prices of BancGroup Common Stock for the
10 trading days ending on the trading day that is five calendar days immediately
preceding the Effective Date of the Merger. See "THE MERGER -- Conversion of
First Independence Common Stock." The shares of BancGroup Common Stock are
listed on the New York Stock Exchange ("NYSE"). The closing price per share of
the BancGroup Common Stock on the NYSE on July 16, 1997 was $27.75.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least a majority of the outstanding shares of First
Independence Common Stock.
BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), to register the shares of the
BancGroup Common Stock to be issued in connection with the Merger as well as to
register shares of BancGroup Common Stock to be issued upon the exercise of
stock purchase warrants and employee stock options respecting First Independence
Common Stock assumed by BancGroup as part of the Merger. This document
constitutes a Proxy Statement of First Independence in connection with the
solicitation of proxies by First Independence for the Special Meeting and a
Prospectus of BancGroup with respect to the BancGroup Common Stock to be issued
in the Merger and with respect to the BancGroup Common Stock to be issued upon
the exercise of stock purchase warrants and employee stock options assumed in
the Merger. This Prospectus and accompanying form of proxy are first being
mailed to shareholders of First Independence on or about the date set forth
below.
THE BOARD OF DIRECTORS OF FIRST INDEPENDENCE UNANIMOUSLY RECOMMENDS
APPROVAL OF THE AGREEMENT.
---------------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES 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 BANCGROUP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The principal office and mailing address of First Independence are 16740
San Carlos Boulevard, SW, Fort Myers, Florida 33908 (telephone 941-466-7500),
and the principal office and mailing address of BancGroup are Colonial Financial
Center, One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101
(telephone 334-240-5000).
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 4
AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by
BancGroup, including proxy and information statements, can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at certain
regional offices: 7 World Trade Center, 13th Floor, New York, New York 10048;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; 1801
California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as BancGroup, that file electronically with the Commission.
The BancGroup Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under the
Securities Act to register the shares of BancGroup Common Stock being offered in
connection with the Merger. This Prospectus omits certain information contained
in the Registration Statement and exhibits thereto. Such Registration Statement,
including the exhibits thereto, can be inspected at the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such Registration Statement can be obtained at prescribed rates from the
Commission at that address.
The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning
First Independence has been furnished by First Independence.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS OF BANCGROUP BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE,
WITHOUT CHARGE, UPON REQUEST FROM THE PERSONS SPECIFIED BELOW. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY
BANCGROUP NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.
The following documents filed by BancGroup with the Commission are hereby
incorporated by reference into this Prospectus:
(1) BancGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) BancGroup's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(3) BancGroup's Reports on Form 8-K dated January 20, 1997, March 10,
1997, April 15, 1997, June 11, 1997 and June 24, 1997; and
(4) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting, or, in the case of the exercise of stock purchase warrants and
employee stock options that are being assumed by BancGroup, prior to the
exercise of such warrants and options, shall be deemed incorporated by reference
in this Prospectus and made a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed
incorporated herein by reference will be deemed to be modified or superseded for
the purpose of this
i
<PAGE> 5
Prospectus to the extent that a statement contained herein or in another
subsequently filed document which also is, or is deemed to be, incorporated
herein by reference modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
BancGroup has entered into the Agreement with First Independence regarding
the Merger described herein. Various provisions of the Agreement are summarized
or referred to in this Prospectus, and are qualified in their entirety by
reference to the Agreement which is incorporated by reference into this
Prospectus and attached hereto as Appendix A.
BancGroup will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of any
such person, a copy of any and all of the documents which have been incorporated
herein by reference but not delivered herewith (other than the exhibits to such
documents unless specifically incorporated herein). Such request, in writing or
by telephone, should be directed to W. Flake Oakley, IV, Secretary, The Colonial
BancGroup, Inc., One Commerce Street, Post Office Box 1108, Montgomery, Alabama
36101 (telephone 334-240-5000).
ii
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.....................................................
THE SPECIAL MEETING.........................................
General Record Date; Shares Entitled to Vote; Vote Required
for the Merger............................................
Solicitation, Voting and Revocation of Proxies..............
Effect of Merger on Outstanding BancGroup Common Stock......
THE MERGER..................................................
General.....................................................
Background of the Merger....................................
First Independence's Board of Directors' Reasons for
Approving the Merger......................................
Recommendation of the Board of Directors of First
Independence..............................................
BancGroup's Reasons for the Merger..........................
Interests of Certain Persons in the Merger..................
Conversion of First Independence Common Stock...............
Surrender of First Independence Common Stock Certificates...
Certain Federal Income Tax Consequences.....................
Other Possible Consequences.................................
Conditions to Consummation of the Merger....................
Amendment or Termination....................................
Regulatory Approvals........................................
Conduct of Business Pending the Merger......................
Commitments with Respect to Other Offers....................
Indemnification.............................................
Rights of Dissenting Shareholders...........................
Resale of BancGroup Common Stock Issued in the Merger.......
Accounting Treatment........................................
NYSE Reporting of BancGroup Common Stock Issued in the
Merger....................................................
Treatment of First Independence Options.....................
Treatment of First Independence Warrants....................
COMPARATIVE MARKET PRICES AND DIVIDENDS
BancGroup...................................................
First Independence..........................................
BANCGROUP CAPITAL STOCK AND DEBENTURES......................
BancGroup Common Stock......................................
Preference Stock............................................
1986 Debentures.............................................
Changes in Control..........................................
COMPARATIVE RIGHTS OF STOCKHOLDERS..........................
Director Elections..........................................
Removal of Directors........................................
Voting......................................................
Preemptive Rights...........................................
Directors' Liability........................................
Indemnification Special Meetings of Stockholders; Action
Without a Meeting.........................................
Mergers, Share Exchanges and Sales of Assets................
Amendment of Certificate of Incorporation and Bylaws........
Rights of Dissenting Stockholders...........................
Preferred Stock.............................................
Effect of the Merger on First Independence Shareholders.....
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES...............
Condensed Pro Forma Statements of Condition (Unaudited).....
Condensed Pro Forma Statements of Income (Unaudited)........
Recent Developments.........................................
Selected Financial Data.....................................
FIRST INDEPENDENCE BANK OF FLORIDA..........................
Selected Interim Financial Data (unaudited).................
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Three Months Ended March
31, 1997 and 1996.........................................
Selected Financial Data.....................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Fiscal Years Ended
December 31, 1996, 1995 and 1994..........................
BUSINESS OF BANCGROUP
General.....................................................
Proposed Affiliate Banks....................................
Voting Securities and Principal Stockholders................
Security Ownership of Management............................
Management Information......................................
BUSINESS OF FIRST INDEPENDENCE..............................
General.....................................................
Market Area.................................................
Properties..................................................
Competition.................................................
Principal Holders of Common Stock...........................
ADJOURNMENT OF SPECIAL MEETING..............................
OTHER MATTERS...............................................
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS......
LEGAL MATTERS...............................................
EXPERTS.....................................................
INDEX TO FINANCIAL STATEMENTS...............................
APPENDIX A -- Agreement and Plan of Merger including
amendment................................................. A-1
APPENDIX B -- Section 658.44 of the Florida Banking Code
Regarding Dissenters' Rights.............................. B-1
</TABLE>
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR FIRST
INDEPENDENCE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION, TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL
TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF BANCGROUP OR FIRST INDEPENDENCE SINCE THE DATE OF THIS
PROSPECTUS OR THAT INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THE DATES THEREOF.
iv
<PAGE> 8
SUMMARY
The following provides a summary of certain information included in this
Prospectus. This summary is qualified in its entirety by the more detailed
information appearing elsewhere herein, the Appendices hereto and the documents
incorporated herein by reference. Shareholders of First Independence are urged
to read this Prospectus in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of First Independence with and into
Colonial Bank, a wholly owned subsidiary of BancGroup.
THE SPECIAL MEETING
The Special Meeting will be held at the main office of First Independence,
located at 16740 San Carlos Boulevard, SW, Fort Myers, Florida on
, , 1997, at p.m., local time, for the purpose of
considering and voting upon the Agreement and the Merger. Only holders of record
of First Independence Common Stock at the close of business on
, , 1997 (the "Record Date") are entitled to the notice of
and to vote at the Special Meeting. As of the Record Date, shares of First
Independence Common Stock were issued and outstanding. See "THE SPECIAL
MEETING."
THE COMPANIES
BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974 and has operated under its current name and management since
1981. BancGroup operates a wholly owned commercial banking subsidiary, Colonial
Bank, in the states of Alabama, Georgia, Florida and Tennessee. Colonial Bank
conducts a full service commercial banking business through 120 branches in
Alabama, three branches in Tennessee, fourteen branches in Georgia and 44
branches in Florida. BancGroup has also entered into an agreement to acquire
three additional banks. Colonial Mortgage Company, a subsidiary of Colonial
Bank, is a mortgage banking company which services approximately $10.6 billion
in residential loans and which originates residential mortgages in 37 states
through 6 regional offices. At March 31, 1997, BancGroup had consolidated total
assets of $6.0 billion and consolidated stockholders' equity of $426.1 million.
Since May 1, 1997, BancGroup has acquired two banking institutions with
aggregate assets of $230 million and aggregate stockholders' equity of $21.2
million. These acquisitions are included in the pro forma statements included
herein. See "BUSINESS OF BANCGROUP."
First Independence. First Independence is a Florida state bank which is
headquartered in Fort Myers, Florida. Currently, the Bank operates three offices
located in Lee County, Florida. At March 31, 1997, First Independence had total
assets of approximately $74.4 million, total deposits of approximately $69.3
million and total shareholders' equity of approximately $4.7 million. See
"BUSINESS OF FIRST INDEPENDENCE."
TERMS OF THE MERGER
The Agreement provides for the Merger of First Independence with and into
Colonial Bank, with Colonial Bank to be the surviving corporation. Upon the date
of consummation of the Merger (the "Effective Date"), each outstanding share of
First Independence Common Stock (except shares as to which dissenters' rights
are perfected) will be converted by operation of law and without any action by
any holder thereof into shares of BancGroup Common Stock. The number of shares
of BancGroup Common Stock into which each outstanding share of First
Independence Common Stock on the Effective Date will be converted will be equal
to $20.71 divided by the Market Value (the "Merger Consideration"). The "Market
Value" will represent the per share market value of the BancGroup Common Stock
at the Effective Date and will be determined by calculating the average of the
closing prices of the BancGroup Common Stock as reported by the NYSE on
1
<PAGE> 9
each of the 10 trading days ending on the trading day five calendar days
immediately preceding the Effective Date.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. To the extent that a fractional interest arises as a result of
the BancGroup Common Stock issuable in the Merger, cash will be paid in lieu
thereof based upon the Market Value.
As of the date of this Prospectus, First Independence had granted options
(the "First Independence Options") which entitle the holders thereof to acquire
up to 58,519 shares of First Independence Common Stock. On the Effective Date,
BancGroup will assume all First Independence Options outstanding, and each such
option will represent the right to acquire BancGroup Common Stock on
substantially the same terms applicable to the First Independence Options. The
number of shares of BancGroup Common Stock to be issued pursuant to such options
will equal the number of shares of First Independence Common Stock subject to
such First Independence Options multiplied by the Exchange Ratio, as defined
below, provided that no fractions of shares of BancGroup Common Stock will be
issued. The number of shares of BancGroup Common Stock to be issued upon the
exercise of First Independence Options, if a fractional share exists, will equal
the number of whole shares obtained by rounding to the nearest whole number,
giving account to such fraction, or by paying for such fraction in cash. The
exercise price for the acquisition of BancGroup Common Stock will be the
exercise price for each share of First Independence Common Stock subject to such
options divided by the Exchange Ratio, adjusted appropriately for any rounding
to whole shares that may be required. The "Exchange Ratio" will mean the result
obtained by dividing $20.71 by the Market Value.
As of the date of this Prospectus, First Independence had granted warrants
(the "First Independence Warrants") which entitle the holders thereof to acquire
199,940 shares of First Independence Common Stock. As a condition to BancGroup's
obligation to consummate the Merger, BancGroup must receive certification from
First Independence that holders of First Independence Warrants holding no less
than 93 percent of the First Independence Warrants either exercised such
Warrants in accordance with their terms prior to the Effective Date or have
given notice to First Independence that such holders wish to surrender their
Warrants to BancGroup, effective at the Effective Date, in order to receive an
amount of BancGroup Common Stock in exchange therefor equal to the difference
between the total value of the shares of BancGroup Common Stock to be issued
pursuant to such Warrant (based upon the number of shares multiplied by the
Market Value) less the exercise price of such Warrant at the Effective Date,
divided by the Market Value. No fractions of shares will be issued and fractions
will be paid in cash at the Market Value.
To the extent that up to seven percent of the holders of the First
Independence Warrants do not provide such notice to First Independence of their
intent to exchange the First Independence Warrants, or should BancGroup waive
the foregoing condition, BancGroup will assume such First Independence Warrants
outstanding, and each such Warrant will represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the First
Independence Warrants. The number of shares of BancGroup Common Stock to be
issued pursuant to such warrants will equal the number of shares of First
Independence Common Stock subject to such First Independence Warrants multiplied
by the Exchange Ratio, provided that no fractions of shares of BancGroup Common
Stock will be issued. The number of shares of BancGroup Common Stock to be
issued upon the exercise of First Independence Warrants, if a fractional share
exists, will equal the number of whole shares obtained by rounding to the
nearest whole number, giving account to such fraction, or by paying for such
fraction in cash. The exercise price for the acquisition of BancGroup Common
Stock will be the exercise price for each share of First Independence Common
Stock subject to such warrant divided by the Exchange Ratio, adjusted
appropriately for any rounding to whole shares that may be required.
First Independence shareholders will be given notice of the consummation of
the Merger promptly after the Effective Date of the Merger. Certificates for the
shares of BancGroup Common Stock issued will not be distributed or dividends
paid on such shares until shareholders surrender their certificates representing
their shares of First Independence Common Stock.
2
<PAGE> 10
See "THE MERGER -- Conversion of First Independence Common Stock,"
"Surrender of First Independence Common Stock Certificates," "Treatment of First
Independence Options" and "Treatment of First Independence Warrants."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and First Independence, see "THE
MERGER -- Rights of Dissenting Shareholders," "-- Conversion of First
Independence Common Stock;" "THE SPECIAL MEETING -- Solicitation, Voting and
Revocation of Proxies," "-- Record Date; Shares Entitled to Vote; Vote
Required;" "BUSINESS OF BANCGROUP -- Voting Securities and Principal
Stockholders," "-- Security Ownership of Management," and "BUSINESS OF FIRST
INDEPENDENCE-- Principal Holders of Common Stock."
RECOMMENDATION OF FIRST INDEPENDENCE'S BOARD OF DIRECTORS
The Board of Directors of First Independence has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF FIRST INDEPENDENCE BELIEVES THAT THE MERGER
IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FIRST INDEPENDENCE
AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT. For a
discussion of the factors considered by the Board of Directors in reaching its
conclusions, see "THE MERGER -- Background of the Merger" and "First
Independence's Board of Directors' Reasons for Approving the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, certain of the executive officers of First
Independence held First Independence Options which entitle them to purchase, in
the aggregate, up to 46,332 shares of First Independence Common Stock. Under the
terms of the Agreement, any First Independence Options which are not exercised
prior to the Effective Date will be assumed by BancGroup. See "THE
MERGER -- Conversion of First Independence Common Stock" and "Treatment of First
Independence Options."
As of the Record Date, two of the directors of First Independence
beneficially owned First Independence Warrants which entitle them to purchase,
in the aggregate, up to 31,884 shares of First Independence Common Stock. Under
the terms of the Agreement, the holders of at least 93 percent of all First
Independence Warrants must have either exercised such Warrants in accordance
with their terms prior to the Effective Date or given notice to First
Independence of their intent to exchange their Warrants for BancGroup Common
Stock as of the Effective Date, and in accordance with the Agreement. However,
to the extent that up to seven percent of the First Independence Warrants are
not exchanged, or if BancGroup waives this condition, BancGroup will assume the
First Independence Warrants. See "THE MERGER -- Treatment of First Independence
Warrants."
On the Effective Date, and subject to the existing agreements referenced
above, all employees of First Independence will, at BancGroup's option, either
become employees of BancGroup or its subsidiaries or be entitled to severance
benefits in accordance with Colonial Bank's severance policy as of the date of
the Agreement, except that such severance policy will be modified and will apply
to employees of First Independence who become employees of BancGroup or Colonial
Bank, as follows: (i) if an employee has worked less than one year at the time
of termination, such employee will receive a severance payment equal to one
month's salary; (ii) if an employee has worked for more than one year at the
time of termination, and is terminated within the first 12 months after the
Effective Date, such employee will receive a severance payment equal to six
months' salary; and (iii) if an employee has worked more than two years and is
terminated after 12 months and before the end of 24 months before the Effective
Date, such employee will receive a severance payment equal to three months'
salary. Employment at First Independence will be counted as employment at
BancGroup to determine the period of time the employee has been employed. All
employees of First Independence who become employees of BancGroup or its
subsidiaries on the Effective Date will be entitled, to the extent permitted by
applicable law, to participate in all benefit plans of BancGroup to the same
extent as BancGroup's employees.
3
<PAGE> 11
Upon consummation of the Merger, Colonial Bank and Edward H. Black
(President and Chief Executive Officer of First Independence) will enter into a
Severance Agreement which will provide that Mr. Black will be maintained in his
present position as President and Chief Executive Officer at an annual salary of
no less than $130,000, subject to termination of his employment by Colonial Bank
upon 15 days' prior written notice (in which event Mr. Black will be entitled to
receive from Colonial Bank in cash a lump-sum payment equal to $65,000 if
termination occurs within one year of the Effective Date or $32,500 if such
termination occurs within two years but after one year from the Effective Date).
The obligation of Colonial Bank to make the cash payment does not apply if Mr.
Black voluntarily terminates his employment with Colonial Bank for any reason,
or if Colonial Bank terminates his employment for "cause" (as defined in the
Severance Agreement). Unless sooner terminated as provided above, the Severance
Agreement terminates on the second anniversary of the Effective Date.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of First Independence against certain claims and liabilities
arising out of or pertaining to matters existing or occurring at or prior to the
Effective Date, to the extent that First Independence would have been authorized
under Florida law, or under its Articles of Incorporation or Bylaws, to
indemnify such persons.
Except as indicated above, none of the directors or executive officers of
First Independence, and no associate of any such person, has any substantial
direct or indirect interest in the Merger, other than an interest arising from
the ownership of First Independence Common Stock.
See "THE MERGER -- Interests of Certain Persons in the Merger."
VOTE REQUIRED
Under Florida law, the Agreement must be approved by the affirmative vote
of the holders of at least a majority of the outstanding shares of First
Independence Common Stock. Each share of First Independence Common Stock is
entitled to one vote on the Agreement. Approval of the Agreement and the Merger
by BancGroup stockholders is not required under Delaware, Alabama, Florida or
other applicable law, or the rules of the NYSE on which the BancGroup Common
Stock is listed. See "THE SPECIAL MEETING."
Only holders of record of First Independence Common Stock at the close of
business on the Record Date are entitled to notice of and to vote at the Special
Meeting. As of such date, 529,167 shares of First Independence Common Stock were
issued and outstanding. As of the Record Date, the directors and executive
officers of First Independence and the Bank beneficially owned approximately
12.3% of the outstanding shares of First Independence Common Stock. As of the
same date, the directors, executive officers and affiliates of BancGroup held no
shares of First Independence Common Stock. See "THE SPECIAL MEETING."
As of the Record Date, the directors of First Independence beneficially
owned 64,566 shares of First Independence Common Stock representing
approximately 12.2% of the outstanding shares and have agreed with BancGroup to
vote their shares in favor of the Agreement. See "THE SPECIAL MEETING." As of
April 30, 1997, Directors and executive officers of BancGroup beneficially owned
in the aggregate 4,454,136 shares of BancGroup Common Stock representing
approximately 10.83% of BancGroup's outstanding shares.
Proxies should be returned to First Independence in the envelope enclosed
herewith. Shareholders of First Independence submitting proxies may revoke their
proxies by (i) giving notice of such revocation in writing to the Secretary of
First Independence at or prior to the Special Meeting, (ii) by executing and
delivering a proxy bearing a later date to the Secretary of First Independence
at or prior to the Special Meeting, or (iii) by attending the Special Meeting
and voting in person. Because approval of the Agreement requires the approval of
at least a majority of the outstanding shares of First Independence Common
Stock, failure to submit a proxy or failure to vote in person at the Special
Meeting will have the same effect as a negative vote. See "THE SPECIAL
MEETING -- Solicitation, Voting and Revocation of Proxies."
4
<PAGE> 12
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Independence Common Stock as of the Record Date are
entitled to dissenters' rights of appraisal pursuant to Section 658.44 of the
Florida Banking Code (the "FBC"). A holder of First Independence Common Stock
who complies with the provisions of applicable law relating to dissenters'
rights will be entitled to receive payment in cash of the value of only those
shares held by the shareholder (i) which are voted against the approval of the
Agreement at the Special Meeting, or (ii) with respect to which the holder
thereof has given written notice to First Independence at or prior to the
Special Meeting that the shareholder dissents from the Agreement. To the extent
that a First Independence shareholder exercises dissenters' rights, that
shareholder will lose the right to receive BancGroup Common Stock in the Merger
and will instead receive a cash payment for the value of his or her shares. Such
"value" may be determined by appraisal, the result of which cannot be predicted.
Shareholders wishing to exercise dissenters' rights of appraisal must follow
properly all requirements for the exercise of such rights as set forth in
Section 658.44 of the FBC, a copy of which is attached as Appendix B to this
Prospectus. See "THE MERGER -- Rights of Dissenting Shareholders." Any
shareholder who properly exercises dissenters' rights of appraisal and receives
cash for his or her shares will encounter income tax treatment different than
the treatment for shareholders who do not exercise dissenters' rights. See "THE
MERGER -- Rights of Dissenting Shareholders."
CONDITIONS TO THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The mutual obligations of the parties to consummate the Merger are subject
to the following conditions, among others: (i) the approval of the Agreement by
the holders of at least a majority of the outstanding shares of First
Independence Common Stock; (ii) the approval of the Merger by The Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the Alabama
Banking Department (the "Alabama Department"); (iii) the absence of any pending
or threatened litigation which seeks to restrain or prohibit the Merger; (iv)
the consummation of the Merger on or before December 31, 1997; and (v) receipt
of opinions of counsel as to certain matters, including tax matters.
The obligation of First Independence to consummate the Merger is further
subject to several conditions, including: (i) the absence of any material
adverse changes in the financial condition or affairs of BancGroup; and (ii) the
shares of BancGroup Common Stock to be issued under the Agreement shall have
been approved for listing on the NYSE.
The obligations of BancGroup to consummate the Merger are subject to
various conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of First Independence; (ii) the holders of
not more than 10% of the outstanding shares of First Independence Common Stock
shall have exercised dissenters' rights of appraisal with respect to their
shares; (iii) the receipt of a letter from Coopers & Lybrand L.L.P., BancGroup's
independent accountants, to the effect that such independent accountants concur
with the conclusions of BancGroup's and First Independence's management that no
conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests, and (iv) the receipt of certification
from First Independence that holders of no less than 93 percent of the First
Independence Warrants have either exercised such Warrants in accordance with
their terms prior to the Effective Date or given notice to First Independence
that they wish to exchange their Warrants for BancGroup Common Stock as of the
Effective Date as explained elsewhere in this Prospectus.
Applications for appropriate regulatory approvals by the Federal Reserve
and the Alabama Department were filed with such agencies on or about July 3,
1997. The regulatory approval process is expected to take approximately two
months from that date, and it is anticipated that the Merger will be consummated
in the third quarter of 1997.
See "THE MERGER -- Conditions to Consummation of the Merger" and
"Regulatory Approvals."
5
<PAGE> 13
AMENDMENT OR TERMINATION OF AGREEMENT
The Boards of Directors of BancGroup and First Independence may agree to
amend or terminate the Agreement at any time prior to the Effective Date.
However, the Board of Directors of First Independence may not agree to any
amendments to the Agreement which would alter the Merger Consideration or which,
in the opinion of the Board of Directors of First Independence, would adversely
affect the rights of the shareholders of First Independence, unless such
amendments are approved by the holders of a majority of the outstanding First
Independence Common Stock. Such amendments may require the filing of an
amendment of the Registration Statement, of which this Prospectus forms a part,
with the Commission. See "THE MERGER -- Amendment or Termination."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the holders of the First Independence Common Stock may be
different from the rights of the holders of the BancGroup Common Stock. A
discussion of these rights and a comparison thereof is set forth at "COMPARATIVE
RIGHTS OF STOCKHOLDERS."
FEDERAL INCOME TAX CONSEQUENCES
No ruling with respect to the federal income tax consequences of the Merger
to First Independence's shareholders will be requested from the Internal Revenue
Service (the "IRS"). First Independence has received an opinion from Coopers &
Lybrand L.L.P., that, among other things, a shareholder of First Independence
who exchanges shares of First Independence Common Stock for BancGroup Common
Stock will not recognize gain except that, shareholders of First Independence
will recognize gain to the extent such shareholders receive cash in lieu of
fractional shares of BancGroup Common Stock. Holders of First Independence
Warrants whose Warrants are assumed by BancGroup will realize gain or loss for
federal income tax purposes upon such assumption, and holders of First
Independence Warrants who exchange their Warrants for BancGroup Common Stock
will realize gain or loss for federal income tax purposes upon such exchange.
Shareholders who receive cash for their shares of First Independence Common
Stock upon perfection of dissenters' rights also will realize gain or loss for
federal income tax purposes with respect to such shares. See "APPROVAL OF THE
MERGER -- Certain Federal Income Tax Consequences." First Independence
shareholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the Merger.
ACCOUNTING TREATMENT
The merger of First Independence into BancGroup will be treated as a
"pooling-of-interests" transaction by BancGroup for accounting purposes. See
"THE MERGER -- Accounting Treatment."
RECENT PER SHARE MARKET PRICES
First Independence. There is no established public trading market for the
First Independence Common Stock. The shares of First Independence Common Stock
are not actively traded, and such trading activity, as it occurs, takes place in
privately negotiated transactions. Management of First Independence is aware of
certain transactions in shares of First Independence that have occurred since
January 1, 1995, although the trading prices of all stock transactions are not
known. The following sets forth the trading prices for the shares
6
<PAGE> 14
of First Independence Common Stock that have occurred since January 1, 1995 for
transactions in which the trading prices are known to management of First
Independence:
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK
------------------
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter............................................. $ 8.00 $ 8.00
Second Quarter............................................ 10.00 10.00
Third Quarter............................................. 9.00 9.00
Fourth Quarter............................................ -- --
1996
First Quarter............................................. 8.00 8.00
Second Quarter............................................ 9.00 9.00
Third Quarter............................................. 10.00 9.00
Fourth Quarter............................................ 9.00 8.75
1997
First Quarter............................................. 10.00 8.75
Second Quarter............................................ 8.75 8.75
Third Quarter (through , 1997).................. -- --
</TABLE>
In the first quarter of 1995, the Bank sold 200,000 shares of Common Stock
for $10.00 per share which entitled the purchaser to receive for each share of
Common Stock purchased a First Independence Warrant exercisable on or before
November 1, 1998 at the greater of $10.00 per share or the book value of the
First Independence Common Stock as of the last day of the calendar quarter
preceding the date such warrant is exercised. See "The Merger -- Treatment of
First Independence Warrants."
First Independence has not paid any cash dividends since 1991.
BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." The following table indicates the high and low closing prices
of the BancGroup Class A Common Stock and the BancGroup Common Stock as reported
on the NASDAQ System and the NYSE, respectively, for the last two full fiscal
years. Prior to February 21, 1995, BancGroup had two classes of Common Stock
outstanding, Class A and Class B. Class B was not publicly traded. Class A was
traded as a NASDAQ security under the symbol "CLBGA" until February 24, 1995. On
February 21, 1995, the BancGroup Class A and Class B Common Stock were
reclassified into BancGroup Common Stock.
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK(1)
-------------------
HIGH LOW
------ -----
<S> <C> <C>
1995
First Quarter(2).......................................... $11 13/16 $ 9 3/4
Second Quarter............................................ 13 5/8 11 9/16
Third Quarter............................................. 14 15/16 13 3/4
Fourth Quarter............................................ 16 7/16 14 1/4
1996
First Quarter............................................. 18 1/4 15
Second Quarter............................................ 18 1/16 15 5/8
Third Quarter............................................. 17 15/16 15 5/8
Fourth Quarter............................................ 20 1/8 17 3/8
1997
First Quarter............................................. 24 18 2/3
Second Quarter............................................ 24 7/8 22
Third Quarter (through , 1997).................. -- --
</TABLE>
7
<PAGE> 15
- ---------------
(1) Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
(2) Trading on the NYSE commenced on February 24, 1995.
On May 8, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $23 5/8 per share. The following table presents the market value of
BancGroup Common Stock on that date, and the market value and equivalent per
share value of First Independence Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP FIRST INDEPENDENCE BANCGROUP
COMMON STOCK COMMON STOCK COMMON STOCK
(PER SHARE) (PER SHARE) (PER SHARE)
------------ ------------------ ------------
<S> <C> <C> <C>
Comparative Market Value............... $23.625(1) $8.75(2) $20.71(3)
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on May 8, 1997.
(2) There is no established public trading market for the shares of First
Independence Common Stock. The value shown is the price at which shares of
First Independence Common Stock were sold on April 7, 1997, which was the
last sale price prior to the public announcement of the Merger on May 9,
1997, of which management of First Independence is aware.
(3) Assuming the Market Value (as defined) as of that date was $23.625, then
.8766 ($20.71 divided by $23.625) shares of BancGroup Common Stock would
have been exchanged for each share of First Independence Common Stock.
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup Common Stock from engaging in a "business
combination" with BancGroup unless certain conditions are satisfied. Also, the
Change in Bank Control Act of 1978 prohibits a person from acquiring "control"
of BancGroup unless certain notice provisions with the Federal Reserve Board
have been satisfied.
BancGroup's Restated Certificate of Incorporation and bylaws also contain
provisions which may deter or prevent a takeover of BancGroup that is not
supported by BancGroup's Board of Directors. These provisions include: (1) a
classified board of directors, (2) super majority voting requirements for
certain "business combinations" that exceed the provisions of Delaware law
described above, (3) flexibility for the board to consider non-economic and
other factors in evaluating a "business combination," (4) inability of
stockholders to call special meetings and act by written consent, and (5)
certain advance notice provisions for the conduct of business at stockholder
meetings.
See "BANCGROUP CAPITAL STOCK AND DEBENTURES" and "COMPARATIVE RIGHTS OF
STOCKHOLDERS."
8
<PAGE> 16
PER SHARE DATA
The table below presents on a per share basis the book value, cash
dividends and income from continuing operations of BancGroup and First
Independence on a historical basis and on a pro forma equivalent basis assuming
consummation of the Merger. Certain information from the table has been taken
from the condensed pro forma statements of condition and income included
elsewhere in this document. The table should be read in conjunction with those
pro forma statements.
PER SHARE DATA
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 1996 1995 1994
-------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- HISTORICAL (AS
RESTATED):
Net Income
Primary............................ $ 0.42 $0.36 $ 1.26 $1.23 $0.96
Fully diluted...................... 0.42 0.36 1.25 1.19 0.95
Book value at end of period.......... 10.47 9.76 10.29 9.43 7.93
Dividends per share:
Common Stock....................... 0.15 0.135 0.54 0.3375
Common A........................... 0.1125 0.40
Common B........................... 0.0625 0.20
FIRST INDEPENDENCE BANK
Net Income
Historical:
Primary.......................... 0.44 0.49 0.92 (1.38) 0.55)
Fully diluted.................... 0.44 0.49 0.92 (1.38) 0.55)
Pro forma equivalent assuming
completed business combinations
and First Independence(a):
Primary.......................... 0.36 0.31 1.05 1.02 0.81
Fully diluted.................... 0.35 0.31 1.03 1.00 0.80
Pro forma equivalent assuming
completed business combinations,
First Independence and other
proposed business
combinations(a):
Primary.......................... 0.36 0.31 1.05 1.02 0.81
Fully diluted.................... 0.36 0.31 1.05 1.00 0.80
Book value at end of period
Historical......................... 8.90 8.05 8.50 7.60 7.81
Pro forma equivalent assuming
completed business combinations
and First Independence(a)........ 9.00 N/A N/A N/A N/A
Pro forma equivalent assuming
completed business combinations,
First Independence and other
proposed business
combinations(a):................. 9.00 N/A N/A N/A N/A
Dividends per share
Historical......................... 0.00 0.00 0.00 0.00 0.00
Pro forma equivalent assuming
completed business combinations
and First Independence(b): 0.13 0.11 0.46 0.38 0.34
Pro forma equivalent assuming
completed business combinations,
First Independence and other
proposed business
combinations(b):................. 0.13 0.11 0.46 0.38 0.34
BANCGROUP -- PRO FORMA COMBINED
(COMPLETED BUSINESS COMBINATIONS
AND FIRST INDEPENDENCE):
Net Income
Primary............................ 0.42 0.37 1.23 1.20 0.95
</TABLE>
9
<PAGE> 17
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 1996 1995 1994
-------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Fully diluted...................... 0.41 0.36 1.21 1.17 0.94
Book value at end of period.......... 10.58 N/A N/A N/A N/A
BANCGROUP -- PRO FORMA COMBINED
(COMPLETED BUSINESS COMBINATIONS,
FIRST INDEPENDENCE AND OTHER
PROPOSED BUSINESS COMBINATIONS):
Net Income
Primary............................ 0.42 0.37 1.24 1.20 0.95
Fully diluted...................... 0.42 0.36 1.23 1.17 0.94
Book value at end of period.......... 10.58 N/A N/A N/A N/A
</TABLE>
- ---------------
N/A Not applicable due to pro forma balance sheet being presented only at March
31, 1997 which assumes the transaction was consummated on the latest
balance sheet date in accordance with Rule 11.02(b) of Regulation S-X.
(a) Pro forma equivalent per share amounts are calculated by multiplying the
pro forma combined total income per share and the pro forma combined total
book value per share of BancGroup by the conversion ratio so that the per
share amounts are equated to the respective values for one share of First
Independence Common Stock. For the purposes of these pro forma equivalent
per share amounts, a .8505 BancGroup common stock share conversion ratio is
utilized. The ratio is based on the 10-day average of the closing market
price of Colonial BancGroup, Inc. Common Stock of $24.35 as of July 1, 1997
($20.71/24.35 = .8505).
(b) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the .8505 conversion ratio per
share of First Independence common stock (see note (a)). BancGroup
presently contemplates that dividends will be declared in the future.
However, the payment of cash dividends is subject to BancGroup's actual
results of operations as well as certain other internal and external
factors. Accordingly, there is no assurance that cash dividends will either
be declared and paid in the future, or, if declared and paid, that such
dividends will approximate the pro forma amounts indicated.
10
<PAGE> 18
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of First
Independence in connection with the solicitation of proxies by the Board of
Directors of First Independence for use at the Special Meeting. The purpose of
the Special Meeting is to consider and vote upon the Agreement which provides
for the proposed Merger of First Independence with and into Colonial Bank.
Colonial Bank will be the surviving corporation in the Merger.
This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. No vote of
BancGroup stockholders is required to approve the Merger.
THE BOARD OF DIRECTORS OF FIRST INDEPENDENCE BELIEVES THAT THE MERGER IS IN
THE BEST INTERESTS OF FIRST INDEPENDENCE AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE AGREEMENT (ITEM 1 ON THE PROXY
CARD).
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of First Independence has fixed the close of
business on , 1997, as the Record Date for determination of
shareholders entitled to vote at the Special Meeting. There were
record holders of First Independence Common Stock and shares of
First Independence Common Stock outstanding, each entitled to one vote per
share, as of the Record Date. First Independence is obligated to issue an
additional 58,519 shares of First Independence Common Stock upon the exercise of
outstanding First Independence Options and an additional 199,940 shares of First
Independence Common Stock upon the exercise of outstanding First Independence
Warrants.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of First Independence Common Stock on
the Record Date is necessary to constitute a quorum for the transaction of
business at the Special Meeting. In the absence of a quorum, the Special Meeting
may be postponed from time to time until First Independence shareholders holding
the requisite amount of shares of First Independence Common Stock are
represented in person or by proxy. If a quorum is present, the affirmative vote
of the holders of at least a majority of the outstanding shares of First
Independence Common Stock, whether or not present or represented at the Special
Meeting, is required to approve the Agreement. Broker nonvotes and abstentions
will not be counted as votes cast "FOR" or "AGAINST" the proposal to approve the
Agreement, and, as a result, such non-votes will have the same effect as votes
cast "AGAINST" the Agreement. Each holder of record of shares of First
Independence Common Stock is entitled to cast, for each share registered in his
or her name, one vote on the Agreement as well as on each other matter presented
to a vote of shareholders at the Special Meeting.
Under Section 658.44 of the FBC, any shares that are voted "AGAINST" the
Merger or respect to which the holder thereof has given written notice to First
Independence at or prior to the Special Meeting that the shareholder dissents
from the Agreement, are automatically deemed to be shares of a shareholder
exercising dissenters rights. If the Merger is consummated, such shares will be
paid for in cash pursuant to the process described in "THE MERGER -- Rights of
Dissenting Shareholders." Therefore, any shares voted "AGAINST" the Merger or
respect to which the holder thereof has given written notice to First
Independence at or prior to the Special Meeting that the shareholder dissents
from the Agreement, will not be entitled to receive BancGroup Common Stock and
will encounter income tax treatment different than the treatment for
shareholders who receive BancGroup Common Stock in the Merger. Broker nonvotes
and abstentions will NOT result in those shares being deemed to have exercised
dissenters rights of appraisal.
As of the Record Date, directors of First Independence owned
shares of First Independence Common Stock representing
approximately % of the outstanding shares. These individuals have agreed
with BancGroup to vote their shares in favor of the Merger.
11
<PAGE> 19
If the Agreement is approved at the Special Meeting, First Independence is
expected to merge with and into Colonial Bank promptly after the other
conditions to the Agreement are satisfied. See "THE MERGER -- Conditions of
Consummation of the Merger."
THE BOARD OF DIRECTORS OF FIRST INDEPENDENCE URGES THE SHAREHOLDERS OF
FIRST INDEPENDENCE TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE AND UNANIMOUSLY RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE
VOTED IN FAVOR OF THE AGREEMENT.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of First Independence, without receiving special compensation
therefor, may solicit proxies from First Independence's shareholders by
telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries, if any, to
forward solicitation materials to any beneficial owners of shares of First
Independence Common Stock.
First Independence will bear the cost of assembling and mailing this
Prospectus and other materials furnished to shareholders of First Independence.
It will also pay all other expenses of solicitation, including the expenses of
brokers, custodians, nominees, and other fiduciaries who, at the request of
First Independence, mail material to or otherwise communicate with beneficial
owners of the shares held by them. BancGroup will pay all expenses incident to
the registration of the BancGroup Common Stock to be issued in connection with
the Merger.
Shares of First Independence Common Stock represented by a proxy properly
signed and received at or prior to the Special Meeting, unless properly revoked,
will be voted in accordance with the instructions on the proxy. If a proxy is
signed and returned without any voting instructions, shares of First
Independence Common Stock represented by the proxy will be voted "FOR" the
proposal to approve the Agreement and in accordance with the determination of
the majority of the Board of Directors of First Independence as to any other
matter which may properly come before the Special Meeting, including any
adjournment or postponement thereof. A shareholder may revoke any proxy given
pursuant to this solicitation by: (i) delivering to the Secretary of First
Independence, prior to or at the Special Meeting, a written notice revoking the
proxy; (ii) delivering to the Secretary of First Independence, at or prior to
the Special Meeting, a duly executed proxy relating to the same shares and
bearing a later date; or (iii) voting in person at the Special Meeting. All
written notices of revocation and other communications with respect to the
revocation of First Independence's proxies should be addressed to:
First Independence Bank of Florida
16740 San Carlos Boulevard, SW
Fort Myers, Florida 33908
Attention: Edward H. Black, President and Chief
Executive Officer
Attendance at the Special Meeting will not, in and of itself, constitute a
revocation of a proxy.
Proxies marked as abstentions and shares held in street name which have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast. Such proxies will, however, be counted for purposes of determining
whether a quorum is present at the Special Meeting.
The Board of Directors of First Independence is not aware of any business
to be acted upon at the Special Meeting other than consideration of the Merger
described herein. If, however, other matters are properly brought before the
Special Meeting, or any adjournments or postponements thereof, the persons
appointed as proxies will have the discretion to vote or act on such matters
according to their best judgment. Proxies voted in favor of the Merger, or
proxies as to which no voting instructions are given, will be voted to adjourn
the Special Meeting, if necessary, in order to solicit additional proxies in
favor of the Merger. Proxies voted against the Merger and abstentions will not
be voted for an adjournment. See "ADJOURNMENT OF THE SPECIAL MEETING."
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EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, no First Independence Options are exercised prior to the Merger, 93
percent of the First Independence Warrants are exchanged in accordance with the
Agreement, and a Market Value of BancGroup Common Stock of $24.35 on the
Effective Date (which was the Market Value (as defined) calculated as of July 1,
1997), BancGroup would issue 530,752 shares of BancGroup Common Stock to the
shareholders of First Independence pursuant to the Merger. Based on those
assumptions, the 531,849 shares of BancGroup Common Stock would represent
approximately 1.3% of the total number of shares of BancGroup Common Stock
outstanding following the Merger, not counting any additional shares BancGroup
may issue, including shares to be issued pursuant to other pending acquisitions.
THE MERGER
THE FOLLOWING SETS FORTH A SUMMARY OF THE MATERIAL PROVISIONS OF THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE DESCRIPTION DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
AGREEMENT ATTACHED HERETO AS APPENDIX A AND CERTAIN PROVISIONS OF FLORIDA LAW
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS, A COPY OF WHICH PROVISIONS
ARE ATTACHED HERETO AS APPENDIX B. ALL FIRST INDEPENDENCE SHAREHOLDERS ARE URGED
TO READ THE AGREEMENT AND THE APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement provides that, subject to shareholder approval, receipt of
necessary regulatory approval and certain other conditions described below at
"Conditions to Consummation of the Merger," First Independence will merge with
and into Colonial Bank. Upon completion of the Merger, the corporate existence
of First Independence will cease, and Colonial Bank will succeed to the business
formerly conducted by First Independence.
BACKGROUND OF THE MERGER
On February 19, 1997, Mr. Robert M. Taylor (a director of First
Independence) was contacted by an acquaintance who previously had been active in
the Fort Myers banking community and who advised Mr. Taylor that he was calling
on behalf of BancGroup, with whom the individual had previously performed
consulting work. The individual inquired as to whether the Board of Directors of
First Independence would be interested in discussing a possible merger
transaction. The individual subsequently sent to Mr. Taylor a copy of
BancGroup's annual report and called to ask if BancGroup representatives could
visit with First Independence representatives in Fort Myers.
On March 19, 1997, Mr. Robert E. Lowder (the Chairman, Chief Executive
Officer and President of BancGroup) and W. Flake Oakley, IV (the Chief Financial
Officer of BancGroup) met with Mr. James E. Courtney (the Chairman of First
Independence), Mr. Edward H. Black (the President and Chief Executive Officer of
First Independence), and Mr. Taylor. The BancGroup representatives discussed
BancGroup's history and prospects, and its interest in acquiring First
Independence. First Independence representatives summarized First Independence's
progress over the prior two year period as well as its prospects. The parties
concurred that certain information regarding First Independence would be
forwarded to BancGroup for its review. On March 31, 1997, First Independence
sent information regarding First Independence to the BancGroup representatives.
On April 8, 1997, BancGroup delivered a proposal for the acquisition of
First Independence. On April 15, 1997, the Board of Directors of First
Independence reviewed the BancGroup proposal, along with BancGroup's request to
schedule a presentation to the entire First Independence Board. At the meeting,
the Board of Directors authorized First Independence's Chairman to advise
BancGroup that the Directors rejected the BancGroup April 8, 1997 proposal, but
might be interested in discussions with BancGroup if the value could be
increased to a range determined acceptable to the Board of Directors.
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Subsequent to the meeting, a representative of BancGroup called First
Independence's President to indicate that BancGroup had an interest in acquiring
the Bank at First Independence Board's suggested price range and requested a
meeting with First Independence's Board of Directors. On April 24, 1997,
representatives of BancGroup met with First Independence's Board of Directors
and presented and reviewed certain information regarding BancGroup, First
Independence, and the terms of a proposed transaction. At the conclusion of the
meeting, the Colonial and First Independence representatives concurred that the
parties would be interested in pursuing an acquisition by BancGroup of First
Independence at a price per share of $20.76, subject to completion by BancGroup
of a due diligence review of First Independence.
From April 27, 1997 to April 30, 1997, BancGroup performed a due diligence
review of First Independence. On May 1, 1997, BancGroup forwarded to First
Independence a draft of a proposed definitive agreement.
From May 1 to May 8, 1997, representatives of Colonial and representatives
of First Independence negotiated the terms of the Agreement. As a part of those
negotiations, and in order to induce BancGroup to provide a more attractive
severance arrangement for First Independence employees (other than the President
and Chief Executive Officer of First Independence) whose employment may be
terminated as a result of the Merger, the price per share for First Independence
Common Stock was reduced from $20.76 to $20.71.
On May 8, 1997, a special meeting of First Independence Board of Directors
was held, in which First Independence's legal counsel participated. During this
meeting, legal counsel reviewed generally for First Independence's Directors the
fiduciary obligations of directors in mergers of financial institutions.
Following discussion and review by First Independence Board of Directors of the
terms and conditions of the Agreement, the Merger, and related information and
issues, the Board of Directors unanimously approved the Agreement and the
transactions contemplated thereby. BancGroup, Colonial Bank and First
Independence signed the Agreement as of May 8, 1997.
On July 7, 1997, BancGroup, Colonial Bank and First Independence amended
the Agreement dated as of May 8, 1997, to provide that holders of the First
Independence Warrants could surrender such warrants to BancGroup at the
Effective Date and receive shares of BancGroup Common Stock with a value
(calculated based upon the Market Value) equal to the difference between the
value of such warrant (calculated based upon the Market Value) and the exercise
price of such warrant. See "Treatment of First Independence Warrants".
FIRST INDEPENDENCE'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
First Independence's Board of Directors believes that the Merger is in the
best interests of First Independence and its shareholders. The Board of
Directors of First Independence considered a number of factors in deciding to
approve and recommend the terms of the Agreement to First Independence
shareholders, including the terms of the proposed transaction; the financial
condition, results of operations, and future prospects of First Independence;
the value of the consideration to be received by First Independence shareholders
relative to the book value and earnings per share of First Independence Common
Stock; the competitive and regulatory environment for financial institutions
generally; the fact that the Merger will enable First Independence shareholders
to exchange their shares of First Independence Common Stock for shares of common
stock of a larger and more diversified entity, the stock of which is more widely
held and more actively traded; that the Merger will enable First Independence
shareholders to hold stock in a financial institution that has historically paid
cash dividends to its shareholders (as compared to First Independence, which has
not paid any cash dividends to its shareholders since 1991); the likelihood of
receiving the requisite regulatory approvals; that it is expected that the
Merger will be a tax-free transaction (except in respect of the assumption of
the First Independence Warrants by BancGroup, the exchange of the First
Independence Warrants for BancGroup Common Stock and of cash received for First
Independence Common Stock) for federal income tax purposes; and other
information. The foregoing discussion of the information and factors considered
by the Board of Directors is not intended to be exhaustive of the factors
considered by the Board of Directors. The First Independence Board of Directors
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given different weights to different factors.
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RECOMMENDATION OF THE BOARD OF DIRECTORS OF FIRST INDEPENDENCE
The Board of Directors of First Independence has determined that the Merger
is in the best interests of First Independence and its shareholders. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FIRST INDEPENDENCE
VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE AGREEMENT AND THE MERGER.
BANCGROUP'S REASONS FOR THE MERGER
The Boards of Directors of BancGroup and Colonial Bank have unanimously
approved the Agreement and the Merger. BancGroup has been seeking to expand its
banking operations in the state of Florida. BancGroup, through Colonial Bank,
currently operates in the Orlando, Ormond Beach, Tampa, Miami Beach, Winter
Haven and West Palm Beach areas, with an acquisition pending in the Miami area.
The Board of Directors of BancGroup believes that the combination of First
Independence with Colonial Bank will strengthen its banking operations in
Florida.
In approving the Agreement and the Merger, the Boards of Directors of
BancGroup and Colonial Bank took into account: (i) the financial performance and
condition of First Independence, including the quality of its capital and
assets; (ii) similarities in the philosophies of BancGroup and First
Independence, including First Independence's commitment to delivering high
quality personalized financial services to its customers; and (iii) First
Independence's management's knowledge of and experience in the Fort Myers,
Florida market.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, certain executive officers of First Independence
hold First Independence Options which entitle them to purchase, in the
aggregate, up to 46,332 shares of First Independence Common Stock. Under the
terms of the Agreement, any First Independence Options which are not exercised
prior to the Effective Date will be assumed by BancGroup giving the holders of
such options the right to acquire shares of BancGroup Common Stock. See
"Conversion of First Independence Common Stock," "Treatment of First
Independence Options" and "Treatment of First Independence Warrants."
As of the Record Date, two of the directors of First Independence
beneficially owned First Independence Warrants which entitle them to purchase,
in the aggregate, up to 31,884 shares of First Independence Common Stock. Under
the terms of the Agreement, the holders of at least 93 percent of all First
Independence Warrants must have either exercised such Warrants in accordance
with their terms prior to the Effective Date or given notice to First
Independence of their intent to exchange their First Independence Warrants for
BancGroup Common Stock as of the Effective Date, and in accordance with the
Agreement. However, to the extent that up to seven percent of the First
Independence Warrants are not exchanged, or if BancGroup waives this condition,
BancGroup will assume the First Independence Warrants. See "Treatment of First
Independence Warrants."
On the Effective Date, all employees of First Independence (including its
executive officers) will, at BancGroup's option, either become employees of
BancGroup or its subsidiaries or be entitled to severance benefits in accordance
with the severance policy of Colonial Bank, as of the date of the Agreement,
except that such severance policy will be modified and will apply to employees
of First Independence who become employees of BancGroup, as follows: (i) if an
employee has worked less than one year at the time of termination, such employee
will receive a severance payment equal to one month's salary; (ii) if an
employee has worked for more than one year at the time of termination, and is
terminated within the first 12 months after the Effective Date, such employee
will receive a severance payment equal to six months' salary; and (iii) if an
employee has worked more than two years and is terminated after 12 months and
before the end of 24 months after the Effective Date, such employee will receive
a severance payment equal to three months' salary. Employment at First
Independence will be counted as employment at BancGroup to determine the period
of time the employee has been employed. All employees of First Independence who
become employees of BancGroup or its subsidiaries on the Effective Date will be
entitled, to the extent permitted by applicable law, to participate in all
benefit plans of BancGroup to the same extent as BancGroup's employees.
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Upon consummation of the Merger, Colonial Bank and Edward H. Black
(President and Chief Executive Officer of First Independence) will enter a
Severance Agreement which will provide that Mr. Black will be maintained in his
present position as President and Chief Executive Officer at an annual salary of
no less than $130,000, subject to termination of his employment by Colonial Bank
upon 15 days' prior written notice (in which event Mr. Black will be entitled to
receive from Colonial Bank in cash a lump-sum payment equal to $65,000 if
termination occurs within one year of the Effective Date or $32,500 if such
termination occurs within two years but after one year from the Effective Date).
The obligation of Colonial Bank to make the cash payment does not apply if Mr.
Black voluntarily terminates his employment with Colonial Bank for any reason,
or if Colonial Bank terminates his employment for "cause" (as defined in the
Severance Agreement). Unless sooner terminated as provided above, the Severance
Agreement terminates on the second anniversary of the Effective Date.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of First Independence against certain claims and liabilities
arising out of or pertaining to matters existing or occurring at or prior to the
Effective Date, to the extent that First Independence would have been authorized
under Florida law, or under its Articles of Incorporation or Bylaws, to
indemnify such persons.
Except as described above, none of the directors or executive officers of
First Independence, and no associate of any such person, has any substantial
direct or indirect interest in the Merger, other than an interest arising from
the ownership of First Independence Common Stock.
CONVERSION OF FIRST INDEPENDENCE COMMON STOCK
On the Effective Date, each share of First Independence Common Stock
outstanding and held by First Independence's shareholders (except shares as to
which dissenters' rights of appraisal are perfected) will be converted by
operation of law and without any action by any holder thereof into shares of
BancGroup Common Stock. The number of shares, or fractions of a share of
BancGroup Common Stock into which each outstanding share of First Independence
Common Stock on the Effective Date will be converted, will be equal to $20.71
divided by the Market Value. The Market Value will represent the per share
market value of the BancGroup Common Stock at the Effective Date and will be
determined by calculating the average of the closing prices of the Common Stock
of BancGroup as reported by the NYSE on each of the 10 consecutive trading days
ending on the trading day five calendar days immediately preceding the Effective
Date.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of First Independence having a fractional interest
arising upon the conversion of First Independence Common Stock into BancGroup
Common Stock will, at the time of surrender of the certificates representing
First Independence Common Stock, be paid by BancGroup an amount of cash equal to
such fractional interest multiplied by the Market Value.
As an example, if the Market Value is $24.35 (which was the Market Value
(as defined) calculated as of July 1, 1997), then each share of First
Independence Common Stock will be converted on the Effective Date into .8505 of
a share of BancGroup Common Stock (i.e., $20.71 divided by $24.35). As a result,
a shareholder of First Independence who owns 500 shares of First Independence
Common Stock would receive 425 shares of BancGroup Common Stock ($20.71 / $24.35
multiplied by 500) with the .26 of a share paid in cash equal to $6.33 (.26
multiplied by $24.35).
As the Market Value of the BancGroup Common Stock rises, the number of
shares of BancGroup Common Stock to be issued in the Merger will decrease, and
as the Market Value falls, the number of such shares to be issued will increase.
The closing sales price on the NYSE of the BancGroup Common Stock on July 16,
1997 was $27.75 per share.
Shareholders are advised to obtain current market quotations for BancGroup
Common Stock. The market price of BancGroup Common Stock at the Effective Date,
or on the date on which certificates representing such shares are received by
First Independence shareholders, may be higher or lower than the market price of
BancGroup Common Stock as of the Record Date or at the time of the Special
Meeting.
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The Agreement provides that if, prior to the Effective Date, BancGroup
Common Stock is changed into a different number of shares or a different class
of shares by reason of any recapitalization or reclassification, stock dividend,
combination, stock split, or reverse stock split of the BancGroup Common Stock,
an appropriate and proportionate adjustment will be made in the number of shares
of BancGroup Common Stock into which the First Independence Common Stock will be
converted in the Merger.
For a description of the assumption of First Independence Options and First
Independence Warrants, see "Treatment of First Independence Options" and
"Treatment of First Independence Warrants."
SURRENDER OF FIRST INDEPENDENCE COMMON STOCK CERTIFICATES
Upon the Effective Date and subject to the conditions described at
"Conditions to Consummation of the Merger," First Independence's shareholders
(except to the extent that such holders perfect dissenters' rights of appraisal
under the FBC) will automatically, and without further action by such
shareholders or by BancGroup, become owners of BancGroup Common Stock as
described herein. Outstanding certificates representing shares of the First
Independence Common Stock will represent shares of BancGroup Common Stock.
Thereafter, upon surrender of the certificates formerly representing shares of
First Independence Common Stock, the holders will be entitled to receive
certificates for the BancGroup Common Stock. Dividends on the shares of
BancGroup Common Stock will accumulate without interest and will not be
distributed to any former shareholder of First Independence unless and until
such shareholder surrenders for cancellation his certificate for First
Independence Common Stock. SunTrust Bank, Atlanta, Atlanta, Georgia, transfer
agent for BancGroup Common Stock, will act as the Exchange Agent with respect to
the shares of First Independence Common Stock surrendered in connection with the
Merger.
A detailed explanation of these arrangements will be mailed to First
Independence shareholders promptly following the Effective Date. STOCK
CERTIFICATES SHOULD NOT BE SENT TO THE EXCHANGE AGENT UNTIL SUCH NOTICE IS
RECEIVED.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for federal income
tax purposes under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"). The obligation of the parties to consummate the Merger is
conditioned on the receipt of an opinion in form and substance reasonably
satisfactory to First Independence and BancGroup from Coopers & Lybrand L.L.P.,
which serves as BancGroup's independent public accountant, to the effect that
the Merger will constitute such a reorganization. A copy of such opinion has
been delivered to First Independence. In delivering its opinion, Coopers &
Lybrand L.L.P., has received and relied upon certain representations contained
in certificates of officers of BancGroup and First Independence and certain
other information, data, documentation and other materials as it deems
necessary. The tax opinion is based upon customary assumptions contained
therein, including the assumption that First Independence has no knowledge of
any plan or intention on the part of the First Independence shareholders to sell
or dispose of BancGroup Common Stock that would reduce their holdings to the
number of shares having in the aggregate a fair market value of less than 50% of
the total fair market value of the First Independence Common Stock outstanding
immediately upon the Merger.
Neither First Independence nor BancGroup intends to seek a ruling from the
Internal Revenue Service as to the federal income tax consequences of the
Merger. First Independence's shareholders should be aware that the opinion will
not be binding on the Internal Revenue Service or the courts. First
Independence's shareholders also should be aware that some of the tax
consequences of the Merger are governed by provisions of the Code as to which
there are no final regulations and little or no judicial or administrative
guidance. There can be no assurance that future legislation, administrative
rulings, or court decisions will not adversely affect the accuracy of the
statements contained herein.
The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code and the following federal income tax
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consequences will result to First Independence's shareholders who exchange their
shares of First Independence Common Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by First Independence's
shareholders on the exchange of shares of First Independence Common Stock
for shares of BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
First Independence shareholder (including any fractional shares of
BancGroup Common Stock deemed received, but not actually received), will be
the same as the aggregate tax basis of the shares of First Independence
Common Stock surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each First Independence shareholder will include the period
during which the shares of First Independence Common Stock exchanged
therefor were held, provided that the shares of First Independence Common
Stock were a capital asset in the holder's hands as of the Effective Date;
(iv) Cash payments received by each First Independence shareholder in
lieu of a fractional share of BancGroup Common Stock will be treated for
federal income tax purposes as if the fractional share had been issued in
the exchange and then redeemed by BancGroup. Gain or loss will be
recognized on the redemption of the fractional share and generally will be
capital gain or loss if the First Independence Common Stock is a capital
asset in the hands of the holder;
(v) No gain or loss will be recognized by First Independence upon the
transfer of its assets and liabilities to BancGroup. No gain or loss will
be recognized by Colonial Bank upon the receipt of the assets and
liabilities of First Independence;
(vi) The basis of the assets of First Independence acquired by
Colonial Bank will be the same as the basis of the assets in the hands of
First Independence immediately prior to the Merger;
(vii) The holding period of the assets of First Independence in the
hands of Colonial Bank will include the period during which such assets
were held by First Independence; and
(viii) A First Independence shareholder who dissents and receives only
cash pursuant to dissenters rights will recognize gain or loss. Such gain
or loss will, in general, be treated as capital gain or loss, measured by
the difference between the amount of cash received and the tax basis of the
shares of First Independence Common Stock converted, if the shares of First
Independence Common Stock were held as capital assets. However, a First
Independence shareholder who receives only cash may need to consider the
effects of Section 302 and 318 of the Code in determining the federal
income tax consequences of the transaction.
(ix) Holders of First Independence Warrants whose warrants are assumed
by BancGroup will realize gain or loss for federal income tax purposes upon
such assumption, and holders of First Independence Warrants who exchange
their warrants for BancGroup Common Stock will realize gain or loss for
federal income tax purposes upon such exchange. In the exchange, such gain
will generally be equal to the excess of the bargain element in such
warrants (that is, the excess of the fair market value of the stock for
which they can be exchanged ($20.71) over the exercise price of such
warrants ($10.00), over the amount paid for such warrants.)
Each First Independence shareholder will be required to report on such
shareholder's federal income tax return for the fiscal year of such shareholder
in which the Merger occurs that such shareholder has received BancGroup Common
Stock in a reorganization.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF ALL MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF FIRST
INDEPENDENCE, TO FIRST INDEPENDENCE AND TO BANCGROUP AND DOES NOT PURPORT TO BE
A COMPLETE DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. THE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR SHAREHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME
TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, NON-UNITED STATES PERSONS, STOCKHOLDERS WHO DO NOT HOLD THEIR
SHARES OF
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<PAGE> 26
FIRST INDEPENDENCE COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF
SECTION 1221 OF THE CODE, AND SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF FIRST
INDEPENDENCE COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY
OR FOREIGN JURISDICTION; MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF FIRST
INDEPENDENCE OPTIONS ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON THE CODE,
TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS
AS OF THE DATE HEREOF. ALL OF THE FOREGOING IS SUBJECT TO CHANGE AND ANY SUCH
CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. FIRST
INDEPENDENCE SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER
TO THEM.
OTHER POSSIBLE CONSEQUENCES
If the Merger is consummated, the shareholders of First Independence, a
Florida state bank, will become shareholders of BancGroup, a Delaware business
corporation.
For a discussion of the differences, if any, in the rights, preferences,
and privileges attaching to First Independence Common Stock as compared with
BancGroup Common Stock, see "COMPARATIVE RIGHTS OF STOCKHOLDERS."
CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The obligations of First Independence and BancGroup to consummate the
Merger are conditioned upon, among other things, (i) the approval of the
Agreement by the holders of at least a majority of the outstanding shares of
First Independence Common Stock; (ii) the approval of the Merger by the Federal
Reserve and by the Alabama Department; (iii) the absence of pending or
threatened litigation with a view to restraining or prohibiting consummation of
the Merger or in which it is sought to obtain divestiture, rescission or damages
in connection with the Merger; (iv) the absence of any investigation by any
governmental agency which might result in any such proceeding; (v) consummation
of the Merger no later than December 31, 1997; and (vi) receipt of opinions of
counsel regarding certain matters.
The obligation of First Independence to consummate the Merger is further
subject to several other conditions, including: (i) the absence of any material
adverse change in the financial condition or affairs of BancGroup; (ii) the
shares of BancGroup Common Stock to be issued under the Agreement shall have
been approved for listing on the NYSE; and (iii) the accuracy in all material
respects of the representations and warranties of BancGroup contained in the
Agreement and the performance by BancGroup of all of its covenants and
agreements under the Agreement.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of First Independence; (ii) the holders of
not more than 10% of the outstanding shares of First Independence Common Stock
shall have exercised dissenters' rights of appraisal with respect to their
shares; (iii) the receipt of a letter from Coopers & Lybrand L.L.P. concurring
with the conclusions of BancGroup's and First Independence's management that no
conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests; (iv) the accuracy in all material
respects of the representations and warranties of First Independence contained
in the Agreement, and the performance by First Independence of all of its
covenants and agreements under the Agreement; (v) the receipt by BancGroup of
certain undertakings from holders of First Independence Common Stock who may be
deemed to be "affiliates" of First Independence pursuant to the rules of the
Commission; and (vi) the receipt by BancGroup of certification from First
Independence that holders of First Independence Warrants holding no less than 93
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percent of the First Independence Warrants have either exercised such Warrants
in accordance with their terms prior to the Effective Date or given notice to
First Independence of their intent to surrender their First Independence
Warrants in exchange for BancGroup Common Stock as of the Effective Date, and in
accordance with the Agreement.
It is anticipated that the foregoing conditions, as well as certain other
conditions contained in the Agreement, such as the receipt of certificates of
officers of each party as to compliance with the Agreement, and satisfaction of
each party of all representations, warranties and covenants, will be satisfied.
The Agreement provides that First Independence and BancGroup may waive all
conditions to their obligations to consummate the Merger, other than the receipt
of the requisite approvals of regulatory authorities and First Independence
shareholder approval of the Merger. In making any decision regarding a waiver of
one or more conditions to consummation of the Merger or an amendment of the
Agreement, the Boards of Directors of First Independence and BancGroup would be
subject to the fiduciary duty standards imposed upon such boards by relevant law
that would require such boards to act in the best interests of their respective
shareholders.
AMENDMENT OR TERMINATION
The Boards of Directors of BancGroup and First Independence may agree to
amend or terminate the Agreement before or after approval by the shareholders of
First Independence. However, the Board of Directors of First Independence may
not amend the Agreement in a manner which would alter the Merger Consideration
or which, in the opinion of the Board of Directors of First Independence, would
adversely affect the rights of the shareholders of First Independence, unless
such amendments are approved by a majority of the outstanding shares of First
Independence Common Stock. Such amendments may require the filing of an
amendment of the Registration Statement, of which this Prospectus forms a part,
with the Commission. See "Conditions to Consummation of the Merger."
REGULATORY APPROVALS
The approval of the Federal Reserve and the Alabama Department must be
obtained prior to consummation of the Merger. In addition, notification of the
Merger must be filed with the Florida Department of Banking and Finance.
Applications were filed with the Federal Reserve and the Alabama Department, and
notification was filed with the Florida Department of Banking and Finance, on
July 3, 1997. The regulatory approval process is expected to take approximately
two months from that date.
Alabama State Banking Department Approval. The Merger must be approved by
the Alabama Department pursuant to applicable provisions of the Alabama Banking
Code. If the Superintendent of the Alabama Department finds that (1) the
proposed transaction will not be detrimental to the safety and soundness of the
bank resulting from the Merger, (2) any new officers and directors of the
resulting bank are qualified by character, experience, and financial
responsibility to direct and manage the resulting bank, and (3) the proposed
Merger is consistent with the convenience and needs of the communities to be
served by the resulting bank in the State of Alabama and is otherwise in the
public interest, the Merger shall be approved by the Superintendent.
Federal Reserve Approval. On June 13, 1997, Colonial Bank became a member
of the Federal Reserve. As the primary federal regulator of state-chartered
banks that are members of the Federal Reserve, the Federal Reserve became the
primary federal regulator of Colonial Bank upon its admission to membership in
the Federal Reserve. In that the Bank Merger Act requires that a bank merger be
approved by the primary federal regulator of the resulting bank, and in that
Colonial Bank will be the bank resulting from the Merger, the Federal Reserve's
approval of the Merger must be obtained.
The Federal Reserve is prohibited from approving the Merger 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. In addition, the Federal Reserve is prohibited from approving
the Merger if its effect, in any section of the country, would be substantially
to lessen competition, or to tend to create a monopoly, or which in any other
manner would be in restraint of trade, unless it finds that the anti-competitive
effects of the Merger are clearly outweighed in the public interest by the
probable effect of the
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Merger in meeting the convenience and needs of the community to be served. The
Federal Reserve is required to take into consideration the financial and
managerial resources and future prospects of the existing and proposed
institutions, and the convenience and needs of the community to be served.
In that the Merger constitutes an interstate bank merger, certain
additional requirements are applicable to the Merger. For example, subject to
certain exceptions, the Federal Reserve is prohibited from approving the Merger
if Colonial Bank materially fails to comply with filing requirements imposed by
the Florida Department of Banking and Finance for interstate bank merger
transactions. In addition, the Federal Reserve is prohibited from approving the
Merger if the bank resulting from the Merger, including all insured depository
institutions which are affiliates of such resulting bank, upon consummation of
the transaction, would control more than 10% of the total amount of deposits of
insured depository institutions in the United States. The Federal Reserve is
also prohibited from approving the Merger if either party to the Merger has a
branch in any state in which any other bank involved in the Merger has a branch,
and the resulting bank, upon consummation of the Merger, would control 30% or
more of the total amount of deposits of insured depository institutions in any
such state. Finally, the Federal Reserve may approve the interstate bank merger
only if each bank involved in the transaction is adequately capitalized as of
the date the application is filed, and the Federal Reserve determines that the
resulting bank will continue to be adequately capitalized and adequately managed
upon consummation of the Merger.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Merger, in ordinary circumstances, for a period ranging from 15-30 days
following the Federal Reserve's approval of the Merger. During such period, the
United States Department of Justice, should it object to the Merger for
antitrust reasons, may challenge the consummation of the Merger.
The Agreement provides that the obligation of each of BancGroup, Colonial
Bank and First Independence to consummate the Merger is conditioned upon the
receipt of all necessary regulatory approvals. There can be no assurance that
the applications necessary for Colonial Bank to consummate the Merger with First
Independence will be approved, and, if such approvals are received, that such
approvals will not be conditioned upon terms and conditions that would cause the
parties to abandon the Merger.
Any approval received from the banking agencies reflects only their view
that the Merger does not contravene applicable competitive standards imposed by
law, and that the Merger is consistent with regulatory policies relating to
safety and soundness. THE APPROVAL OF THE BANKING AGENCIES IS NOT AN ENDORSEMENT
OR RECOMMENDATION OF THE MERGER.
BancGroup is not aware of any other governmental approvals or actions that
may be required for consummation of the Merger except for the Federal Reserve
and the Alabama Department approvals, and the notification filed with the
Florida Department of Banking and Finance, described above. Should any such
approval or action be required, it is presently contemplated that such approval
or action would be sought.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the business
of First Independence pending consummation of the Merger. The Agreement
prohibits First Independence from taking any of the following actions, prior to
the Effective Date, subject to certain limited exceptions previously agreed to
by the parties, without the prior written approval of BancGroup:
(i) Issuing, delivering or agreeing to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued or
held in the treasury), except shares of First Independence Common Stock
issued upon the exercise of First Independence Options and First
Independence Warrants;
(ii) Borrowing or agreeing to borrow any funds or incurring or
becoming subject to, any liability (absolute or contingent) except
borrowings, obligations and liabilities incurred in the ordinary course of
business and consistent with past practice;
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(iii) Paying any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent balance sheet and current liabilities incurred since that date
in the ordinary course of business and consistent with past practice;
(iv) Declaring or making or agreeing to declare or make, any payment
of dividends or distributions of any assets of any kind whatsoever to
shareholders, or purchasing or redeeming or agreeing to purchase or redeem,
any of its outstanding securities;
(v) Except in the ordinary course of business, selling or transferring
or agreeing to sell or transfer, any of its assets, property or rights or
canceling, or agreeing to cancel, any debts or claims;
(vi) Except in the ordinary course of business, entering or agreeing
to enter into any agreement or arrangement granting any preferential rights
to purchase any of its assets, property or rights or requiring the consent
of any party to the transfer and assignment of any of its assets, property
or rights;
(vii) Waiving any rights of value which in the aggregate are material;
(viii) Except in the ordinary course of business, making or permitting
any amendment or termination of any contract, agreement or license to which
it is a party if such amendment or termination is material considering its
business as a whole;
(ix) Except in accordance with past practice, making any accrual or
arrangement for or payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or former officer or
employee;
(x) Except in accordance with past practice, increasing the rate of
compensation payable to or to become payable to any of its officers or
employees or making any material increase in any profit-sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(xi) Failing to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations; and
(xii) Entering into any other material transaction other than in the
ordinary course of business.
The Agreement provides that prior to the Effective Date, no director or
officer of First Independence or any of its subsidiaries shall, directly or
indirectly, own, manage, operate, join, control, be employed by or participate
in the ownership, proposed ownership, management, operation or control of or be
connected in any manner with, any business, corporation or partnership which is
competitive to the business of First Independence or its subsidiaries.
The Agreement also provides that (i) First Independence will consult with
BancGroup respecting loan requests in excess of $250,000 that are not
single-family residential loan requests and respecting other loan requests
outside the normal course of business, and (ii) First Independence will consult
with BancGroup respecting business issues that First Independence believes
should be brought to the attention of BancGroup.
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, and except for the Merger, neither
First Independence nor any of its directors or officers (or any person
representing any of the foregoing) shall solicit or encourage inquiries or
proposals with respect to, furnish any information relating to or participate in
any negotiations or discussions concerning, any acquisition or purchase of all
or of a substantial portion of the assets of, or of a substantial equity
interest in, First Independence or any business combination involving First
Independence (collectively, an "Acquisition Proposal") other than as
contemplated by the Agreement. First Independence will notify BancGroup
immediately if any such inquiries or proposals are received by First
Independence, if any such information is requested from First Independence, or
if any such negotiations or discussions are sought to be initiated with First
Independence. First Independence is required to instruct its officers,
directors, agents or affiliates or their subsidiaries to refrain from doing any
of the above. First Independence may communicate
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information about an Acquisition Proposal to its shareholders if and to the
extent that legal counsel provides a written opinion to First Independence that
it is required to do so in order to comply with its legal obligations.
If (i) an Acquisition Proposal is submitted to and approved by the
shareholders of First Independence at any time prior to the Effective Date; or
(ii) an Acquisition Proposal is received by First Independence or is made
directly to the shareholders of First Independence at any time prior to the
termination of the Agreement (except for a termination by First Independence for
a breach of the Agreement by BancGroup) and, in the case of (i) or (ii), the
Merger is not closed as contemplated by the Agreement, then First Independence
is required to pay to BancGroup a termination fee in an amount equal to $675,000
in cash, as liquidated damages, and not as a penalty, and, upon the payment in
full thereof, the Agreement will be terminated and no party to the Agreement
will have any further liability under the Agreement.
INDEMNIFICATION
BancGroup has agreed to indemnify present and former directors and officers
of First Independence and the Bank against liabilities arising out of actions or
omissions occurring at or prior to the Effective Date to the extent First
Independence would have been authorized under Florida law and First
Independence's Articles of Incorporation and Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Independence Common Stock as of the Record Date are
entitled to dissenters' rights under Florida law. Consummation of the Merger is
subject to, among other things, the holders of no more than 10% of the
outstanding First Independence Common Stock electing to exercise their
dissenters' rights. PURSUANT TO SECTION 658.44 OF THE FBC, A FIRST INDEPENDENCE
SHAREHOLDER WHO VOTES HIS SHARES AGAINST THE MERGER, OR WHO OTHERWISE GIVES
WRITTEN NOTICE TO FIRST INDEPENDENCE AT OR PRIOR TO THE SPECIAL MEETING THAT THE
SHAREHOLDER DISSENTS FROM THE AGREEMENT, WILL LOSE THE RIGHT TO RECEIVE THE
SHARES OF BANCGROUP COMMON STOCK TO BE RECEIVED PURSUANT TO THE TERMS OF THE
AGREEMENT AND WILL INSTEAD RECEIVE A CASH PAYMENT FOR THE VALUE OF HIS OR HER
SHARES AS OF THE EFFECTIVE DATE.
In order to exercise dissenters rights, a dissenting shareholder of First
Independence (a "Dissenting Shareholder") must fully comply with the statutory
procedures of Section 658.44 of the FBC, which is summarized below. Such Section
is attached hereto as Appendix B. Shareholders of First Independence are urged
to read this Section in its entirety and to consult with their legal advisors.
Each shareholder of First Independence who desires to assert his or her
dissenters rights is cautioned that failure on his or her part to adhere
strictly to the requirements of Florida law in any regard will cause a
forfeiture of any dissenters rights. The following summary of Florida law is
qualified in its entirety by reference to the full text of the provisions of the
FBC attached hereto as Appendix B.
Any shareholder of First Independence who has voted against the Agreement
by proxy or in person at the Special Meeting or has given notice in writing at
or prior to such meeting to the presiding officer that he or she dissents from
the Agreement, will be entitled to receive payment in cash of the value of the
shares so held by him. On or promptly after the Effective Date, BancGroup may
fix an amount which it considers to be not more than the fair market value of
the shares of First Independence and which it will pay to the holders of
dissenting shares of First Independence and, if it fixes such amount, will offer
to pay such amount to the holders of all dissenting shares of First
Independence. The owners of dissenting shares who have accepted such offer will
be entitled to receive the amount so offered for such shares in cash upon
surrendering the stock certificates representing such shares at any time within
30 days after the Effective Date.
The value of dissenting shares of First Independence, the owners of which
have not accepted an offer for such shares made by BancGroup, will be determined
as of the Effective Date by three appraisers, one to be selected by the owners
of at least two thirds of such dissenting shares, one to be selected by the
Board of Directors of Colonial Bank, and the third to be selected by the two so
chosen. The value agreed upon by any two of the appraisers will control and be
final and binding on all parties. If, within 90 days from the Effective Date for
any reason one or more of the appraisers is not selected, or the appraisers fail
to determine the value of such dissenting shares, the Florida Department will
cause an appraisal of such dissenting shares to be made
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which will be final and binding on all parties. The expenses of appraisal will
be paid by Colonial Bank. The owners of dissenting shares, the value of which is
to be determined by appraisal, will be entitled to receive the value of such
shares in cash upon surrender of the stock certificates representing such shares
at any time within 30 days after the value of such shares has been determined by
appraisal made on or after the Effective Date.
Any shareholder of First Independence who votes against the Agreement in
person or by proxy at the Special Meeting or who gives notice in writing at or
prior to such meeting to the presiding officer that he or she dissents, will be
notified in writing of the date of consummation of the Merger. The failure of a
shareholder to vote against the Agreement will not constitute a waiver of the
above described dissenters' rights, provided that such shareholder has given
notice in writing at or prior to the Special Meeting to the presiding officer
that such shareholder dissents from the Agreement.
The foregoing discussion is only a summary of the provisions of Florida law
and does not purport to be complete and is qualified in its entirety by
reference to Section 658.44 of the FBC, which is attached hereto as Appendix B.
Any shareholder who intends to dissent from the Merger should review the text of
Section 658.44 carefully and should also consult with his or her attorney. Any
shareholder who fails to strictly follow the procedures set forth in said
statute will forfeit dissenters' rights.
Any dissenting shareholder who perfects his or her right to be paid the
value of his or her shares will recognize gain or loss, if any, for federal
income tax purposes upon the receipt of cash for such shares. The amount of gain
or loss and its character as ordinary or capital gain or loss will be determined
in accordance with applicable provisions of the Internal Revenue Code of 1986,
as amended.
BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE FLORIDA LAW RELATING TO
DISSENTERS' APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM
THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISERS.
RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
The issuance of the shares of BancGroup Common Stock pursuant to the Merger
(including any shares to be issued pursuant to First Independence Options and
First Independence Warrants) has been registered under the Securities Act of
1933 (the "Securities Act"). As a result, shareholders of First Independence who
are not "affiliates" of First Independence (as such term is defined under the
Securities Act) may resell, without restriction, all shares of BancGroup Common
Stock which they receive in connection with the Merger. Under the Securities
Act, only affiliates of First Independence are subject to restrictions on the
resale of the BancGroup Common Stock which they receive in the Merger.
The BancGroup Common Stock received by affiliates of First Independence who
do not also become affiliates of BancGroup after the consummation of the Merger
may not be sold except pursuant to an effective Registration Statement under the
Securities Act covering such shares or in compliance with Rule 145 promulgated
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such shareholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers or certain other
transactions within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of BancGroup Common
Stock or the average weekly trading volume in BancGroup Common Stock reported on
the NYSE during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to the availability of current public information about
BancGroup. The restrictions on sales will cease to apply under most
circumstances once the former First Independence affiliate has held the
BancGroup Common Stock for at least one year. BancGroup Common Stock held by
affiliates of First Independence who become affiliates of BancGroup, if any,
will be subject to additional restrictions on the ability of such persons to
resell such shares. In addition, affiliates of First Independence will agree not
to sell or otherwise reduce risk relative to any shares of BancGroup Common
Stock received in the Merger until financial results concerning at least 30 days
of post-Merger combined operations have been published by BancGroup.
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First Independence will provide BancGroup with such information as may be
reasonably necessary to determine the identity of those persons (primarily
officers, directors and principal shareholders) who may be deemed to be
affiliates of First Independence. First Independence will also obtain from each
such person a written undertaking to the effect that no sale or transfer will be
made of any shares of BancGroup Common Stock by such person except pursuant to
Rule 145 or pursuant to an effective registration statement or an exemption from
registration under the Securities Act. Receipt of such an undertaking is a
condition to BancGroup's obligation to close the Merger. If such undertakings
are not received and BancGroup waives receipt of such condition, the
certificates for the shares of BancGroup Common Stock to be issued to such
person will contain an appropriate restrictive legend and appropriate stock
transfer orders will be given to BancGroup's stock transfer agent.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a pooling-of-interests transaction
in accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of First Independence Common Stock
acquired for cash pursuant to the exercise of dissenters' rights or in lieu of
fractional shares not exceed 10% of the outstanding shares of First Independence
Common Stock. Under this accounting treatment, assets and liabilities of First
Independence would be added to those of BancGroup at their recorded book values,
and the shareholders' equity of the two companies would be combined in
BancGroup's consolidated balance sheet. Financial statements of BancGroup issued
after the Effective Date of the Merger may be restated to reflect the
consolidated operations of BancGroup and First Independence as if the Merger had
taken place prior to the periods covered by the financial statements.
NYSE REPORTING OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
Sales of BancGroup Common Stock to be issued in the Merger in exchange for
First Independence Common Stock will be reported on the NYSE.
TREATMENT OF FIRST INDEPENDENCE OPTIONS
ASSUMPTION OF OPTIONS. As of the date of this Prospectus, First
Independence had granted options (the "First Independence Options"), which
entitle the holders thereof to acquire up to 58,519 shares of First Independence
Common Stock. On the Effective Date, BancGroup will assume all First
Independence Options outstanding, and each such option will represent the right
to acquire BancGroup Common Stock on substantially the same terms applicable to
the First Independence Options. The registration statement registering the
shares of BancGroup Common Stock issued pursuant to the Merger also registers
the shares of BancGroup Common Stock to be issued upon the exercise of the First
Independence Options assumed by BancGroup. The number of shares of BancGroup
Common Stock to be issued pursuant to such options will equal the number of
shares of First Independence Common Stock subject to such First Independence
Options multiplied by the Exchange Ratio, provided that no fraction of shares of
BancGroup Common Stock will be issued and the number of shares of BancGroup
Common Stock to be issued upon the exercise of First Independence Options, if a
fractional share exists, will equal the number of whole shares obtained by
rounding to the nearest whole number, giving account to such fraction, or else
such fractional interest shall be paid in cash. The exercise price for the
acquisition of BancGroup Common Stock will be the exercise price for each share
of First Independence Common Stock subject to such options divided by the
Exchange Ratio, adjusted appropriately for any rounding to whole shares that may
be done. For these purposes, the "Exchange Ratio" means the result obtained by
dividing $20.71 by the Market Value.
The First Independence Options are issuable pursuant to the First
Independence Bank of Florida Stock Option Plan (the "Option Plan").
The Option Plan is not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended, nor is it subject to the Employee Retirement
Income Security Act of 1974. First Independence Options are not transferrable
except under the laws of descent and distribution.
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PURPOSE OF THE OPTION PLAN. The purpose of the Option Plan is to promote
the best interests of First Independence and its shareholders by enabling First
Independence to attract and retain persons of ability as employees, furnishing
an incentive to employees of First Independence by providing them with an equity
participation in First Independence and rewarding those employees who contribute
to the operating progress and earning power of First Independence. BancGroup
believes that its assumption of the First Independence Options will be
consistent with this purpose. No further options will be granted under the
Option Plan after the Merger. A total of 13 persons currently hold First
Independence Options.
TAX CONSEQUENCES -- INCENTIVE OPTIONS. Certain options issued under the
Option Plan may qualify as "incentive stock options," under Section 422 of the
Internal Revenue Code of 1986, as amended. To the extent an option so qualifies
under the Internal Revenue Code, no income will result to a grantee of any such
option upon the granting or exercising of an option by the grantee, and
BancGroup will not be entitled to a tax deduction by reason of such grant or
exercise.
If, after exercising the option, the employee holds the stock obtained
through exercise for at least two years after the date of option grant and at
least one year after the stock was obtained, the employee's gain (if any) on
selling the stock will generally be treated as a long term capital gain.
Generally, the employee's alternative minimum taxable income for minimum tax
purposes will be increased by the difference between the option price and the
fair market value of the stock on the date of exercise.
If the holding period requirements just stated are not met, then any gain
on the sale of the stock will be taxed partly or entirely at ordinary income tax
rates. If the stock is held for less than the required holding period, then the
difference between the option exercise price and the fair market value of the
stock on the date of exercise will be taxed at ordinary income tax rates. The
gain equal to the increase in the fair market value of the stock after the date
of exercise of the option will generally be taxed as capital gain.
It should be understood that the holding periods discussed above relate
only to federal income tax treatment and not to any securities law restrictions
that may apply to the sale of shares obtained through an option.
To the extent that options issued under the Option Plan do not qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code, they
will be considered as nonqualified options. Upon the exercise of a nonqualified
option, ordinary income will result to the grantee equal to the difference
between the price of the option and the fair market value of the stock subject
to the option at the date of exercise. BancGroup, however, will be entitled to a
tax deduction equal to the amount of ordinary income accruing to the optionee.
The foregoing statements concerning federal income tax treatment are
necessarily general and may not apply in a particular instance. Option holders
should contact their own professional tax advisors for advice concerning their
particular tax situation and any changes in the tax law since the date of this
Prospectus.
ADMINISTRATION. The shares of stock to be delivered upon the exercise of
First Independence Options granted under the Option Plan will be made available,
after the Merger, from the authorized but unissued shares of BancGroup's Common
Stock.
The Option Plan is to be administered, after the Merger, by the Personnel
and Compensation Committee (the "Committee") of the Board of Directors of
BancGroup. All members of the Committee are directors of BancGroup. The Chairman
of the Committee, John C. H. Miller, Jr., receives employee-related compensation
from BancGroup and holds options under BancGroup's stock option plans. Mr.
Miller is a member of a law firm that performs legal services for BancGroup. See
"LEGAL OPINIONS." Another member of the Committee, Jack H. Rainer, is Chairman
of Bankers Credit Life Insurance Company, which provides credit life insurance
on certain loans made by Colonial Bank. The members of the Committee serve at
the pleasure of the Board of Directors of BancGroup. The Committee will
interpret the Option Plan and resolve questions presented by holders of options
under the Option Plan. Requests for information or questions about the Option
Plan should be directed to BancGroup's Corporate Secretary, at the offices of
BancGroup, Post Office Box 1108, One Commerce Street, Montgomery, Alabama 36101,
telephone: (334) 240-5000.
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CERTAIN OPTION AGREEMENTS, BY THEIR TERMS, TERMINATE AS OF THE EFFECTIVE
DATE. HOLDERS OF FIRST INDEPENDENCE OPTIONS ARE URGED TO EXAMINE THEIR
INDIVIDUAL OPTION AGREEMENT AND OBTAIN APPROPRIATE LEGAL ADVICE REGARDING
WHETHER SUCH FIRST INDEPENDENCE OPTION WILL SO TERMINATE.
EXERCISE OF OPTIONS. After a First Independence Option becomes exercisable
in accordance with its terms, it may be exercised by the holder by giving
written notice to BancGroup on a form provided by BancGroup and by paying to
BancGroup in cash the exercise price of the shares to be acquired under the
option. Payment may be made to BancGroup by cash, check, bank draft, or money
order, or by delivering BancGroup stock already owned by the option holder. The
period during which an option may be exercised is stated in the agreement
respecting each grant of options but in no case may be more than 10 years from
the date the option is granted. The optionee must be in the continuous employ of
First Independence or BancGroup from the date of grant through the date of
exercise, except as stated below.
TERMINATION OF EMPLOYMENT. If an employee is terminated for cause, the
option will also terminate as of the date of termination of employment. "Cause"
is defined in the several stock option agreements pursuant to which the First
Independence Options were issued. If an employee's employment is terminated
without cause, the holder of the option has 30 days (three years in the case of
options granted by First Independence to its President and Chief Executive
Officer and another senior officer) following such termination to exercise such
option. In the case of permanent and total disability, the optionee has the
right at any time during the period ending one year from the date of termination
of employment as a result of such disability to exercise the option.
AMENDMENT AND OTHER MATTERS. BancGroup's Board of Directors may at any
time amend the Option Plan, except that no amendment may make any change in any
option already granted which would adversely affect the rights of any
participant.
It is not anticipated that BancGroup will make any reports to option
holders regarding the amount or status of First Independence Options held.
Option holders may obtain such information from BancGroup at the address given
above.
The shares subject to options will be obtained by BancGroup from authorized
but unissued shares. BancGroup has reserved sufficient authorized but unissued
shares for issuance pursuant to options under the Option Plan and does not
anticipate acquiring any shares in the open market for such purposes.
TREATMENT OF FIRST INDEPENDENCE WARRANTS
SURRENDER AND ASSUMPTION OF WARRANTS. As of the date of this Prospectus,
First Independence had granted the First Independence Warrants, which entitle
the holders thereof to acquire up to 199,940 shares of First Independence Common
Stock. The Agreement provides that no later than five days prior to the
Effective Date, the holders of at least 93% of First Independence Warrants must
have either exercised such Warrants in accordance with their terms prior to the
Effective Date or given notice to First Independence of their intent to exchange
their First Independence Warrants for BancGroup Common Stock as of the Effective
Date. In the case of such exchange, for each share of First Independence Common
Stock represented by a First Independence Warrant, the holder thereof is
entitled to receive an amount of BancGroup Common Stock equal to the quotient
obtained by dividing (i) $20.71 less the warrant exercise price by (ii) the
Market Value. Thus, the holder of the warrant is entitled to receive BancGroup
Common Stock with a value (calculated based upon the Market Value) equal to the
difference between the value of the First Independence Warrant (calculated based
upon the Market Value) and the exercise price of the Warrant. The exercise price
of the First Independence Warrants is an amount per share equal to the greater
of $10.00 or the book value of the First Independence Common Stock as of the
last day of the calendar quarter preceding the date such warrant is exercised.
As of June 30, 1997, the book value of First Independence Common Stock was
$9.45. If the book value of First Independence Common Stock rises above $10.00,
then holders of First Independence Warrants will receive fewer shares of
BancGroup Common Stock in the exchange by following the foregoing procedure.
The Agreement provides that holders of at least 93 percent of the First
Independence Warrants must have either exercised such Warrants in accordance
with their terms prior to the Effective Date or surrendered
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their Warrants according to the foregoing procedure. The remaining First
Independence Warrants not so surrendered will be assumed by BancGroup. To the
extent that up to seven percent of the holders of the First Independence
Warrants do not provide such notice to First Independence of their intent to
exchange the First Independence Warrants, or should BancGroup waive the
foregoing condition, BancGroup will assume all First Independence Warrants
outstanding, and each such First Independence Warrant will represent the right
to acquire BancGroup Common stock on substantially the same terms applicable to
the First Independence Warrants. The number of shares of BancGroup Common Stock
to be issued pursuant to such warrants will equal the number of shares of First
Independence Common Stock subject to such First Independence Warrants multiplied
by the Exchange Ratio, provided that no fractions of shares of BancGroup Common
Stock will be issued. The number of shares of BancGroup Common Stock to be
issued upon the exercise of First Independence Warrants, if a fractional share
exists, will equal the number of whole shares obtained by rounding to the
nearest whole number, giving account to such fraction, or by paying for such
fraction in cash. The exercise price for the acquisition of BancGroup Common
Stock will be the exercise price for each share of First Independence Common
Stock subject to such warrant divided by the Exchange Ratio, adjusted
appropriately for any rounding to whole shares that may be required.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The Common Stock
was first listed on the NYSE on February 24, 1995. Prior to February 21, 1995,
BancGroup had two classes of common stock outstanding, Class A and Class B. The
Class B was not publicly traded. The Class A Common Stock was traded in the
over-the-counter market and quoted on the NASDAQ National Market System. The
BancGroup Class A Common Stock had more limited voting rights than the BancGroup
Class B Common Stock. The Class A and Class B Common Stock were reclassified
into one class of Common Stock on February 21, 1995, and the Class A Common
Stock ceased to be quoted on NASDAQ on February 24, 1995.
The following table shows the dividends paid per share and indicates the
high and low closing prices for the BancGroup Class A Common Stock as reported
by the NASDAQ National Market System up to February 24, 1995, and the same
information reported by the NYSE for the BancGroup Common Stock commencing
February 24, 1995.
<TABLE>
<CAPTION>
PRICE(1)
------------- DIVIDENDS(1)
HIGH LOW (PER SHARE)
---- --- ------------
<S> <C> <C> <C>
1995
1st Quarter............................................... $11 13/16 $ 9 3/4 $0.1125
2nd Quarter............................................... 13 5/8 11 9/16 0.1125
3rd Quarter............................................... 14 15/16 13 3/4 0.1125
4th Quarter............................................... 16 7/16 14 1/4 0.1125
1996
1st Quarter............................................... 18 1/4 15 0.135
2nd Quarter............................................... 18 1/16 15 5/8 0.135
3rd Quarter............................................... 17 15/16 15 5/8 0.135
4th Quarter............................................... 20 1/8 17 3/8 0.135
1997
1st Quarter............................................... 24 18 2/3 0.15
2nd Quarter............................................... 24 7/8 22 0.15
3rd Quarter (through 1997....................... -- -- --
</TABLE>
- ---------------
(1) Price and dividends have been restated to reflect the impact of a
two-for-one stock split effected in the form of a 100% stock dividend paid
February 11, 1997.
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<PAGE> 36
On May 8, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $23 5/8 per share.
At December 31, 1996, BancGroup's subsidiaries accounted for approximately
98% of BancGroup's consolidated assets. BancGroup derives substantially all of
its income from dividends received from its subsidiaries. Various statutory
provisions and regulatory policies limit the amount of dividends the subsidiary
banks may pay without regulatory approval. In addition, federal statutes
restrict the ability of subsidiary banks to make loans to BancGroup, and
regulatory policies may also restrict such dividends.
FIRST INDEPENDENCE
There is no established public trading market for the First Independence
Common Stock. The shares of First Independence Common Stock are not actively
traded, and such trading activity, as it occurs, takes place in privately
negotiated transactions.
Management of First Independence is aware of certain transactions in shares
of First Independence that have occurred since January 1, 1995, although the
trading prices of all stock transactions are not known. The following sets forth
the trading prices for the shares of First Independence Common Stock that have
occurred since January 1, 1995 for transactions in which the trading prices are
known to management of First Independence:
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK
------------------
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter............................................. $ 8.00 $ 8.00
Second Quarter............................................ 10.00 10.00
Third Quarter............................................. 9.00 9.00
Fourth Quarter............................................ -- --
1996
First Quarter............................................. 8.00 8.00
Second Quarter............................................ 9.00 9.00
Third Quarter............................................. 10.00 9.00
Fourth Quarter............................................ 9.00 8.75
1997
First Quarter............................................. 10.00 8.75
Second Quarter............................................ 8.75 8.75
Third Quarter (through , 1997)..................... -- --
</TABLE>
In the first quarter of 1995, the Bank sold 200,00 shares of Common Stock
for $10.00 per share which entitled the purchaser to receive for each share of
Common Stock purchased a First Independence Warrant exercisable on or before
November 1, 1998 at the greater of $10.00 per share or the book value of the
First Independence Common Stock as of the calendar quarter preceding the date
such Warrant is exercised. See "THE MERGER -- Treatment of First Independence
Warrants."
First Independence has not paid any cash dividends since 1991.
The Agreement restricts First Independence's ability to pay dividends prior
to the Effective Date. See "THE MERGER -- Conduct of Business Pending the
Merger."
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 100,000,000 shares of
BancGroup Common Stock, par value $2.50 per share, and 1,000,000 shares of its
Preference Stock, par value $2.50 per share. As of April 30, 1997, there were
issued and outstanding a total of 40,740,357 shares of BancGroup Common Stock.
No shares of Preference Stock are issued and outstanding. In 1986, BancGroup
issued $28,750,000 in principal amount
29
<PAGE> 37
of its 7 1/2% Convertible Subordinated Debentures due 2011 (the "1986
Debentures") of which $7,187,000 were outstanding as of December 31, 1996 and
convertible at any time into 512,800 shares of BancGroup Common Stock, subject
to adjustment. There are 1,839,981 shares of BancGroup Common Stock subject to
issue upon exercise of options under BancGroup's stock option plans. In addition
to BancGroup Common Stock to be issued in the Merger, BancGroup will issue
additional shares of its Common Stock in pending acquisitions. See "BUSINESS OF
BANCGROUP -- Proposed Affiliate Banks." On January 20, 1997, BancGroup issued,
through a special purpose trust, $70 million of Trust Preferred Securities.
The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
Restated Certificate of Incorporation (the "Certificate"), as amended, and
bylaws of BancGroup, do not purport to be complete and are qualified in their
entirety by reference to the foregoing.
BANCGROUP COMMON STOCK
Dividends. Subject to the rights of holders of BancGroup's Preference
Stock, if any, to receive certain dividends prior to the declaration of
dividends on shares of BancGroup Common Stock, when and as dividends, payable in
cash, stock or other property, are declared by the BancGroup Board of Directors,
the holders of BancGroup Common Stock are entitled to share ratably in such
dividends.
Voting Rights. Each holder of BancGroup Common Stock has one vote for each
share held on matters presented for consideration by the stockholders.
Preemptive Rights. The holders of BancGroup Common Stock have no
preemptive rights to acquire any additional shares of BancGroup.
Issuance of Stock. The BancGroup Certificate authorizes the BancGroup
Board to issue authorized shares of BancGroup Common Stock without stockholder
approval. However, BancGroup's Common Stock is listed on the NYSE, which
requires stockholder approval of the issuance of additional shares of BancGroup
Common Stock under certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-up
of BancGroup, whether voluntary or involuntary, the holders of BancGroup Common
Stock will be entitled to share ratably in any of its assets or funds that are
available for distribution to its stockholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after preferences
of any outstanding Preference Stock.
PREFERENCE STOCK
BancGroup's Preference Stock may be issued from time to time as a class
without series, or if so determined by the BancGroup Board of Directors, either
in whole or in part in one or more series. The voting rights, and such
designations, preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, including, but not limited to, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of BancGroup Preference Stock (or of the entire class of BancGroup
Preference Stock if none of such shares has been issued), the number of shares
constituting any such series and the terms and conditions of the issue thereof
may be fixed by resolution of the BancGroup Board of Directors. BancGroup
Preference Stock may have a preference over the BancGroup Common Stock with
respect to the payment of dividends and the distribution of assets in the event
of the liquidation or winding-up of BancGroup and such other preferences as may
be fixed by the BancGroup Board.
1986 DEBENTURES
BancGroup issued in 1986 its 7 1/2% Convertible Subordinated Debentures due
2011 (the "1986 Debentures") in the total principal amount of $28,750,000. The
1986 Debentures were issued under a trust indenture (the "1986 Indenture")
between BancGroup and SunTrust Bank, Atlanta, Atlanta, Georgia, as trustee.
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<PAGE> 38
The 1986 Debentures will mature on March 31, 2011, and are convertible at
any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $14 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture, a total of 512,800 shares of such BancGroup Common Stock will be
issued. The 1986 Debentures are redeemable, in whole or in part, at the option
of BancGroup at certain premiums until 1996, when the redemption price shall be
equal to 100% of the face amount of the 1986 Debentures plus accrued interest.
The payment of principal and interest on the 1986 Debentures is subordinate, to
the extent provided in the 1986 Indenture, to the prior payment when due of all
Senior Indebtedness of BancGroup. "Senior Indebtedness" is defined as any
indebtedness of BancGroup for money borrowed, or any indebtedness incurred in
connection with an acquisition or with a merger or consolidation, outstanding on
the date of execution of the 1986 Indenture as originally executed, or
thereafter created, incurred or assumed, and any renewal, extension,
modification or refunding thereof, for the payment of which BancGroup (which
term does not include BancGroup's consolidated or unconsolidated subsidiaries)
is at the time of determination responsible or liable as obligor, guarantor or
otherwise. Senior Indebtedness does not include (i) indebtedness as to which, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness is subordinate in right of
payment to any other indebtedness of BancGroup, and (ii) indebtedness which by
its terms states that such indebtedness is subordinate to or equally subordinate
with the 1986 Debentures.
At December 31, 1996, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $870 million. Such debt includes all
short-term debt consisting of federal funds purchased, securities purchased
under repurchase agreements and borrowing with the Federal Home Loan Bank but
excludes all federally-insured deposits. BancGroup may from time to time incur
additional indebtedness constituting Senior Indebtedness. The 1986 Indenture
does not limit the amount of Senior Indebtedness which BancGroup may incur, nor
does such indenture prohibit BancGroup from creating liens on its property for
any purpose.
On January 29, 1997, BancGroup issued, through a special purpose trust, $70
million of Trust Preferred Securities. The securities bear interest at 8.92% and
are mandatorily redeemable by BancGroup beginning January 2017 through January
2027. Also, BancGroup has the option to redeem the securities, in whole or in
part, at a premium after January 2007 through January 2017, or at the face
amount plus accrued interest after January 2017. The securities are subordinated
to substantially all of BancGroup's indebtedness. In BancGroup's consolidated
statement of condition, these securities are shown as long-term debt.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and bylaws may have the
effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup Board of Directors to issue BancGroup
Preference Stock with such rights and privileges, including voting rights, as it
may deem appropriate may enable the BancGroup Board to prevent a change in
control despite a shift in ownership of the BancGroup Common Stock. See
"General" and "Preference Stock." In addition, the power of BancGroup's Board to
issue additional shares of BancGroup Common Stock may help delay or deter a
change in control by increasing the number of shares needed to gain control. See
"BancGroup Common Stock." The following provisions also may deter any change in
control of BancGroup.
Classified Board. BancGroup's Board of Directors is classified into three
classes, as nearly equal in number as possible, with the members of each class
elected to three-year terms. Thus, one-third of BancGroup's Board of Directors
is elected by stockholders each year. With this provision, two annual elections
are required in order to change a majority of the Board of Directors. There are
currently 22 directors of BancGroup. This provision of BancGroup's Certificate
also stipulates that (i) directors can be removed only for cause upon a vote of
80% of the voting power of the outstanding shares entitled to vote in the
election of directors, voting as a class, (ii) vacancies in the Board may only
be filled by a majority vote of the directors remaining in office, (iii) the
maximum number of directors shall be fixed by resolution of the Board of
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<PAGE> 39
Directors, and (iv) the provisions relating to the classified Board can only be
amended by the affirmative vote of the holders of at least 80% of the voting
power of the outstanding shares entitled to vote in the election of directors,
voting as a class.
Business Combinations. Certain "Business Combinations" of BancGroup with a
"Related Person" may only be undertaken with the affirmative vote of at least
75% of the outstanding shares of "Voting Stock," plus the affirmative vote of at
least 67% of the outstanding shares of Voting Stock, not counting shares owned
by the Related Person, unless the Continuing Directors of BancGroup approve such
Business Combination. A "Related Person" is a person, or group, who owns or
acquires 10% or more of the outstanding shares of BancGroup Common Stock,
provided that no person shall be a Related Person if such person would have been
a Related Person on the date of approval of this provision by BancGroup's Board
of Directors, i.e., April 20, 1994. An effect of this provision may be to
exclude Robert E. Lowder, the current Chairman and President of BancGroup, and
certain members of his family from the definition of Related Person. A
"Continuing Director" is a director who was a member of the Board of Directors
immediately prior to the time a person became a Related Person. This provision
may not be amended without the affirmative vote of the holders of at least 75%
of the outstanding shares of Voting Stock, plus the affirmative vote of the
outstanding shares of at least 67% of the outstanding Voting Stock, excluding
shares held by a Related Person. This provision may have the effect of giving
the incumbent Board of Directors a veto over a merger or other Business
Combination that could be desired by a majority of BancGroup's stockholders. As
of April 30, 1997, the Board of Directors of BancGroup owned approximately
10.83% of the outstanding shares of BancGroup Common Stock.
Board Evaluation of Mergers. BancGroup's Certificate permits the Board of
Directors to consider certain factors such as the character and financial
stability of the other party, the projected social, legal, and economic effects
of a proposed transaction upon the employees, suppliers, regulatory agencies and
customers and communities of BancGroup, and other factors when considering
whether BancGroup should undertake a merger, sale of assets, or other similar
transaction with another party. This provision may not be amended except by the
affirmative vote of at least 80% of the outstanding shares of BancGroup Common
Stock. This provision may give greater latitude to the Board of Directors in
terms of the factors which the board may consider in recommending or rejecting a
merger or other Business Combination of BancGroup.
Director Authority. BancGroup's Certificate prohibits stockholders from
calling special stockholders' meetings and acting by written consent. It also
provides that only BancGroup's Board of Directors has the authority to undertake
certain actions with respect to governing BancGroup such as appointing
committees, electing officers, and establishing compensation of officers, and it
allows the Board to act by majority vote.
Bylaw Provisions. BancGroup's bylaws provide that stockholders wishing to
propose nominees for the Board of Directors or other business to be taken up at
an annual meeting of BancGroup stockholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of stockholder meetings but could make it more
difficult for stockholders to nominate directors or introduce business at
stockholder meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning 15% or more of
the outstanding BancGroup Common Stock (or who is an affiliate of BancGroup and
has over the past three years beneficially owned 15% or more of such stock)
(either, for the purpose of this paragraph, an "Interested Stockholder"), unless
the BancGroup Board has approved either (i) the business combination or (ii)
prior to the stock acquisition by which such person's beneficial ownership
interest reached 15% (a "Stock Acquisition"), the Stock Acquisition. The
prohibition lasts for three years from the date of the Stock Acquisition.
Notwithstanding the preceding, Delaware law allows BancGroup to enter into a
business combination with an Interested Stockholder if (i) the business
combination is approved by the BancGroup Board of Directors and authorized by an
affirmative vote of at least 66 2/3% of the outstanding voting stock of
BancGroup which is not owned by the Interested Stockholder or (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
Interested Stockholder, such stockholder owned at least 85% of the outstanding
stock of BancGroup (excluding BancGroup stock held by officers and directors of
BancGroup
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<PAGE> 40
or by certain BancGroup stock plans). These provisions of Delaware law apply
simultaneously with the provisions of BancGroup's Certificate relating to
business combinations with a related person, described above at "Business
Combinations," but they are generally less restrictive than BancGroup's
Certificate.
Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve has been given 60
days' prior written notice of such proposed acquisition and within that time
period the Federal Reserve has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve, the acquisition of more than 10% of a class of voting
stock of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as BancGroup, would, under the
circumstances set forth in the presumption, constitute the acquisition of
control. The receipt of revocable proxies, provided the proxies terminate within
a reasonable time after the meeting to which they relate, is not included in
determining percentages for change in control purposes.
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger is consummated, shareholders of First Independence (except
those perfecting dissenters' rights of appraisal) will become holders of
BancGroup Common Stock. The rights of the holders of the First Independence
Common Stock who become holders of the BancGroup Common Stock following the
Merger will be governed by BancGroup's Certificate and bylaws, as well as the
laws of Delaware, the state in which BancGroup is incorporated.
The following summary compares the rights of the shareholders of First
Independence Common Stock with the rights of the holders of the BancGroup Common
Stock. For a more complete description of the rights of the holders of BancGroup
Common Stock, see "BANCGROUP CAPITAL STOCK AND DEBENTURES."
The following information is qualified in its entirety by BancGroup's
Certificate and bylaws, and First Independence's Articles of Incorporation and
bylaws, the Delaware General Corporation Law (the "Delaware GCL") and the
Florida Banking Code ("FBC").
DIRECTOR ELECTIONS
First Independence. First Independence directors are elected annually.
Shareholders may not cumulate votes in connection with such election or for any
other purpose.
BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the Board to be elected annually. There is no
cumulative voting in the election of directors. See "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control -- Classified Board."
REMOVAL OF DIRECTORS
First Independence. First Independence directors may be removed, with or
without cause, by the First Independence shareholders.
BancGroup. The BancGroup Certificate provides that a director may be
removed from office, but only for cause and by the affirmative vote of the
holders of at least 80% of the voting shares then entitled to vote at an
election of directors.
VOTING
First Independence. Each holder of First Independence Common Stock is
entitled to cast one vote for each share held upon each issue with respect to
which a shareholder vote is authorized, but may not cumulate votes for the
election of directors or for any other purpose.
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<PAGE> 41
BancGroup. Each stockholder of BancGroup is entitled to one vote for each
share of BancGroup Common Stock held, and such holders are not entitled to
cumulative voting rights in the election of directors.
PREEMPTIVE RIGHTS
First Independence. Each First Independence shareholder upon the sale for
cash of any new First Independence stock of the same kind, class or series as
that which the shareholder already holds, has the right to purchase his or her
pro rata share thereof (as nearly as may be done without issuance of fractional
shares) at the price at which it is offered to others.
BancGroup. The holders of BancGroup Common Stock have no preemptive rights
to acquire any additional shares of BancGroup Common Stock or any other shares
of BancGroup capital stock.
DIRECTORS' LIABILITY
First Independence. Section 658.33 of the FBC provides that each director
of a Florida bank, upon assuming office, shall acknowledge that he is familiar
with his responsibilities as a director and that he will diligently and honestly
administer the affairs of such bank and will not knowingly violate, or wilfully
permit to be violated, any of the provisions of the financial institutions
codes, or the pertinent rules of the Florida Department of Banking and Finance.
Section 658.30 of the FBC also provides that, when not in direct conflict with
or superseded by specific provisions of the financial institutions codes, the
provisions of the Florida Business Corporation Act ("FBCA") extend to Florida
state banks. Section 607.0831 of the FBCA provides that a director of a Florida
corporation will not be personally liable for monetary damages to that
corporation or any other person for any statement, vote, decision or failure to
act, regarding corporate management or policy, by a director unless: (a) the
director breached or failed to perform his duties as a director, and (b) the
director's breach of or failure to perform those duties constitutes: (1) 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, (2) a transaction in which the director derived an improper
personal benefit, (3) a payment of certain unlawful dividends and distributions,
(4) in a proceeding by or in the right of such corporation to procure judgment
in its favor or by or in the right of a shareholder, conscious disregard for the
best interest of the corporation, or willful misconduct, or (5) 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. Subject to the provisions of the FBC, the
foregoing would absolve directors of personal liability for negligence in the
performance of their duties, including gross negligence. It would not permit a
director to be exculpated, however, from liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to such
corporation and its shareholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
BancGroup. The BancGroup Certificate provides that a director of BancGroup
will have no personal liability to BancGroup or its stockholders for monetary
damages for breach of fiduciary duty as a director except (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 that involve intentional misconduct or a
knowing violation of law, (iii) for the payment of certain unlawful dividends
and the making of certain stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for negligence in the
performance of duties, including gross negligence. It would not permit a
director to be exculpated, however, for liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to
BancGroup and its stockholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
First Independence. The First Independence Articles of Incorporation
provide that First Independence shall indemnify its directors, officers,
employees or agents, and any former directors, officers, employees or agents, to
the full extent allowed by law. Under Section 607.0850 of the FBCA, the
directors and officers of
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<PAGE> 42
First Independence may be indemnified against certain liabilities which they may
incur in their capacity as officers and directors. Such indemnification is
generally available if the executive acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interest of First
Independence, and with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Indemnification may also be
available unless a court of competent jurisdiction establishes by final
adjudication that the actions or omissions of the executive are material to the
cause of action so adjudicated and constituted: (a) a violation of the criminal
law, unless the executive had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(b) a transaction from which the executive derived an improper personal benefit;
or (c) willful misconduct or conscious disregard for the best interest of First
Independence in a proceeding by or in the right of First Independence to procure
a judgment in its favor or a proceeding by or in the right of a shareholder.
Further, to the extent that the proposed indemnitee is successful on the merits
or otherwise in the defense of any action, suit or proceeding (or any claim,
issue or matter therein) he or she must be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection with such proceeding.
First Independence maintains a directors' and officers' insurance policy
pursuant to which officers and directors of First Independence would be entitled
to indemnification against certain liabilities.
BancGroup. Section 145 of the Delaware GCL contains detailed and
comprehensive provisions providing for indemnification of directors and officers
of Delaware corporations against expenses, judgments, fines and settlements in
connection with litigation. Under the Delaware GCL, other than an action brought
by or in the right of BancGroup, such indemnification is available if it is
determined that the proposed indemnitee acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
BancGroup and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In actions brought by or
in the right of BancGroup, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred in the defense or
settlement of such action if the indemnitee acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
BancGroup and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
BancGroup unless and only to the extent that the Delaware Court of Chancery or
the court in which the action was brought determines upon application that in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the Delaware GCL.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING
First Independence. First Independence's bylaws authorize a special
shareholders meeting to be called by the Board of Directors upon a three-fourths
vote of the directors or by holders of not less than three-fourths of the total
voting power of all outstanding shares of First Independence Common Stock.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's stockholders may only be called by a majority of the BancGroup Board
of Directors or by the chairman of the Board of Directors of BancGroup. Holders
of BancGroup Common Stock may not call special meetings or act by written
consent.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
First Independence. Section 658.44 of the FBC provides that certain
mergers, consolidations, and sales of substantially all of the assets of a
Florida bank must be approved by the Florida Department of Banking and
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<PAGE> 43
Finance and by a majority of the outstanding shares of the bank entitled to vote
thereon. The Merger does not require the prior approval of the Florida
Department of Banking and Finance.
BancGroup. The Delaware GCL provides that mergers and sales of
substantially all of the assets of Delaware corporations must be approved by a
majority of the outstanding stock of the corporation entitled to vote thereon.
The Delaware GCL also provides, however, that the stockholders of the
corporation surviving a merger need not approve the transaction if: (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of such corporation; (ii) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding immediately prior to the
effective date of the merger. See also "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control" for a description of the statutory provisions
and the provisions of the BancGroup Certificate relating to changes of control
of BancGroup. See "Antitakeover Statutes" for a description of additional
restrictions on business combination transactions.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
First Independence. Section 658.23 of the FBC requires amendments to the
Articles of Incorporation of a Florida bank to be approved by the Florida
Department of Banking and Finance and to be adopted by the shareholders upon
recommendation of the Board of Directors. Unless the FBC requires a greater
vote, amendments may be adopted by a majority of the votes cast, a quorum being
present.
Section 658.23 of the FBC provides that, unless the Articles of
Incorporation provide otherwise, the Board of Directors has the authority to
adopt or amend bylaws that do not conflict with bylaws that may have been
adopted by the shareholders.
BancGroup. Under the Delaware GCL, a Delaware corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "supermajority" stockholder approval to amend or repeal any
provision of, or adopt any provision inconsistent with, certain provisions in
the BancGroup Certificate governing (i) the election or removal of directors,
(ii) business combinations between BancGroup and a Related Person, and (iii)
board of director evaluation of business combination procedures. See "BANCGROUP
CAPITAL STOCK AND DEBENTURES -- Changes in Control."
As is permitted by the Delaware GCL, the Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The stockholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
bylaws.
RIGHTS OF DISSENTING STOCKHOLDERS
First Independence. Holders of First Independence Common Stock as of the
Record Date are entitled to dissenters' rights of appraisal under Florida law.
For a description of such appraisal rights, see "THE MERGER -- Rights of
Dissenting Stockholders."
BancGroup. Under the Delaware GCL, a stockholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
otherwise would have received in the transaction. For this purpose, "fair value"
may be determined by all generally accepted techniques of valuation used in the
financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. Such fair value is
determined by the Delaware Court of
36
<PAGE> 44
Chancery if a petition for appraisal is timely filed. Appraisal rights are not
available, however, to stockholders of a corporation (i) if the shares are
listed on a national securities exchange (as is BancGroup Common Stock) or
quoted on the NASDAQ National Market System, or held of record by more than
2,000 stockholders (as is BancGroup Common Stock), and (ii) stockholders are
permitted by the terms of the merger or consolidation to accept in exchange for
their shares (a) shares of stock of the surviving or resulting corporation, (b)
shares of stock of another corporation listed on a national securities exchange
or held of record by more than 2,000 stockholders, (c) cash in lieu of
fractional shares of such stock, or (d) any combination thereof. Stockholders
are not permitted appraisal rights in a merger if such corporation is the
surviving corporation and no vote of its stockholders is required.
PREFERRED STOCK
First Independence. First Independence's Articles of Incorporation do not
authorize the issuance of capital stock other than common voting shares.
BancGroup. The BancGroup Certificate authorizes the issuance of 1,000,000
shares of Preference Stock from time to time by resolution of the BancGroup
Board of Directors. Currently, no shares of Preference Stock are issued and
outstanding. See "BANCGROUP CAPITAL STOCK AND DEBENTURES -- Preference Stock."
EFFECT OF THE MERGER ON FIRST INDEPENDENCE SHAREHOLDERS
As of , 1997, First Independence had
shareholders of record and outstanding shares of common stock. As of April 30,
1997, BancGroup had 40,740,357 shares of BancGroup Common Stock outstanding with
7,729 stockholders of record.
Assuming that (i) no dissenters' rights of appraisal are exercised in the
Merger; (ii) no First Independence Options are exercised prior to the Merger;
(iii) 93 percent of the First Independence Warrants are exchanged in accordance
with the Agreement prior to the Merger; and (iv) a Market Value of BancGroup
Common Stock of $24.35 on the Effective Date (which was the Market Value (as
defined) calculated as of July 1, 1997); an aggregate of 531,849 shares of
BancGroup Common Stock would be issued to the shareholders of First Independence
pursuant to the Merger. These shares would represent approximately 1.3% of the
total shares of BancGroup Common Stock outstanding after the Merger, not
counting any shares of BancGroup Common Stock to be issued in other pending
acquisitions.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal stockholder and each director and officer of BancGroup. Based
upon the foregoing assumptions, as a group, the directors and officers of
BancGroup who own approximately 10.83% of BancGroup's outstanding shares would
own approximately 10.24% after the Merger. See "BUSINESS OF BANCGROUP -- Voting
Securities and Principal Stockholders."
BancGroup has entered into agreements pursuant to which additional shares
of BancGroup Common Stock will be issued. See "BUSINESS OF BANCGROUP -- Proposed
Affiliate Banks."
37
<PAGE> 45
THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of March 31, 1997 (as restated), (ii)
the combined presentation of the condensed consolidated statements of condition
of completed business combinations: First Commerce Banks of Florida, Inc.
("First Commerce") and Great Southern Bancorp, Inc. ("Great Southern"),
(completed business combinations) as of March 31, 1997, (iii) the condensed
consolidated statement of condition of First Independence Bank of Florida
("First Independence"), as of March 31, 1997, (iv) the condensed consolidated
statement of condition of the other probable business combination with
BancGroup; Dadeland Bancshares, Inc. ("Dadeland"), ("Other probable business
combination") as of March 31, 1997, (v) adjustments to give effect to the
proposed and completed purchase method acquisitions of First Commerce and
Dadeland and the proposed and completed pooling-of-interests method business
combinations with First Independence and Great Southern, (vi) the pro forma
combined condensed statement of condition of BancGroup and subsidiaries as if
such combinations had occurred on March 31, 1997.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein, and the separate
statements of condition of First Independence included elsewhere herein. The pro
forma information provided below may not be indicative of future results.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED FIRST
COLONIAL BUSINESS ADJUSTMENTS/ INDEPENDENCE ADJUSTMENTS/
BANCGROUP** COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks...... $ 189,949 $ 12,428 $(12,735)(2) $ 6,665 $ 196,307
Interest-bearing deposits in
banks....................... 5,767 5,767
Federal funds sold........... 72,199 16,511 9,167 97,877
Securities available for
sale........................ 476,029 32,495 508,524
Investment securities........ 335,117 1,547 41(3) 7,293 343,998
Mortgage loans held for
sale........................ 142,510 142,510
Loans, net of unearned
income...................... 4,481,882 160,913 49,074 4,691,869
Less: Allowance for possible
loan losses................. (56,981) (2,489) (698) (60,168)
---------- -------- -------- ------- ------ ----------
Loans, net................... 4,424,901 158,424 48,376 4,831,701
Premises and equipment,
net......................... 103,089 4,175 (198)(3) 1,486 108,552
Excess of cost over tangible
and identified intangible
assets acquired, net........ 39,526 5,768(3) 45,294
Mortgage servicing rights.... 114,616 114,616
Other real estate owned...... 10,506 313 10,819
Accrued interest and other
assets...................... 94,691 4,077 452(3) 1,394 100,614
---------- -------- -------- ------- ------ ----------
Total Assets................. $6,008,900 $229,970 $ (6,672) $74,381 $6,306,579
========== ======== ======== ======= ====== ==========
Liabilities and Shareholders'
Equity:
Deposits..................... $4,715,949 $204,522 $69,320 $4,989,791
FHLB short-term borrowings... 540,000 2,000 542,000
Other short-term
borrowings.................. 141,989 1,200 143,189
Subordinated debt............ 7,522 7,522
Trust preferred securities... 70,000 70,000
Other long-term debt......... 15,762 15,762
Other liabilities............ 91,544 1,048 1,135(3) 350 94,077
---------- -------- -------- ------- ------ ----------
Total liabilities............ 5,582,766 208,770 1,135 69,670 5,862,341
Common Stock................. 101,709 32 (16)(1) 2,646 (2,646)(4) 105,374
(16)(3) 1,345(4)
2,320(1)
Additional paid in capital... 178,889 14,328 (7,591)(1) 2,552 (2,552)(4) 187,913
(6,853)(3) 3,853(4)
5,287(1)
Retained earnings............ 152,227 7,021 (4,199)(3) (445) 154,604
Treasury Stock............... (3,152) (12,735)(2)
15,771(2)
116(2)
Unearned compensation........ (1,978) (1,978)
Unrealized gain (loss) on
securities available for
sale, net of taxes.......... (1,561) (181) 109(3) (42) (1,675)
---------- -------- -------- ------- ------ ----------
Total equity................. 426,134 21,200 (7,807) 4,711 444,238
Total liabilities and
equity...................... $6,008,900 $229,970 $ (6,672) $74,381 $6,306,579
========== ======== ======== ======= ====== ==========
Capital Ratios:
Capital Ratio............... 8.09%
Tangible Leverage Ratio..... 7.84%
Tier One Capital Ratio*..... 10.60%
Total Capital Ratio*........ 12.03%
<CAPTION>
MARCH 31, 1997
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATION (DEDUCTIONS) TOTAL
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Cash and due from banks...... $ 6,286 $(38,000) $ 164,593
Interest-bearing deposits in
banks....................... 5,767
Federal funds sold........... 7,875 105,752
Securities available for
sale........................ 18,706 527,230
Investment securities........ 343,998
Mortgage loans held for
sale........................ 142,510
Loans, net of unearned
income...................... 97,008 4,788,877
Less: Allowance for possible
loan losses................. (974) (61,142)
-------- -------- ----------
Loans, net................... 96,034 4,727,735
Premises and equipment,
net......................... 5,304 (684)(5) 113,172
Excess of cost over tangible
and identified intangible
assets acquired, net........ 23,058(5) 68,352
Mortgage servicing rights.... 114,616
Other real estate owned...... 10,819
Accrued interest and other
assets...................... 2,432 280(5) 103,326
-------- -------- ----------
Total Assets................. $136,637 $(15,346) $6,427,870
======== ======== ==========
Liabilities and Shareholders'
Equity:
Deposits..................... 113,374 $5,103,165
FHLB short-term borrowings... 542,000
Other short-term
borrowings.................. 6,544 149,733
Subordinated debt............ 7,522
Trust preferred securities... 70,000
Other long-term debt......... 15,762
Other liabilities............ 1,280 93(5) 95,450
-------- -------- ----------
Total liabilities............ 121,198 93 5,983,632
Common Stock................. 1 (1)(5) 105,374
Additional paid in capital... 4,207 (4,207)(5) 187,913
Retained earnings............ 12,631 (12,631)(5) 154,604
Treasury Stock............... (1,378) 1,378(5)
Unearned compensation........ (1,978)
Unrealized gain (loss) on
securities available for
sale, net of taxes.......... (22) 22(5) (1,675)
-------- -------- ----------
Total equity................. 15,439 (15,439) 444,238
Total liabilities and
equity...................... $136,637 $(15,346) $6,427,870
======== ======== ==========
Capital Ratios:
Capital Ratio............... 8.40%
Tangible Leverage Ratio..... 7.72%
Tier One Capital Ratio*..... 10.44%
Total Capital Ratio*........ 11.85%
</TABLE>
- ---------------
* Based on risk weighted assets
** Restated to give effect to the April 22, 1997 pooling-of-interests business
combination with Fort Brooke Bancorporation.
38
<PAGE> 46
COMPLETED BUSINESS COMBINATIONS
GREAT SOUTHERN
(pooling of interests)
(1) To record the issuance of 927,975 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Great Southern:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Great Southern outstanding shares........................... 1,731,620
Conversion ratio, determined as follows:
$13.05/$24.35 per share, the 10-day average market value
of BancGroup Common Stock on July 1, 1997.............. 0.5359
BancGroup shares issued..................................... 927,975
Par value of 927,975 shares issued at $2.50 per share....... $ 2,320
Shares issued at par value.................................. $ 2,320
Total capital stock of Great Southern....................... 7,607
Excess recorded as an increase in contributed capital....... 5,287
-------
7,607
To eliminate Great Southern
Common stock, at par value................................ (16)
Contributed capital....................................... (7,591)
-------
(7,607)
-------
Net change in equity.............................. $ 0
=======
</TABLE>
FIRST COMMERCE
(purchase method)
(2) To show the purchase of treasury stock for the purpose of issuance in the
First Commerce business combination:
<TABLE>
<S> <C>
Cash........................................................ $(12,735)
Treasury stock.............................................. 12,735
</TABLE>
(3) To assign the amount by which the estimated value of BancGroup's investment
in First Commerce is in excess of the historical carrying amount of the net
assets acquired, based on the estimated fair value of such net assets and to
record the investment in First Commerce by the issuance of approximately
685,695
39
<PAGE> 47
shares of BancGroup Common Stock for all of the outstanding 1,585,737 shares
of First Commerce as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of First Commerce.... $10,843
Adjustments to state assets at fair value:
Write-down of fixed assets................................ (198)
Write-up securities held to maturity...................... 41
Acquisition accruals:
Broker fee................................................ (156)
Severance pay............................................. (230)
Buyout data processing contract........................... (540)
Other legal, accounting, and professional................. (209)
Tax effect of purchase adjustments.......................... 452
Goodwill.................................................... 5,768
-------
Total adjustments........................................... 4,928
Adjusted equity in carrying value of net assets............. $15,771
=======
Allocated as follows:
Cost of 671,165 shares of BancGroup common stock purchased
and re-issued for First Commerce outstanding shares at a
value of $23.00 per share................................. 15,437
Issuance of an additional 14,530 shares of BancGroup common
stock at a value of $23.00 per share...................... 334
Total purchase price........................................ $15,771
=======
</TABLE>
FIRST INDEPENDENCE
(pooling of interests)
(4) To record the issuance of 537,989 shares of BancGroup Common Stock in
exchange for all of the outstanding shares and warrants of First
Independence:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Independence outstanding shares....................... 529,167
First Independence warrants (converted to First Independence
stock at a ratio of .5171 as defined in the merger
agreement)................................................ 103,389
---------
Total First Independence shares and warrants................ 632,556
Conversion ratio, determined as follows:
$20.71/$24.35 per share, the 10-day average market value
of BancGroup Common Stock on July 1, 1997.............. 0.8505
---------
BancGroup shares to be issued............................... 537,989
Par value of 537,989 shares issued at $2.50 per share....... $ 1,345
Shares issued at par value.................................. $ 1,345
Total capital stock of First Independence................... 5,198
Excess recorded as an increase in contributed capital....... 3,853
-------
5,198
To eliminate First Independence capital stock:
Common stock, at par value................................ (2,646)
Contributed capital....................................... (2,552)
-------
(5,198)
-------
Net change in equity.............................. $ 0
=======
</TABLE>
40
<PAGE> 48
OTHER PROBABLE COMBINATIONS
DADELAND BANCSHARES, INC.
(purchase method)
(5) To assign the amount by which the estimated value of the investment in
Dadeland is in excess of the historical carrying amount of the net assets
acquired, based on the estimated fair value of such assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of Dadeland.......... $15,439
Adjustments to state assets at fair value:
Write-down of fixed assets................................ (684)
Acquisition accruals
Unpaid bills -- computer equipment........................ (73)
Data processing buy-out................................... (20)
Tax effect of purchase adjustments.......................... 280
Goodwill.................................................... 23,058
-------
Total adjustments........................................... 22,561
-------
Adjusted equity in carrying value of net assets............. 38,000
=======
Total purchase price to be paid in cash..................... $38,000
=======
</TABLE>
41
<PAGE> 49
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
The following summaries include (i) the condensed consolidated statements
of income of BancGroup and subsidiaries on a historical basis for the three
months ended March 31, 1997 and 1996 (as restated), and the years ended December
31, 1996, 1995, and 1994 (as restated), (ii) combined presentation of the
condensed consolidated statement of income of the completed combinations, (iii)
the condensed statements of income of First Independence for the three months
ended March 31, 1997 and 1996 and the years ended December 31, 1996, 1995, and
1994, (iv) the condensed consolidated statements of income of the other probable
business combinations for the three months ended March 31, 1997 and the year
ended December 31, 1996, (v) adjustments to give effect to the completed and
proposed purchase method combinations with First Commerce and Dadeland and the
completed and proposed pooling-of-interests method business combinations with
Great Southern and First Independence, and (vi) the pro forma combined condensed
consolidated statements of income of BancGroup and subsidiaries as if such
business combinations had occurred on January 1, 1994. Note that for the
purchase method combination, Article 11 of Regulation S-X requires pro forma
statements of income to be presented for only the most recent fiscal year and
interim period. Accordingly, only the condensed consolidated statements of
income for the three months ended March 31, 1997 and the year ended December 31,
1996 are included in (ii), (iv), (v) and (vi) above for First Commerce and
Dadeland.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries (as restated), incorporated by reference herein, and
the statements of income of First Independence, included elsewhere herein. The
pro forma information provided may not necessarily be indicative of future
results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
------------------------------------------------------------------------
CONSOLIDATED FIRST
COLONIAL COMPLETED INDEPENDENCE
BANCGROUP BUSINESS ADJUSTMENTS/ BANK OF ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) FLORIDA (DEDUCTIONS)
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income...... $ 113,461 $ 4,531 $ (237)(1) $ 1,274
(2)(1)
Interest expense..... 57,739 1,629 531
---------- --------- ---------- ------- --------
Net interest
income............. 55,722 2,902 (239) 743
Provision for loan
losses............. 2,854 108
---------- --------- ---------- ------- --------
Net interest income
after provision for
loan losses........ 52,868 2,794 (239) 743
---------- --------- ---------- ------- --------
Noninterest income... 18,850 573 111
Noninterest
expense............ 44,376 2,401 (10)(1) 623
12(1)
---------- --------- ---------- ------- --------
Income before income
taxes.............. 27,342 966 (301) 231
Applicable income
taxes.............. 9,997 354 80(1)
---------- --------- ---------- ------- --------
Net income........... $ 17,345 $ 612 $ (381) $ 231
========== ========= ========== ======= ========
Average primary
shares
outstanding**...... 41,313,000 3,269,710 (3,269,710) 529,167 (529,167)
1,019,710 550,702
Average fully-diluted
shares
outstanding**...... 41,914,000 3,269,710 (3,269,710) 529,167 (529,167)
1,025,601 557,333
Earnings per share:
Net Income:
Primary**........ $0.42
Fully diluted**.. $0.42
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
------------------------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
SUBTOTAL COMBINATIONS (DEDUCTIONS) TOTAL
---------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income...... $ 119,027 $ 2,437 $ 121,464
Interest expense..... 59,899 588 60,487
---------- --------- ---------- ----------
Net interest
income............. 59,128 1,849 60,977
Provision for loan
losses............. 2,962 30 2,992
---------- --------- ---------- ----------
Net interest income
after provision for
loan losses........ 56,166 1,819 57,985
---------- --------- ---------- ----------
Noninterest income... 19,534 552 20,086
Noninterest
expense............ 47,462 1,695 (34)(2) 49,411
288(2)
---------- --------- ---------- ----------
Income before income
taxes.............. 28,238 676 (254)(2) 28,660
Applicable income
taxes.............. 10,431 251 72(2) 10,694
---------- --------- ---------- ----------
Net income........... $ 17,807 $ 425 $ (266) $ 17,966
========== ========= ========== ==========
Average primary
shares
outstanding**...... 42,883,412 116,721 (116,721) 42,883,412
0
Average fully-diluted
shares
outstanding**...... 43,496,934 116,721 (116,721) 43,496,934
0
Earnings per share:
Net Income:
Primary**........ $0.42 $0.42
Fully diluted**.. $0.41 $0.42
</TABLE>
- ---------------
* Restated to give effect to the April 22, 1997 pooling of interests
combination with Fort Brooke Bancorporation
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997
42
<PAGE> 50
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------------------------------------
CONSOLIDATED FIRST
COLONIAL COMPLETED INDEPENDENCE PRO FORMA
BANCGROUP BUSINESS ADJUSTMENTS/ BANK OF ADJUSTMENTS/ COMBINED
(RESTATED)* COMBINATIONS (DEDUCTIONS) FLORIDA (DEDUCTIONS) TOTAL
------------ ------------ ------------ ------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income........................... $95,728 $2,136 $912 $98,776
Interest expense.......................... 48,627 687 361 49,675
---------- --------- ---------- ------- -------- ----------
Net interest income....................... 47,101 1,449 551 49,101
Provision for loan losses................. 1,772 20 1,792
---------- --------- ---------- ------- -------- ----------
Net interest income after provision for
loan losses............................. 45,329 1,429 551 47,309
---------- --------- ---------- ------- -------- ----------
Noninterest income........................ 18,029 280 211 18,520
Noninterest expense....................... 41,533 1,088 513 43,134
---------- --------- ---------- ------- -------- ----------
Income before income taxes................ 21,825 621 249 22,695
Applicable income taxes................... 7,701 236 (12) 7,925
---------- --------- ---------- ------- -------- ----------
Net income................................ $14,124 $385 $261 $14,770
========== ========= ========== ======= ======== ==========
Average primary shares outstanding**...... 38,816,000 1,542,420 (1,542,420) 529,107 (529,107) 40,213,812
888,000 509,812
Average fully-diluted shares
outstanding**........................... 39,660,000 1,542,420 (1,542,420) 529,107 (529,107) 41,080,984
893,822 527,162
Earnings per share:
Net Income:
Primary**............................. $0.36 $0.37
Fully diluted**....................... $0.36 $0.36
</TABLE>
- ---------------
* Restated to give effect to the January 3, 1997, January 31, 1997 and April
22, 1997 pooling of interests combinations with Jefferson Bancorp, Inc., D/W
Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
43
<PAGE> 51
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------
CONSOLIDATED FIRST
COLONIAL COMPLETED INDEPENDENCE
BANCGROUP BUSINESS ADJUSTMENTS/ BANK OF ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) FLORIDA (DEDUCTIONS)
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income...... $ 406,838 $ 18,061 $ (948)(1) $ 3,916
(8)(1)
Interest expense..... 205,843 6,553 1,692
----------- ---------- ----------- -------- ---------
Net interest
income............. 200,995 11,508 (956) 2,224
Provision for loan
losses............. 12,545 1,084 108
----------- ---------- ----------- -------- ---------
Net interest income
after provision for
loan losses........ 188,450 10,424 (956) 2,116
----------- ---------- ----------- -------- ---------
Noninterest income... 72,382 1,806 602
Noninterest
expense............ 183,316 10,100 (40)(1) 2,244
288(1)
----------- ---------- ----------- -------- ---------
Income before income
taxes.............. 77,516 2,130 (1,204) 474
Applicable income
taxes.............. 27,303 754 321(1) (13)
----------- ---------- ----------- -------- ---------
Net income........... $ 50,213 $ 1,376 $ (1,525) $ 487
=========== ========== =========== ======== =========
Average primary
shares
outstanding**...... 39,764,000 2,389,710 (2,389,710) 529,153 (529,153)
941,367 522,351
Average fully-diluted
shares
outstanding**...... 40,623,000 2,401,790 (2,401,790) 529,153 (529,153)
958,285 541,373
Earnings per share:
Net Income:
Primary**........ $ 1.26
Fully
diluted**...... $ 1.25
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
SUBTOTAL COMBINATIONS (DEDUCTIONS) TOTAL
----------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income...... $ 427,859 $ 9,235 $ 437,094
Interest expense..... 214,088 2,092 216,180
----------- ---------- ----------- -----------
Net interest
income............. 213,771 7,143 220,914
Provision for loan
losses............. 13,737 46 13,783
----------- ---------- ----------- -----------
Net interest income
after provision for
loan losses........ 200,034 7,097 207,131
----------- ---------- ----------- -----------
Noninterest income... 74,790 2,039 76,829
Noninterest
expense............ 195,908 6,349 $ (137)(2) 203,273
1,153(2)
----------- ---------- ----------- -----------
Income before income
taxes.............. 78,916 2,787 (1,016) 80,687
Applicable income
taxes.............. 28,365 1,033 49(2) 29,447
----------- ---------- ----------- -----------
Net income........... $ 50,551 $ 1,754 $ (1,065) $ 51,240
=========== ========== =========== ===========
Average primary
shares
outstanding**...... 41,227,718 116,721 (116,721) 41,227,718
0
Average fully-diluted
shares
outstanding**...... 42,122,638 116,721 (116,721) 42,122,638
0
Earnings per share:
Net Income:
Primary**........ $ 1.23 $ 1.24
Fully
diluted**...... $ 1.21 $ 1.23
</TABLE>
- ---------------
* Restated to give effect to the January 3, 1997, January 31, 1997 and April
22, 1997 pooling of interests combinations with Jefferson Bancorp, Inc., D/W
Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
44
<PAGE> 52
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------------
CONSOLIDATED FIRST
COLONIAL COMPLETED INDEPENDENCE PRO FORMA
BANCGROUP BUSINESS ADJUSTMENTS/ BANK ADJUSTMENTS/ COMBINED
(RESTATED)* COMBINATIONS (DEDUCTIONS) OF FLORIDA (DEDUCTIONS) TOTAL
------------ ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income.......................... $ 341,826 $ 8,654 $ 3,275 $ 353,755
Interest expense......................... 170,483 3,159 1,357 174,999
----------- ---------- ----------- -------- --------- -----------
Net interest income...................... 171,343 5,495 1,918 178,756
Provision for loan losses................ 8,986 50 18 9,054
----------- ---------- ----------- -------- --------- -----------
Net interest income after provision for
loan losses............................ 162,357 5,445 1,900 169,702
----------- ---------- ----------- -------- --------- -----------
Noninterest income....................... 60,527 857 411 61,795
Noninterest expense...................... 150,654 4,400 3,008 158,062
----------- ---------- ----------- -------- --------- -----------
Income before income taxes............... 72,230 1,902 (697) 73,435
Income taxes............................. 25,765 740 26,505
----------- ---------- ----------- -------- --------- -----------
Net Income............................... $ 46,465 $ 1,162 $ 0 $ (697) $ 46,930
=========== ========== =========== ======== ========= ===========
Average primary shares outstanding**..... 37,912,000 1,542,420 (1,542,420) 479,792 (479,792) 39,223,971
877,091 434,880
Average fully-diluted shares
outstanding**.......................... 39,796,000 1,542,420 (1,542,420) 479,792 (479,792) 41,151,016
887,906 467,110
Earnings per share:
Net Income:
Primary**.............................. $ 1.23 $ 1.20
Fully diluted**........................ $ 1.19 $ 1.17
</TABLE>
- ---------------
* Restated to give effect to the January 3, 1997, January 31, 1997 and April
22, 1997 pooling of interests combinations with Jefferson Bancorp, Inc., D/W
Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
45
<PAGE> 53
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------------------------------
CONSOLIDATED FIRST
COLONIAL COMPLETED INDEPENDENCE PRO FORMA
BANCGROUP BUSINESS ADJUSTMENTS/ BANK ADJUSTMENTS/ COMBINED
(RESTATED)* COMBINATIONS (DEDUCTIONS) OF FLORIDA (DEDUCTIONS) TOTAL
------------- ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income......................... $ 255,758 $ 6,911 $ 2,786 $ 265,455
Interest expense........................ 105,797 2,196 965 108,958
----------- --------- ---------- -------- --------- -----------
Net interest income..................... 149,961 4,715 1,821 156,497
Provision for loan losses............... 8,254 170 132 8,556
----------- --------- ---------- -------- --------- -----------
Net interest income after provision for
loan losses........................... 141,707 4,545 1,689 147,941
----------- --------- ---------- -------- --------- -----------
Noninterest income...................... 54,149 782 322 $ 55,253
Noninterest expense..................... 144,119 3,959 2,191 150,269
----------- --------- ---------- -------- --------- -----------
Income before income taxes.............. 51,737 1,368 (180) 52,925
Income taxes............................ 17,243 481 17,724
----------- --------- ---------- -------- --------- -----------
Net Income.............................. $ 34,494 $ 887 $ (180) $ 35,201
=========== ========= ========== ======== ========= ===========
Average primary shares outstanding**.... 35,907,000 1,506,176 (1,506,176) 329,107 (329,107) 37,029,264
839,166 283,098
Average fully-diluted shares
outstanding**......................... 37,383,000 1,506,176 (1,506,176) 329,107 (329,107) 38,505,264
839,166 283,098
Earnings per share:
Net Income:
Primary**........................... $ 0.96 $ 0.95
Fully diluted**..................... $ 0.95 $ 0.94
</TABLE>
- ---------------
* Restated to give effect to the January 3, 1997, January 31, 1997 and April
22, 1997 pooling of interests combinations with Jefferson Bancorp, Inc., D/W
Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
46
<PAGE> 54
PRO FORMA ADJUSTMENTS:
COMPLETED BUSINESS COMBINATIONS
Adjustments Applicable to the purchase method business combination with
First Commerce:
(1) To amortize the assignment of estimated fair value in excess of the carrying
amount of assets acquired. The amortization consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Increases in income:
Amortization of write down on fixed assets (5 year
period)............................................ $ 10 $ 40
Decreases in income:
Amortization of write-up on securities portfolio (5
year period)....................................... (2) (8)
Earnings forgone on $15,887 cash at an average
interest rate 5.95%................................ (237) (948)
----- -------
Total......................................... (229) (916)
----- -------
Increase in expense:
Amortization of goodwill (20 year period)............. (72) (288)
----- -------
Total......................................... (72) (288)
----- -------
Net decrease in income before tax....................... (301) (1,204)
----- -------
Tax effect of the pro forma adjustments (other than
goodwill amortization)................................ (80) (321)
----- -------
Net decrease in income........................ $(381) $(1,525)
===== =======
</TABLE>
PENDING BUSINESS COMBINATIONS
(2) To amortize the assignment of estimated fair value in excess of the carrying
amount of assets acquired.
Adjustments Applicable to the purchase method business combination with
Dadeland:
The amortization consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Increases in income:
Amortization of write down on fixed assets (5 year
period)............................................ $ 34 $ 137
----- -------
Total......................................... 34 137
----- -------
Increase in expense:
Amortization of goodwill (20 year period)............. (288) (1,153)
----- -------
Total......................................... (288) (1,153)
----- -------
Net decrease in income before tax....................... (254) (1,016)
----- -------
Tax effect of the pro forma adjustments (other than
goodwill amortization)................................ (12) (49)
----- -------
Net decrease in income........................ $(266) $(1,065)
===== =======
</TABLE>
47
<PAGE> 55
RECENT DEVELOPMENTS -- BANCGROUP
BancGroup -- Recent Unaudited Results
The following table presents certain unaudited data for BancGroup for the
period ended June 30, 1997. Unaudited historical data reflect, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to a fair presentation of such data. The unaudited financial
information is presented for informational purposes only and is not necessarily
indicative of the financial position or results of operations which would have
actually occurred if the transactions had been consummated in the past or which
may be obtained in the future.
THE COLONIAL BANCGROUP, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
% CHANGE
JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 TO 1996
---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets............................................... $6,100,616 $5,273,401 16%
Loans, net of unearned income.............................. 4,582,254 3,946,343 16
Total earning assets....................................... 5,582,686 4,834,628 15
Deposits................................................... 4,747,342 4,049,960 17
Shareholders' equity....................................... 431,368 378,711 14
Book value per share....................................... $ 10.54 $ 10.11 4
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
% CHANGE
1997 1996 97 TO 96
-------- -------- --------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent).................... $115,396 $ 98,593 17%
Provision for loan losses................................... 6,190 3,623 71
Noninterest income.......................................... 39,627 35,923 10
Noninterest expense......................................... 90,051 82,986 9
Net income.................................................. $ 36,329 $ 30,197 20
Average primary shares outstanding.......................... 41,231 38,950
Average fully diluted shares outstanding.................... 41,798 39,624
Earnings per common share:
Primary................................................... $ .88 $ .78 13%
Fully-diluted............................................. .87 .77 13
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------
1997 1996
----- -----
<S> <C> <C>
SELECTED RATIOS:
Return on average assets.................................... 1.23% 1.19%
Return on average equity.................................... 17.24 16.37
Efficiency ratio............................................ 58.09 61.69
Equity to assets............................................ 7.07 7.18
Total capital............................................... 8.06 8.22
Tier one leverage........................................... 7.70 6.86
</TABLE>
48
<PAGE> 56
Net income for the six months ended June 30, 1997 was $36,329,000 compared
to $30,197,000 for the previous period, a 20% increase. Earnings per share for
the year were $.87 on a fully diluted basis, a 13% increase over 1996. The
company's return on average equity was 17.24% compared to 16.37% in 1996. Return
on average assets was 1.23% compared to 1.19% in 1996.
49
<PAGE> 57
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical basis (as restated) for the three months ended March 31, 1997 and
1996, as of March 31, 1997 and, years ended December 31, 1996, 1995, 1994, 1993
and 1992 and as of December 31, 1996 and on a pro forma basis for the three
months ended March 31, 1997 and 1996 and, years ended December 31, 1996, 1995,
1994, 1993 and 1992 and as of December 31, 1996.
The pro forma information includes consolidated BancGroup and subsidiaries
(as restated) and consolidated Great Southern, Tomoka, Fort Brooke, First
Commerce, Shamrock, First Family and Dadeland. The pro forma balance sheet data
gives effect to the combinations as if they had occurred on December 31, 1996
and the pro forma operating data gives effect to the combinations as if they had
occurred at the beginning of the earliest period presented. Note that for the
purchase method combinations, Article 11 of Regulation S-X requires pro forma
statements be presented for only the most recent fiscal year. Accordingly, only
the pro forma information as of and for the year ended December 31, 1996 is
included for Shamrock, First Family, First Commerce and Dadeland.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus or incorporated by reference.
50
<PAGE> 58
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income............................................. $121,464 $113,461 $98,776 $ 95,728
Interest expense............................................ 60,487 57,739 49,675 48,627
-------- -------- ------- -----------
Net interest income......................................... 60,977 55,722 49,101 47,101
Provision for possible loan losses.......................... 2,992 2,854 1,792 1,772
-------- -------- ------- -----------
Net interest income after provision for loan losses......... 57,985 52,868 47,309 45,329
Noninterest income.......................................... 20,086 18,850 18,520 18,029
Noninterest expense......................................... 49,411 44,376 43,134 41,533
-------- -------- ------- -----------
Income before income taxes.................................. 28,660 27,342 22,695 21,825
Applicable income taxes..................................... 10,694 9,997 7,925 7,701
-------- -------- ------- -----------
Net income.................................................. $ 17,966 $ 17,345 $14,770 $ 14,124
-------- -------- ------- -----------
EARNINGS PER SHARE
Net income:
Primary**................................................. $ 0.42 $ 0.42 $ 0.37 $ 0.36
Fully-diluted**........................................... $ 0.42 $ 0.42 $ 0.36 $ 0.36
Average shares outstanding
Primary**................................................. 42,883 41,313 40,214 38,816
Fully-diluted**........................................... 43,497 41,914 41,081 39,660
Cash dividends:
Common**.................................................. $ 0.15 $ 0.15 $ 0.135 $ 0.135
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------------- -----------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL
1996 1995 1994 1993 1992 1996* 1995*
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income....... $437,094 $353,755 $265,455 $216,197 $204,738 $406,838 $341,826
Interest expense...... 216,180 174,999 108,958 85,254 91,636 205,843 170,483
-------- -------- -------- -------- -------- -------- --------
Net interest income... 220,914 178,756 156,497 130,943 113,102 200,995 171,343
Provision for possible
loan losses......... 13,783 9,054 8,556 12,564 16,446 12,545 8,986
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses......... 207,131 169,702 147,941 118,379 96,656 188,450 162,357
Noninterest income.... 76,829 61,795 55,253 52,984 47,761 72,382 60,527
Noninterest expense... 198,808 158,062 150,269 133,805 119,506 178,851 150,654
SAIF special
assessment(1)....... 4,465 -- -- -- -- 4,465 --
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes............... 80,687 73,435 52,925 37,558 24,911 77,516 72,230
Applicable income
taxes............... 29,447 26,505 17,724 11,297 7,070 27,303 25,765
-------- -------- -------- -------- -------- -------- --------
Income before
extraordinary
items............... 51,213 46,930 35,201 26,261 17,841 50,213 46,465
Extraordinary items... (396) -- --
Cumulative effect
of change in
accounting.......... 3,933 -- --
-------- -------- -------- -------- -------- -------- --------
Net income............ $ 51,213 $ 46,930 $ 35,201 $ 29,798 $ 17,841 $ 50,213 $ 46,485
======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income before
extraordinary items:
Primary**........... $ 1.24 $ 1.20 $ 0.95 $ 0.77 $ 0.60 $ 1.26 $ 1.23
Fully-diluted**..... $ 1.23 $ 1.17 $ 0.94 $ 0.77 $ 0.60 $ 1.25 $ 1.19
Net income:
Primary**........... $ 1.24 $ 1.20 $ 0.95 $ 0.88 $ 0.60 $ 1.26 $ 1.23
Fully-diluted**..... $ 1.23 $ 1.17 $ 0.94 $ 0.87 $ 0.60 $ 1.25 $ 1.19
Average shares
outstanding
Primary**........... 41,228 39,239 37,029 33,927 29,583 39,764 37,912
Fully-diluted**..... 42,123 41,166 38,505 36,113 32,230 40,623 39,796
Cash dividends:
Common**............ $ 0.540 $ 0.034 -- -- -- $ 0.540 $ 0.3375
Class A**........... -- $ 0.113 $ 0.040 $ 0.355 $ 0.335 -- $ 0.1125
Class B**........... -- $ 0.063 $ 0.020 $ 0.155 $ 0.135 -- $ 0.0625
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
BANCGROUP BANCGROUP BANCGROUP
HISTORICAL HISTORICAL HISTORICAL
1994* 1993* 1992*
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF INCOME
Interest income....... $255,758 $204,322 $192,526
Interest expense...... 105,797 81,008 86,283
-------- -------- --------
Net interest income... 149,961 123,314 106,243
Provision for possible
loan losses......... 8,254 11,767 14,625
-------- -------- --------
Net interest income
after provision for
loan losses......... 141,707 111,547 91,618
Noninterest income.... 54,149 50,990 46,226
Noninterest expense... 144,119 125,901 112,340
SAIF special
assessment(1)....... -- -- --
-------- -------- --------
Income before income
taxes............... 51,737 36,636 25,504
Applicable income
taxes............... 17,243 11,249 6,960
-------- -------- --------
Income before
extraordinary
items............... 34,494 25,387 18,544
Extraordinary items... -- (396) --
Cumulative effect
of change in
accounting.......... -- 3,890 --
-------- -------- --------
Net income............ $ 34,494 $ 28,881 $ 18,544
======== ======== ========
EARNINGS PER SHARE
Income before
extraordinary items:
Primary**........... $ 0.96 $ 0.81 $ 0.67
Fully-diluted**..... $ 0.95 $ 0.81 $ 0.67
Net income:
Primary**........... $ 0.96 $ 0.92 $ 0.67
Fully-diluted**..... $ 0.95 $ 0.91 $ 0.67
Average shares
outstanding
Primary**........... 35,907 31,272 27,785
Fully-diluted**..... 37,383 33,458 30,407
Cash dividends:
Common**............ -- -- --
Class A**........... $ 0.40 $ 0.355 $ 0.335
Class B**........... $ 0.20 $ 0.155 $ 0.135
</TABLE>
- ---------------
51
<PAGE> 59
* Restated to give retroactive effect to the January 3, 1997, January 31, 1997
and April 22, 1997 pooling-of-interests business combinations with Jefferson
Bancorp, Inc., D/W Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
<TABLE>
<CAPTION>
BANCGROUP BANCGROUP HISTORICAL
PRO FORMA --------------------------------------------------------------
1996 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION DATA
At year-end:
Total assets........................................ $6,376,053 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned income..................... 4,706,204 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for sale...................... 157,966 157,966 112,203 61,556 368,515 150,835
Deposits.......................................... 4,942,974 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt.................................... 39,092 39,092 47,688 86,662 57,397 22,979
Shareholders' equity.............................. 445,838 402,708 352,731 275,319 256,866 165,142
Average daily balances
Total assets...................................... 5,975,570 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning assets........................... 5,470,717 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned income..................... 4,400,309 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for sale...................... 135,135 135,135 98,785 135,046 248,502 121,820
Deposits.......................................... 4,573,301 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity.............................. 437,737 383,401 308,532 269,353 200,217 159,785
Book value per share at year-end**.................. $ 10.93 $ 10.29 $ 9.43 $ 7.93 $ 7.69 $ 6.34
Tangible book value per share at year-end**......... $ 9.24 $ 9.51 $ 8.62 $ 7.35 $ 7.18 $ 6.06
SELECTED RATIOS
Income before extraordinary items and the cumulative
effect of a change in accounting for income taxes
to:
Average assets.................................... 0.86% 0.95% 1.06% 0.93% 0.84% 0.72%
Average shareholders' equity...................... 11.77 13.09 15.06 12.81 12.68 11.61
Net income to:
Average assets.................................... 0.86 0.95 1.06 0.93 0.94 0.72
Average shareholder's equity...................... 11.77 13.09 15.06 12.81 14.42 11.61
Efficiency ratio(1)................................. 66.44 64.94 64.39 69.83 71.96 73.16
Dividend payout ratio............................... 43.20 42.86 36.59 41.67 38.59 50.00
Average equity to average total assets.............. 7.33 7.25 7.06 7.26 6.64 6.16
Allowance for possible losses to total loans (net of
unearned income).................................. 1.28% 1.27% 1.29% 1.55% 1.61% 1.50%
</TABLE>
- ---------------
* Restated to give retroactive effect to the January 3, 1997, January 31, 1997
and April 22, 1997 pooling-of-interests business combinations with Jefferson
Bancorp, Inc., D/W Bankshares, Inc. and Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
52
<PAGE> 60
FIRST INDEPENDENCE BANK
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables present selected historical financial data for First
Independence Bank. These tables should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
At Period End:
Cash and cash equivalents................................. $ 4,528 $ 3,175 $ 3,022 $ 3,811 $ 3,443
Investment securities, including Federal funds sold....... 8,630 7,949 9,829 7,742 7,414
Loans, net................................................ 46,554 33,236 24,270 23,868 33,112
Other assets.............................................. 2,767 3,940 5,158 6,128 6,312
-------- -------- -------- -------- --------
Total assets........................................ $ 62,479 $ 48,300 $ 42,279 $ 41,549 $ 50,281
======== ======== ======== ======== ========
Deposits.................................................. $ 57,688 $ 43,794 $ 39,312 $ 38,275 $ 47,110
Other liabilities......................................... 294 482 398 304 293
Shareholders' equity...................................... 4,497 4,024 2,569 2,970 2,878
-------- -------- -------- -------- --------
Total liabilities and shareholders' equity.......... $ 62,479 $ 48,300 $ 42,279 $ 41,549 $ 50,281
======== ======== ======== ======== ========
For the Period:
Total interest income..................................... $ 3,916 $ 3,275 $ 2,786 $ 3,279 $ 4,448
Total interest expense.................................... 1,692 1,357 965 1,093 1,987
-------- -------- -------- -------- --------
Net interest income................................. 2,224 1,918 1,821 2,186 2,461
Provision for loan losses................................. 108 18 132 386 1,029
-------- -------- -------- -------- --------
Net interest income after provision for loan
losses............................................ 2,116 1,900 1,689 1,800 1,432
Noninterest income........................................ 602 411 322 471 453
Noninterest expense....................................... (2,244) (3,008) (2,191) (2,228) (2,804)
-------- -------- -------- -------- --------
Income (loss) before income taxes and cumulative effect of
change in accounting principle............................ 474 (697) (180) 43 (919)
Income tax benefit........................................ (13) -- -- (42) --
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of change in
accounting principle.............................. 487 (697) (180) 85 (919)
Cumulative effect of change in accounting principle....... -- -- -- 7 --
-------- -------- -------- -------- --------
Net income (loss)................................... $ 487 $ (697) $ (180) $ 92 $ (919)
======== ======== ======== ======== ========
Net income (loss) per share............................... $ 0.92 $ (1.38) $ (0.55) $ 0.28 $ (3.01)
======== ======== ======== ======== ========
Weighted average number of shares outstanding............. 529,148 503,901 329,107 329,107 305,730
======== ======== ======== ======== ========
Actual shares outstanding at end of year.................... 529,167 529,107 329,107 329,107 329,107
======== ======== ======== ======== ========
Book value per share........................................ $ 8.50 $ 7.60 $ 7.81 $ 9.03 $ 8.75
======== ======== ======== ======== ========
Ratios and Other Data:
Return (loss) on average assets........................... 0.92% (1.52)% (0.44)% 0.20% (1.68)%
Return (loss) on average equity........................... 11.19 (15.87) (6.32) 3.11 (26.84)
Average equity to average assets.......................... 8.21 9.59 6.89 6.55 6.25
Net yield on average earning assets....................... 8.22 8.16 8.33 9.10 9.90
Average earning assets to average interest-bearing
liabilities............................................. 1.22 1.17 1.09 1.04 1.03
Noninterest expense to average assets..................... 4.23 6.57 5.31 4.93 5.12
Nonperforming assets as percent of total assets........... 1.07 4.09 7.29 10.27 8.19
Allowance for loan losses to total loans.................. 1.46 1.90 2.79 3.03 2.28
</TABLE>
53
<PAGE> 61
<TABLE>
<CAPTION>
AT AND FOR THE THREE
MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
At Period End:
Cash and cash equivalents................................. $ 6,664 $ 4,119
Investment securities, including Federal funds sold....... 16,460 8,066
Loans, net................................................ 48,376 35,931
Other assets.............................................. 2,880 3,299
-------- --------
Total assets........................................ $ 74,380 $ 51,415
======== ========
Deposits.................................................. $ 69,320 $ 46,957
Other liabilities......................................... 350 197
Shareholders' equity...................................... 4,710 4,261
-------- --------
Total liabilities and shareholders' equity.......... $ 74,380 $ 51,415
======== ========
For the Period:
Total interest income..................................... $ 1,273 $ 911
Total interest expense.................................... 532 361
-------- --------
Net interest income................................. 741 550
Provision for loan losses................................. -- --
-------- --------
Net interest income after provision for loan losses....... 741 550
Noninterest income........................................ 112 212
Noninterest expense....................................... (622) (512)
-------- --------
Income before income taxes.......................... 231 250
Income tax benefit........................................ -- (13)
-------- --------
Net income.......................................... $ 231 $ 263
======== ========
Net income per share...................................... $ 0.44 $ 0.50
======== ========
Weighted average number of shares outstanding............. 529,167 529,107
======== ========
Actual shares outstanding at end of period.................. 529,167 529,107
======== ========
Book value per share........................................ $ 8.90 $ 8.05
======== ========
Ratios and Other Data:
Return on average assets.................................. 1.37% 2.10%
Return on average equity.................................. 20.00 25.07
Average equity to average assets.......................... 6.86 8.37
Net yield on average earning assets....................... 8.37 8.42
Average earning assets to average interest-bearing
liabilities............................................. 1.25 1.21
Noninterest expense to average assets..................... 0.92 1.02
Nonperforming assets as percent of total assets........... 1.01 3.01
Allowance for loan losses to total loans.................. 1.42 1.72
</TABLE>
54
<PAGE> 62
FIRST INDEPENDENCE BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an understanding
of the major elements of First Independence Bank's financial condition, results
of operation, capital resources and liquidity. It should be read in conjunction
with the financial statements and notes thereto and other information appearing
elsewhere in this Prospectus.
GENERAL
First Independence (or the "Bank") is an FDIC-insured, state chartered
commercial bank headquartered in Fort Myers, Florida and is a member of the
Federal Reserve System. The Bank commenced operations on July 27, 1982. The Bank
has two branch offices located in Fort Myers Beach and Sanibel Island, Florida,
and its main business is to attract deposits and to invest those funds in loans,
including both secured and unsecured commercial loans, consumer loans,
construction and permanent residential mortgage loans, and the origination of
loans secured by commercial real estate properties.
At December 31, 1996, First Independence had total assets of $62.5 million,
an increase of 29.4% over the $48.3 million recorded at December 31, 1995, and
total shareholders' equity of $4.5 million, up 11.8% over the $4.0 million at
December 31, 1995. For the twelve months ended December 31, 1996 it had net
earnings of $487,189, an improvement of $1,183,541 from the loss reported for
the twelve months ending December 31, 1995 of $696,352.
During the year ended December 31, 1996, net loans increased 40.1% to $46.6
million from $33.2 million as of December 31, 1995. The Bank's portfolio of
investment securities increased to $5.3 million as of December 31, 1996 from
$4.9 million at December 31, 1995. The Bank's deposits increased to $57.7
million as of December 31, 1996 from $43.8 million at December 31, 1995. The
31.7% increase in deposits reflected the Bank's strategy of continuing to accept
and retain deposit accounts for which funds can be prudently invested.
REGULATION AND LEGISLATION
As a state-chartered commercial bank, the Bank is subject to extensive
regulation by the Florida Department of Banking and Finance ("Florida
Department") and the Federal Reserve Board. The Bank files reports with the
Florida Department and the Federal Reserve concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as opening additional branch offices and
mergers with or acquisitions of other financial institutions. Periodic
examinations are performed by the Florida Department and the Federal Reserve to
monitor the Bank's compliance with various regulatory requirements and safety
and soundness. The Bank is also subject to regulation by the Federal Reserve
with respect to reserves required to be maintained against deposits and certain
other matters. As a Florida corporation, the Bank is subject to that state's
banking laws and to certain regulations by the Florida Department.
CREDIT RISK
The Bank's business activity entails potential loan losses, the magnitude
of which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Bank. While the Bank has instituted underwriting
guidelines and credit review procedures to protect the Bank from avoidable
credit losses, some losses will inevitably occur.
55
<PAGE> 63
The following tables set forth certain information regarding non-accrual
loans and other real estate owned, the ratios of such loans and real estate
owned to total assets as of the dates indicated, and certain other related
information:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
----- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate loans:
Residential............................... $ 21 $ -- $ -- $ -- $ --
Commercial................................ -- -- -- -- --
Commercial loans............................. -- -- -- -- 18
Consumer and other loans..................... 41 47 87 104 207
----- ------ ------ ------ ------
Total nonaccrual loans............... 62 47 87 104 225
Loans 90 or more days past due and accruing.... -- -- -- 87 --
----- ------ ------ ------ ------
Total nonperforming loans............ 62 47 87 191 225
Other real estate owned:
Real estate acquired by foreclosure or deed
in lieu of foreclosure or in-substance
foreclosures.............................. 606 1,929 2,996 4,165 3,893
----- ------ ------ ------ ------
Total nonperforming assets........... $ 668 $1,976 $3,083 $4,356 $4,118
===== ====== ====== ====== ======
Total nonperforming loans to total
assets............................. 0.10% 0.10% 0.21% 0.46% 0.45%
===== ====== ====== ====== ======
Total nonperforming assets to total
assets............................. 1.07% 4.09% 7.29% 10.48% 8.19%
===== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
--------------
1997 1996
----- ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Nonaccrual loans:
Real estate loans:
Residential............................................ $ 21 $ --
Commercial............................................. -- 55
Commercial loans.......................................... -- --
Consumer and other loans.................................. 37 --
----- ------
Total nonaccrual loans............................ 58 55
Loans 90 or more days past due and accruing................. 90 --
----- ------
Total nonperforming loans......................... 148 55
Other real estate owned:
Real estate acquired by foreclosure or deed in lieu of
foreclosure or in-substance foreclosures............... 606 1,491
----- ------
Total nonperforming assets........................ $ 754 $1,546
===== ======
Total nonperforming loans to total assets......... 0.20% 0.11%
===== ======
Total nonperforming assets to total assets........ 1.01% 3.01%
===== ======
</TABLE>
56
<PAGE> 64
The following tables set forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average loans outstanding.......... $39,917 $28,917 $24,354 $28,297 $37,647
======= ======= ======= ======= =======
Allowance at beginning of period... $ 643 $ 696 $ 747 $ 772 $ 451
------- ------- ------- ------- -------
Loans charged off:
Real estate loans............. -- -- -- 61 192
Commercial loans.............. 8 99 -- 376 536
Consumer loans................ 80 -- 244 -- --
------- ------- ------- ------- -------
Total loans
charged-off............ 88 99 244 437 728
Recoveries....................... 27 28 61 26 20
------- ------- ------- ------- -------
Net charge-offs
(recoveries)................ 61 71 183 411 708
Provision for loan losses
charged to operating
expenses.................... 108 18 132 386 1,029
------- ------- ------- ------- -------
Allowance at end of period.... $ 690 $ 643 $ 696 $ 747 $ 772
======= ======= ======= ======= =======
Net charge-offs to average
loans outstanding........... 0.15% 0.25% 0.75% 1.45% 1.88%
======= ======= ======= ======= =======
Allowance to period-end
loans....................... 1.46% 1.90% 2.79% 3.03% 2.28%
======= ======= ======= ======= =======
Period end total loans............. $47,244 $33,879 $24,966 $24,615 $33,884
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average loans outstanding................................... $48,107 $34,571
======= =======
Allowance at beginning of period............................ $ 690 $ 643
------- -------
Loans charged off:
Real estate loans...................................... -- --
Commercial loans....................................... -- 11
Consumer loans......................................... -- 8
------- -------
Total loans charged-off........................... -- 19
Recoveries................................................ 8 3
------- -------
Net charge-offs (recoveries).............................. (8) 16
Provision for loan losses charged to operating expenses... -- --
------- -------
Allowance at end of period............................. $ 698 $ 627
======= =======
Net charge-offs (recoveries) to average loans
outstanding.......................................... (0.02)% 0.05%
======= =======
Allowance to period-end loans.......................... 1.42% 1.72%
======= =======
Period end total loans...................................... $49,074 $36,558
======= =======
</TABLE>
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its net interest
income, which is equal to the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities,
which consist primarily of deposits. Net interest income is determined by
reference to (i) the difference between yields earned on interest-earning assets
and rates paid on interest-bearing liabilities ("net
57
<PAGE> 65
interest spread"), and (ii) the relative amounts of interest-earning assets and
interest-bearing liabilities. The Bank's net interest spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. In addition, the Bank's net earnings are also affected
by the level of nonperforming loans and real estate owned, as well as the level
of its non-interest income and non-interest expenses, such as salaries and
employee benefits, occupancy, check and data processing and equipment costs and
provisions for loan losses.
The following tables set forth for the periods indicated information
regarding (i) the total dollar amount of interest income of the Bank from
earning assets and the resultant average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resultant average cost;
(iii) net interest income; (iv) net interest spread; and (v) net interest
margin. Average balances are based upon daily balances.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- --------------------------- ---------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------ ------- -------- ------ ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans(1)......................... $39,917 $3,492 8.75% $28,917 $2,656 9.18% $24,354 $2,372 9.74%
Investment securities............ 5,246 290 5.53 8,067 439 5.44 6,850 326 4.76
Federal funds sold............... 2,492 134 5.38 3,146 180 5.72 2,230 88 3.95
------- ------ ---- ------- ------ ---- ------- ------ -----
Total earning assets............. 47,655 3,916 8.22 40,130 3,275 8.16 33,434 2,786 8.33
------ ---- ------ ---- ------ -----
Non-earning assets................. 5,390 5,627 7,861
------- ------- -------
Total assets.............. $53,045 $45,757 $41,295
======= ======= =======
Interest-bearing liabilities:
Savings and NOW accounts......... $10,038 167 1.66 $12,125 242 2.00 $11,177 232 2.08
Money market deposits............ 3,765 75 1.99 3,624 110 3.04 5,854 115 1.96
Certificates of deposit.......... 25,351 1,449 5.72 18,515 1,004 5.42 13,585 615 4.53
Borrowings....................... 11 1 9.09 -- 1 0.00 30 3 10.00
------- ------ ---- ------- ------ ---- ------- ------ -----
Total interest-bearing
liabilities............. 39,165 1,692 4.32 34,264 1,357 3.96 30,646 965 3.15
------ ---- ------ ---- ------ -----
Noninterest-bearing liabilities.... 9,526 7,107 7,802
Shareholders' equity............... 4,354 4,386 2,847
------- ------- -------
Total liabilities and
shareholders' equity.... $53,045 $45,757 $41,295
======= ======= =======
Net interest income................ $2,224 $1,918 $1,821
====== ====== ======
Net interest spread(2)............. 3.90% 4.20% 5.18%
==== ==== =====
Net interest margin(3)............. 4.67% 4.78% 5.45%
==== ==== =====
Ratio of average earning assets to
average interest-bearing
liabilities...................... 1.22 1.17 1.09
======= ======= =======
</TABLE>
58
<PAGE> 66
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE(4) BALANCE INTEREST RATE(4)
------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans(1)................................... $48,107 $1,092 9.08% $34,571 $793 9.18%
Investment securities...................... 6,871 107 6.23 5,234 70 5.35
Federal funds sold......................... 5,859 74 5.05 3,460 48 5.55
------- ------ ---- ------- ---- ----
Total earning assets................ 60,837 1,273 8.37 43,265 911 8.42
------ ---- ---- ----
Non-earning assets........................... 6,477 6,877
------- -------
Total assets........................ $67,314 $50,142
======= =======
Interest-bearing liabilities:
Savings and NOW accounts................... $ 9,437 42 1.78 $11,993 50 1.67
Money market deposits...................... 7,509 42 2.24 3,467 18 2.08
Certificates of deposit.................... 31,777 448 5.64 20,334 293 5.76
------- ------ ---- ------- ---- ----
Total interest-bearing
liabilities....................... 48,723 532 4.37 35,794 361 4.03
------ ---- ----
Noninterest-bearing liabilities.............. 13,971 10,151
Shareholders' equity......................... 4,620 4,197
------- -------
Total liabilities and shareholders'
equity............................ $67,314 $50,142
======= =======
Net interest income.......................... $ 741 $550
====== ====
Net interest spread(2)....................... 4.00% 4.39%
==== ====
Net interest margin(3)....................... 4.87% 5.08%
==== ====
Ratio of average earning assets to average
interest-bearing liabilities............... 1.25 1.21
======= =======
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Represents the difference between the yield on earning assets and the cost
of interest-bearing liabilities.
(3) Represents the net interest income divided by average earning assets.
(4) Annualized.
59
<PAGE> 67
RATE/VOLUME ANALYSIS
The following tables set forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of earning assets and interest bearing liabilities, information is
provided on changes attributable to (1) changes in rate (change in rate
multiplied by prior volume), (2) changes in volume (change in volume multiplied
by prior rate) and (3) changes in rate-volume (change in rate multiplied by
change in volume).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 VS. 1996
-------------------------------
INCREASE (DECREASE) DUE TO
(IN THOUSANDS)
-------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
----- ------ ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................................... $ (9) $ 310 $ (2) $ 299
Investment securities..................................... 12 22 3 37
Other earning assets...................................... (4) 33 (3) 26
----- ------ ---- -----
Total............................................. (1) 365 (2) 362
----- ------ ---- -----
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts............................... 3 (11) -- (8)
Money market accounts.................................. 1 21 2 24
Certificates of deposit................................ (6) 165 (4) 155
----- ------ ---- -----
Total............................................. (2) 175 (2) 171
----- ------ ---- -----
Net change in net interest income........................... $ 1 $ 190 $ -- $ 191
===== ====== ==== =====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 VS. 1995
-------------------------------
INCREASE (DECREASE) DUE TO
(IN THOUSANDS)
-------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
----- ------ ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................................... $(124) $1,010 $(50) $ 836
Investment securities..................................... 7 (153) (3) (149)
Other earning assets...................................... (11) (37) 2 (46)
----- ------ ---- -----
Total............................................. (128) 820 (51) 641
----- ------ ---- -----
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts............................... (41) (42) 8 (75)
Money market accounts.................................. (38) 4 (1) (35)
Certificates of deposit................................ 56 370 19 445
----- ------ ---- -----
Total............................................. (23) 332 26 335
----- ------ ---- -----
Net change in net interest income........................... $(105) $ 488 $(77) $ 306
===== ====== ==== =====
</TABLE>
60
<PAGE> 68
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 VS. 1994
-------------------------------
INCREASE (DECREASE) DUE TO
(IN THOUSANDS)
-------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
----- ------ ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................................... $(136) $ 444 $(24) $ 284
Investment securities..................................... 47 58 8 113
Other earning assets...................................... 39 36 17 92
----- ------ ---- -----
Total............................................. (50) 538 1 489
----- ------ ---- -----
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts............................... (9) 20 (1) 10
Money market accounts.................................. 63 (44) (24) (5)
Certificates of deposit................................ 121 223 45 389
Borrowings................................................ (3) (3) 4 (2)
----- ------ ---- -----
Total............................................. 172 196 24 392
----- ------ ---- -----
Net change in net interest income........................... $(222) $ 342 $(23) $ 97
===== ====== ==== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
A Florida-chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less public funds deposits. The liquidity reserve may
consist of cash on hand, cash on deposit with other correspondent banks, federal
funds sold, and certain investments as determined by the rules of the Florida
Department. As of December 31, 1996 and December 31, 1995, the Bank's liquidity
reserve totaled $13,000,462 and $10,961,845, respectively, or approximately
22.5% and 25.0% of its total deposits.
The following table sets forth the carrying value of the Bank's investment
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities Available for Sale:
U.S. Treasury securities............................... $1,003 $1,008 $3,405
U.S. Government agencies............................... 4,181 3,708 4,520
Other securities....................................... 157 162 112
------ ------ ------
Total investment securities.................... $5,341 $4,878 $8,037
====== ====== ======
</TABLE>
61
<PAGE> 69
The following table sets forth, by maturity distribution, certain
information pertaining to the Bank's investment securities portfolio at December
31, 1996:
<TABLE>
<CAPTION>
SECURITIES AVAILABLE
FOR SALE
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in:
One year or less.......................................... $ 999 $1,002
After one through five years.............................. 3,000 2,988
After five through ten years.............................. 591 569
Mortgage-backed securities/other.......................... 790 782
------ ------
Total............................................. $5,380 $5,341
====== ======
</TABLE>
At December 31, 1996 the securities available for sale portfolio carried a
5.99% aggregate yield to maturity. There were no held to maturity securities at
December 31, 1996.
The Bank's primary sources of funds consist of principal payments on loans
and investment securities, proceeds from sales and maturities of investment
securities and net increases in deposits. The Bank uses its capital resources
principally to purchase investment securities and fund existing and continuing
loan commitments. At December 31, 1996 and 1995, the Bank had commitments to
originate loans totaling $4.4 million and $6.1 million, respectively. Scheduled
maturities of certificates of deposit during the next 12 months following
December 31, 1996 totaled $28.6 million.
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating the minimum capital adequacy of a financial
institution, Federal banking regulators have adopted regulations which make
reference to the institution's "Tier 1 leverage" capital and also to its "total"
capital. In most instances, "Tier 1 leverage" capital will consist solely of
funds permanently committed to the institution (i.e., shareholders' equity),
less net intangible assets. Conversely, "total" capital (comprised of the sum of
Tier 1 and supplementary, or Tier 2 capital) includes not only shareholders'
equity, but the allowance for loan losses (subject to limitations). Under FDIC
regulations, the Bank is required to meet certain minimum capital thresholds.
The requirement is not a valuation allowance and has not been created by charges
against earnings; rather, it represents a restriction on shareholders' equity.
The following chart compares the minimum capital ratios required by the FDIC to
the ratios maintained by First Independence:
<TABLE>
<CAPTION>
MINIMUM AMOUNT AND
ACTUAL RATIO REQUIRED
----------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO
-------------- ----- -------------- -----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets)............................ $5,086 11.0% $3,615 8.0%
Tier 1 Capital (to Risk Weighted
Assets)............................ 4,521 10.0 1,807 4.0
Tier 1 Capital (to Average Assets).... 4,521 8.0 2,362 4.0
As of March 31, 1997:
Total Capital (to Risk Weighted
Assets)............................ $5,355 11.0% $3,857 8.0%
Tier 1 Capital (to Risk Weighted
Assets)............................ 4,752 10.0 1,929 4.0
Tier 1 Capital (to Average Assets).... 4,752 7.0 2,693 4.0
</TABLE>
ASSET AND LIABILITY MANAGEMENT
As part of its asset and liability management, the Bank has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Bank's
earnings. Management believes that these processes and procedures provide the
Bank
62
<PAGE> 70
with better capital planning, asset mix and volume controls, loan-pricing
guidelines, and deposit interest-rate guidelines which should result in controls
and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest-rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate-sensitive assets to rate-sensitive
liabilities. A gap ratio of 1.0 represents perfect matching. A gap is considered
positive when the interest-rate sensitive assets exceed interest-rate sensitive
liabilities. A gap is considered negative when interest-rate sensitive
liabilities exceed interest-rate sensitive assets. During a period of rising
interest rates, a negative gap would adversely affect net interest income, while
a positive gap would result in an increase in net interest income. During a
period of falling interest rates, a negative gap would result in an increase in
net interest income, while a positive gap would adversely affect net interest
income.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on the Bank's results of operations,
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of the Bank's interest-earning
assets and interest-bearing liabilities. Such policies have consisted primarily
of: (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a
stable core deposit base; and (iii) maintaining a significant portion of liquid
assets (cash and short-term investments).
The Bank has also maintained a relatively large portfolio of liquid assets
(cash and assets maturing or repricing in one year or less) in order to reduce
its vulnerability to shifts in market rates of interest. At December 31, 1996
and 1995, 14.12% and 16.97%, respectively, of the Bank's total assets consisted
of cash, federal funds sold, and short-term U.S. Government securities, and its
overall liquidity ratio was approximately 22.5% and 25.0% of total deposits.
The Bank seeks to maintain a large stable core deposit base by providing
quality service to its customers without significantly increasing its cost of
funds or operating expenses. The success of the Bank's core deposit strategy is
demonstrated by the stability of its money-market deposit accounts, savings
accounts and NOW accounts, which, in the aggregate, totaled $14.0 million,
representing 24.30% of total deposits at December 31, 1996 and $14.8 million or
33.77% of such deposits at December 31, 1995. These accounts bore a weighted-
average rate of 1.75% at December 31, 1996 and 2.22% at December 31, 1995.
As of December 31, 1996, the Bank's cumulative one-year interest-rate
sensitivity gap ratio was 0.87%. Although management believes that the
implementation of the referenced strategies has reduced the potential adverse
effects of changes in interest rates on the Bank's results of operations, any
substantial and prolonged increase in market interest rates could have an
adverse impact on the Bank's results of operations. Management monitors the
Bank's interest-rate sensitivity gap on a monthly basis, having retained an
external consulting firm to provide practical and theoretical gap reports. The
practical gap report is based on the Federal Reserve's March 26, 1993 draft for
incorporating Interest-Rate Risk into Risk-Based Capital Standards.
The Bank's management monitors interest rate risk by reviewing several
areas of the Bank's operation, such as liquidity, volatile liability dependency
and rate sensitivity, operating within the targets and guidelines of the Bank's
Funds Management policy. Although management believes little can be done until
the maturity of the Bank's deposits occur to effect changes in rate sensitivity,
the asset mix continues to move toward less rate sensitivity for all time
periods, and while a negative gap will continue in the one year time period, it
should decline in line with management goals.
63
<PAGE> 71
The following table sets forth certain information relating to the Bank's
earning assets and interest-bearing liabilities at March 31, 1997 that are
estimated to mature or are scheduled to reprice within the period shown:
<TABLE>
<CAPTION>
MORE THAN
ONE YEAR TO MORE THAN
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
EARNING ASSETS:
Mortgage and Commercial Loans(1)(2):
Adjustable Rate (all property types).............. $25,712 $ 6,324 $ -- $32,036
Fixed Rate........................................ 2,259 7,822 1,605 11,686
------- ------- ------- -------
Total mortgage and commercial loans....... 27,971 14,146 1,605 43,722
Consumer and other loans(1)(2)...................... 1,322 3,171 12 4,505
Short-term cash equivalents......................... 9,167 -- -- 9,167
Investments(3)...................................... 999 5,000 751 6,750
------- ------- ------- -------
Total Earning Assets...................... 39,459 22,317 2,368 64,144
------- ------- ------- -------
INTEREST-BEARING LIABILITIES(4):
Certificates of deposit........................... 24,047 7,304 -- 31,351
Savings and NOW accounts.......................... 12,212 -- -- 12,212
Money market accounts............................. 9,009 -- -- 9,009
------- ------- ------- -------
Total Interest-Bearing Liabilities........ 45,268 7,304 -- 52,572
------- ------- ------- -------
Rate Sensitivity GAP................................ $(5,809) $15,013 $ 2,368 $11,572
------- ------- ------- -------
Cumulative Rate Sensitivity GAP..................... $(5,809) $ 9,204 $11,572 $11,572
======= ======= ======= =======
Rate Sensitivity GAP Ratio.......................... 0.87% 3.06% --% 122.01%
Cumulative Rate Sensitivity GAP Ratio............... 0.87% 1.18% 122.01% 122.01%
Ratio of Cumulative GAP to Total Earning Assets..... (9.06)% 14.35% 18.04% 18.04%
</TABLE>
- ---------------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which interest rates are next scheduled to adjust rather than in
the period in which loans mature. Fixed-rate loans are scheduled, including
repayment, according to their maturities.
(2) Excludes nonaccrual loans.
(3) Investments are scheduled through repricing and maturity dates.
(4) Checking accounts, NOW accounts, savings accounts and money market deposit
accounts are regarded as ready accessible withdrawable accounts. All other
time accounts are scheduled through the maturity dates.
Loan Maturities. The table below sets forth the contractual maturity of
the Bank's commercial loan and construction loan portfolios at March 31, 1997.
Demand loans, secured exclusively by passbook savings or CD's and having no
stated schedule of repayments and no stated maturity, are reported as due within
one year. The table does not reflect anticipated prepayments.
MATURITY SCHEDULE OF SELECTED LOANS
<TABLE>
<CAPTION>
0 - 12 1 - 5 OVER 5
MONTHS YEARS YEARS TOTAL
------- ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural.................... $13,524 $12,032 $2,193 $27,749
Real Estate -- Construction................................ 996 128 -- 1,124
------- ------- ------ -------
Total.................................................... $14,520 $12,160 $2,193 $28,873
======= ======= ====== =======
Fixed Interest Rate........................................ $ 2,975 $ 8,508 $1,556 $13,039
Variable Interest Rate..................................... 11,545 3,652 637 15,834
</TABLE>
64
<PAGE> 72
The following table shows the distribution of, and certain other
information relating to the Bank's deposit accounts, by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, -------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
% OF % OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT AMOUNT DEPOSIT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits............................. $16,747 24.2% $11,258 19.5% $ 8,196 18.7%
Savings and NOW deposits.................... 12,212 17.6 10,035 17.4 11,504 26.3
Money market deposits....................... 9,009 13.0 3,983 6.9 3,284 7.5
------- ----- ------- ----- ------- -----
Subtotal.......................... 37,968 54.8 25,276 43.8 22,984 52.5
------- ----- ------- ----- ------- -----
Certificates of deposit
2.00 -- 3.99%............................. -- -- -- -- 158 0.4
4.00 -- 5.99.............................. 30,143 43.5 31,636 54.9 12,654 28.9
6.00 -- 7.99.............................. 1,209 1.7 764 1.3 7,966 18.2
8.00 -- 9.99.............................. -- -- 12 -- 32 --
------- ----- ------- ----- ------- -----
Total certificates of deposit(1).......... 31,352 45.2 32,412 56.2 20,810 47.5
------- ----- ------- ----- ------- -----
Total deposits............................ $69,320 100.0% $57,688 100.0% $43,794 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) Includes individual retirements accounts ("IRA") totaling $584,915, $587,913
and $240,672 for March 31, 1997 and December 31, 1996 and 1995,
respectively, all of which were in the form of certificates of deposits.
The following table shows the average amount of and the average rate paid
on each of the following deposit accounts categories during the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------------------
MARCH 31, 1997 1996 1995
----------------- ----------------- -----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing checking accounts..... $ 9,910 0.00% $ 9,226 0.00% $ 6,601 0.00%
NOW and savings accounts.................. 9,437 1.78 10,038 1.66 12,125 2.00
Money market accounts..................... 7,509 2.24 3,765 1.99 3,624 3.04
Certificates of deposit................... 31,777 5.64 25,351 5.72 18,516 5.42
------- ------- -------
Total deposits.................. $58,633 3.62 $48,380 3.50 $40,866 3.32
======= ======= =======
</TABLE>
The following table presents for various interest rate categories the
amounts of outstanding certificates of deposit at December 31, 1996 which mature
during the periods indicated:
<TABLE>
<CAPTION>
MATURITY
- -------- (IN THOUSANDS)
<S> <C>
1997........................................................ $28,600
1998........................................................ 2,509
1999........................................................ 1,303
-------
Total............................................. $32,412
=======
</TABLE>
65
<PAGE> 73
Jumbo certificates ($100,000 and over) outstanding as of March 31, 1997
mature as follows:
<TABLE>
<CAPTION>
MATURITY (IN THOUSANDS)
- -------- --------------
<S> <C>
Due within three months or less............................. $1,405
Due over three months to six months......................... 2,775
Due over six months to one year............................. 309
Due over one year........................................... 1,118
------
Total............................................. $5,607
======
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 1997 AND 1996
General. Net income for the three months ended March 31, 1997 was $230,982
or $.44 per share compared to $263,070 or $.50 per share for the same period in
1996. The decrease in earnings was due primarily to an increase in noninterest
expense (primarily compensation) offset by an increase in net interest income
and a decrease in noninterest income, which was primarily the result of the gain
associated with the one-time termination of the Bank's deferred compensation
plans during 1996.
Interest Income and Expense. Interest income increased $361,856 or 39.7%
to $1,272,778 during the three months ended March 31, 1997. Interest on loans
increased $298,286 to $1,091,539 due to an increase in the average loan
portfolio from $34,571,000 for the quarter ended March 31, 1996 to $48,107,000
for the quarter ended March 31, 1997. Interest on investment securities
increased $37,659 to $107,101 due to an increase in the average amount invested
in securities during first quarter 1997 compared with 1996.
Interest expense on deposit accounts increased from $360,639 for the three
months ended March 31, 1996 to $531,310 for the three months ended March 31,
1997. This increase was primarily the result of an increase in the average
balance of deposits enhanced by a slight increase in average rates paid on
deposit accounts.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. No provision for loan losses was recorded for the three months ended
March 31, 1997 and 1996. The allowance for loan losses increased from $626,587
at March 31, 1996 to $698,027 at March 31, 1997. Nonperforming loans as a
percentage of total assets were .20% at March 31, 1997 as compared to .11% at
March 31, 1996. While management believes that its allowance for loan losses was
adequate as of March 31, 1997, future adjustments to the Bank's allowance for
loan losses may be necessary if economic and other conditions differ
substantially from the assumptions used in making the determination.
Total Noninterest Expense. Total noninterest expense increased 21.6% from
$511,848 for the three months ended March 31, 1996 to $622,286 for the three
months ended March 31, 1997. The increase was primarily due to an increase in
compensation expense of approximately $68,000.
Income Tax Benefit. No income tax benefit was recorded for the three
months ended March 31, 1997. The income tax benefit of $12,907 recorded for the
year ended December 31, 1996 results primarily from the refund received related
to overpayment of taxes paid in prior years.
COMPARISON OF YEARS ENDED DECEMBER 1996 AND 1995
General. Net income for the year ended December 31, 1996 was $487,189 or
$.92 per share compared to a net loss of $696,352 or $1.38 per share for 1995.
The increase in earnings of $1,183,541 was due primarily to an increase in net
interest income and a decrease in noninterest expense.
Interest Income and Expense. Interest income increased $640,484 or 19.6%
to $3,915,901 during the year ended December 31, 1996. Interest on loans
increased $835,985 to $3,491,859 due to an increase in the average loan
portfolio from $28,917,000 during 1995 to $39,917,000 during 1996. Interest on
investment
66
<PAGE> 74
securities decreased $149,502 to $290,024 due to a decrease in the average
amount invested in securities during 1996 compared with 1995.
Interest expense on deposit accounts and short-term borrowings increased
from $1,357,545 for the year ended December 31, 1995 to $1,692,339 for the year
ended December 31, 1996. This increase was primarily the result of an increase
in the average balance of deposits, as well as a slight increase in rates paid
on deposit accounts.
Provision for Credit Losses. The provision for loan losses increased from
$17,500 for the year ended December 31, 1995 to $108,203 during 1996. The
allowance for loan losses increased from $643,142 at December 31, 1995 to
$689,817 at December 31, 1996. Nonperforming loans as a percentage of total
assets were .10% at December 31, 1996 as compared to .92% at December 31, 1995.
Total Noninterest Expense. Total noninterest expense decreased 25.4% from
$3,008,068 for the year ended December 31, 1995 to $2,243,560 for the year ended
December 31, 1996. The decrease was primarily due to a decrease in expenses
related to other real estate owned. Other real estate owned decreased from
$1,928,293 at December 31, 1995 to $606,300 at December 31, 1996. In addition,
the improved financial condition of the Bank resulted in lower FDIC insurance
assessments and fewer regulatory examinations during 1996.
Income Tax Benefit. The income tax benefit of $12,907 recorded for the
year ended December 31, 1996 results primarily from the refund received related
to overpayment of taxes paid in prior years. No income tax benefit was recorded
during 1995 since a valuation allowance was established to reduce the value of
the Bank's net operating loss carryforward to that amount which, based on the
Bank's history of operating results and expectations for the future, was more
likely than not to be fully realized.
COMPARISON OF YEARS ENDED DECEMBER 1995 AND 1994.
General. The net loss for the year ended December 31, 1995 was $696,352 or
$1.38 per share compared to a net loss of $180,203 or $.55 per share for 1994.
The decrease in earnings was due primarily to an increase in other noninterest
expense.
Interest Income and Expense. Interest income increased $571,288 or 20.6%
to $3,348,964 during the year ended December 31, 1995. Interest on loans
increased $365,235 to $2,729,422 due to an increase in the average loan
portfolio from $24,354,000 during 1994 to $28,917,000 during 1995. Interest on
investment securities increased $114,114 to $439,525 due primarily to an
increase in the average amount invested in securities during 1995 compared with
1994.
Interest expense on deposit accounts and short-term borrowings increased
from $965,371 for the year ended December 31, 1994 to $1,357,545 for the year
ended December 31, 1995. This increase was primarily the result of an increase
in the average balance of deposits and an increase in rates paid on
interest-bearing liabilities from 3.15% during 1994 to 3.96% during 1995.
Provision for Credit Losses. The provision for credit losses decreased
from $131,550 for the year ended December 31, 1994 to $17,500 for 1995. The
allowance for loan losses decreased from $696,644 at December 31, 1994 to
$643,142 at December 31, 1995.
Noninterest Expense. Total noninterest expense increased 37.3% from
$2,191,069 for the year ended December 31, 1994 to $3,008,064 for the year ended
December 31, 1995. The increase was primarily due to an increase in employee
compensation and expenses related to other real estate owned, including losses
on sales of certain properties and an increase in the valuation reserve. There
were smaller increases in occupancy and equipment expense from 1994 to 1995.
Income Tax Benefit. No income tax benefit was recorded during 1995 or 1994
since a valuation allowance was established to reduce the value of the Bank's
net operating loss carryforward to that amount which, based on the Bank's
history of operating results and expectations for the future, was more likely
than not to be fully realized.
67
<PAGE> 75
COMPARISON OF YEARS ENDED DECEMBER 1994 AND 1993.
General. The net loss for the year ended December 31, 1994 was $180,203 or
$.55 per share compared to net income of $92,217 or $.28 per share for 1993. The
decrease in earnings was due primarily to decreases in both net interest income
and noninterest income, partially offset by a decrease in the loan loss
provision.
Interest Income. Interest income decreased $493,437 or 15.0% during the
year ended December 31, 1994. Interest on loans decreased $489,517 to $2,372,059
due to a decrease in the average loan portfolio from $28,297,000 during 1993 to
$24,354,000 during 1994. Interest on investment securities decreased from
$341,624 for the year ended December 31, 1993 to $325,411 for the year ended
December 31, 1994, due to a decrease in the average yield earned on investment
securities from 5.91% during 1993 to 4.76% during 1994, even though the average
amount invested in securities increased during 1994 as compared to 1993.
Interest Expense. Interest expense on deposit accounts and short-term
borrowings decreased from $1,092,902 for the year ended December 31, 1993 to
$965,371 for the year ended December 31, 1994. This decrease was primarily the
result of a decrease in the average balance of deposits during 1994 as compared
to 1993.
Noninterest Expense. Total noninterest expense decreased 1.67% from
$2,228,283 for the year ended December 31, 1993 to $2,191,069 for the year ended
December 31, 1994. The decrease was primarily due to decreases in employee
compensation and occupancy and equipment expenses.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared on the traditional basis of accounting, which requires the measurement
of financial position and operating results in terms of historical dollars,
without considering changes in the relative purchasing power of money over time
due to inflation. Unlike most industrial companies, substantially all of the
assets and liabilities of the Bank are monetary in nature. As a result, interest
rates have a more significant impact on the Bank's performance than the effects
of general levels of inflation. Interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services,
since such prices are affected by inflation to a larger extent than interest
rates.
FUTURE ACCOUNTING REQUIREMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (SFAS 125), which
provides accounting and reporting standards for certain transfers and servicing
of financial assets, as well as extinguishment of liabilities. SFAS 125 also
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. SFAS 125, as amended
by SFAS 127, is generally effective for activities under the standards that
occur after December 31, 1997. Management does not anticipate SFAS 125 will have
a material impact on the Bank.
The FASB has also issued Statement of Financial Accounting Standards No.
128, Earnings Per Share (SFAS 128). SFAS 128 establishes standards for computing
and presenting earnings per share, making them comparable to international
accounting standards. It replaces the previously-required presentation of
primary earnings per share with a presentation of basic earnings per share, and
requires a reconciliation of the numerator and denominator of the basic earnings
per share computation to the numerator and denominator of the diluted earnings
per share computation. Under SFAS 128, dilution is excluded from basic earnings
per share. SFAS 128 is effective for periods ending after December 15, 1997, and
earlier application is not permitted. Other than the required restatement after
the effective date of prior earnings per share data, management does not believe
SFAS 128 will have any material effect on the Bank.
68
<PAGE> 76
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware and has operated under its current
name and management since 1981. BancGroup operates Colonial Bank as its wholly
owned commercial banking subsidiary in the states of Alabama, Georgia, Florida
and Tennessee. Colonial Bank, an Alabama banking corporation, conducts a full
service commercial banking business through 110 branches in Alabama, three
branches in Tennessee, fourteen branches in Georgia and 44 branches in Florida.
Colonial Mortgage Company, a subsidiary of Colonial Bank, is a mortgage banking
company which services approximately $10.6 billion in residential loan and which
originates mortgages in 37 states through 6 regional offices. BancGroup's
commercial banking loan portfolio is comprised primarily of commercial real
estate loans (24%) and residential real estate loans (43%), a significant
portion of which is located within the State of Alabama. BancGroup's growth in
loans over the past several years has been concentrated in commercial and
residential real estate loans.
PROPOSED AFFILIATE BANKS
Since May 1, 1997, BancGroup has merged two banking institutions into
BancGroup: Great Southern and First Commerce, both located in Florida, with
aggregate assets and stockholders' equity acquired of $230 million and $21
million, respectively. These acquisitions are included in the pro forma
statements contained herein.
See "THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES -- Condensed Pro Forma
Statements of Condition (Unaudited)."
BancGroup has entered into a definitive agreement dated as of June 23,
1997, to acquire Dadeland Bancshares, Inc. ("Dadeland"). Dadeland is a Florida
corporation and is a holding company for Dadeland Bank located in Miami,
Florida. Dadeland will merge with BancGroup and following such merger Dadeland
Bank will merge with Colonial Bank. BancGroup will pay an aggregate merger
consideration of $38,000,000 in cash for the shares of Dadeland common stock
currently outstanding. This transaction is subject to, among other things,
approval by the stockholders of Dadeland and approval by appropriate regulatory
authorities. At March 31, 1997, Dadeland has assets of $136.6 million, deposits
of $113.3 million and stockholders' equity of $15.4 million.
BancGroup has entered into a letter of intent dated as of July 1, 1997, to
acquire ASB Bancshares, Inc. ("ASB"). ASB is an Alabama corporation and is a
holding company for Ashville Savings Bank located in St. Clair County, Alabama.
ASB will merge with BancGroup and following such merger Ashville Savings Bank
will merge with Colonial Bank. BancGroup will issue a maximum of 617,054 shares
of its Common Stock, depending upon the market value at the time of such merger,
and issue an aggregate amount of $ in subordinated debentures to
the shareholders of ASB. This transaction is subject to, among other things, the
execution of a definitive agreement, approval by the stockholders of ASB and
approval by appropriate regulatory authorities. At March 31, 1997, ASB has
assets of $140.6 million, deposits of $128.3 million and stockholders' equity of
$11.2 million.
BancGroup has entered into a letter of intent dated as of July 21, 1997, to
acquire South Florida Banking Corp. ("South Florida"). South Florida is a
Florida corporation and is a holding company for First National Bank of Florida
at Bonita Springs located in Lee County, Florida. South Florida will merge with
BancGroup and following such merger First National Bank of Florida at Bonita
Springs will merge with Colonial Bank. BancGroup will issue an estimated maximum
of 2,007,000 shares of its Common Stock to the shareholders of South Florida.
The transaction is subject to, among other things, the execution of a definitive
agreement, approval by the shareholders of South Florida and approval by
appropriate regulatory authorities. At March 31, 1997, south Florida has assets
of 245.2 million, deposits of 215.5 million and shareholders' equity of 15.1
million.
69
<PAGE> 77
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of April 30, 1997, BancGroup had issued and outstanding 40,740,357
shares of BancGroup Common Stock with 7,729 stockholders of record. Each such
share is entitled to one vote. In addition, as of that date, 1,839,981 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 512,800 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 100,000,000 shares of BancGroup Common Stock authorized.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of April 30, 1997, of more than five percent of BancGroup's
outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
---------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2)......................................... 2,888,820(3) 7.06%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder............................................. 2,199,298 5.40%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder............................................ 2,146,106 5.27%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated for each person assuming the issuance of shares
of Common Stock pursuant to BancGroup's stock option plans, if any, that are
held by such person.
(2) Robert E. Lowder is the brother of James K. and Thomas H. Lowder. Robert E.
Lowder disclaims any beneficial ownership interest in the shares owned by
his brothers and in 85,442 shares owned by his mother.
(3) Includes 181,020 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates for each director, executive officer, and all
executive officers and directors of BancGroup as a group the number of shares of
outstanding Common Stock of BancGroup beneficially owned as of April 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
---- --------- --------------
<S> <C> <C>
DIRECTORS
Lewis Beville............................................... 1,816 *
Young J. Boozer............................................. 15,256(2) *
William Britton............................................. 19,616 *
Jerry J. Chesser............................................ 147,428 *
Augustus K. Clements, III................................... 18,600 *
Robert S. Craft............................................. 11,994 *
Patrick F. Dye.............................................. 37,960(3) *
Clinton O. Holdbrooks....................................... 280,900(4) *
D. B. Jones................................................. 20,714(5) *
Harold D. King.............................................. 156,108 *
Robert E. Lowder**.......................................... 2,888,820(6) 7.06%
John Ed Mathison............................................ 28,454 *
Milton E. McGregor.......................................... -- *
John C. H. Miller, Jr....................................... 40,480(7) *
Joe D. Mussafer............................................. 20,264 *
William E. Powell, III...................................... 14,352 *
</TABLE>
70
<PAGE> 78
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
---- --------- --------------
<S> <C> <C>
J. Donald Prewitt........................................... 244,940(8) *
Jack H. Rainer.............................................. 2,900 *
Jimmy Rane.................................................. --
Frances E. Roper............................................ 365,342 *
Simuel Sippial.............................................. 2,774 *
Ed V. Welch................................................. 30,454 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III........................................ 46,920(9) *
W. Flake Oakley, IV......................................... 39,458(9) *
Michelle Condon............................................. 18,586(9) *
All Executive Officers and Directors as a Group............. 4,454,136(10) 10.83%
</TABLE>
- ---------------
* Represents less than one percent.
** Executive Officer.
(1) Percentages are calculated for each person and for the group assuming the
issuance of shares of Common Stock pursuant to BancGroup's stock option
plans, if any, that are held by such persons.
(2) Includes 1,000 shares of Common Stock out of 2,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 35,960 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 24,524 shares of Common Stock subject to options under BancGroup's
stock option plans, and 78,998 shares over which Mr. Holdbrooks serves as
trustee.
(5) Mr. Jones holds power to vote these shares as trustee.
(6) These shares include 181,020 shares of Common Stock subject to options
under BancGroup's stock option plans. See the table at "Voting Securities
and Principal Stockholders."
(7) Includes 20,000 shares subject to options.
(8) Includes 61,604 shares subject to stock options.
(9) Young J. Boozer, III, W. Flake Oakley, IV and Michelle Condon, hold options
respecting 25,000, 18,000 and 11,000 shares of Common Stock, respectively,
pursuant to BancGroup's stock option plans.
(10) Includes shares subject to options.
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, at items 10, 11, and 13 and is
incorporated herein by reference.
BUSINESS OF FIRST INDEPENDENCE
GENERAL
First Independence was incorporated on June 9, 1982, and chartered by the
State of Florida as a capital stock commercial bank on July 27, 1982. First
Independence is a member of the Federal Reserve System, with deposits insured by
the FDIC.
First Independence has operated as a traditional commercial financial
institution attracting checking, savings and money market account deposits from
individuals and businesses, and using such deposits to originate commercial and
residential real estate loans which are secured by property located primarily in
Lee County, Florida. First Independence also originates commercial loans, lines
of credit and consumer loans. Its income is primarily derived from interest and
fees received in connection with lending activities. Interest on deposits and
general administrative expenses are First Independence's major expense items.
71
<PAGE> 79
First Independence currently employs 40 individuals and engages in the
general business of personal and commercial banking primarily in Lee County
communities, including Fort Myers, Fort Myers Beach, Sanibel, and Cape Coral, as
well as unincorporated North Fort Myers, Captiva, Pine Island, South Fort Myers,
and Bonita Springs. For its primary sources of funds, First Independence relies
on personal and business deposits, money market deposit accounts, and
certificates of deposit. First Independence's primary sources of income include
interest and fees earned from residential and commercial mortgage loans,
including construction and permanent mortgage loans, secured and unsecured
commercial and consumer loans, revolving credit lines, and automobile loans.
Interest on deposits and general administrative expenses are First
Independence's major expense items.
On May 1, 1992, First Independence entered into an agreement with the
Federal Reserve Bank of Atlanta and the Comptroller of the State of Florida
which imposed certain restrictions and requirements on First Independence's
operations. Among other things, the agreement prohibited the payment of
dividends by First Independence and required First Independence to establish or
revise various policies and procedures relating to capital adequacy, lending,
other real estate, asset/liability management and other functions. As a result
of the compliance by First Independence with the terms of the agreement and the
improvement in First Independence's condition, the Federal Reserve Bank of
Atlanta and the Comptroller of the State of Florida terminated the agreement as
of February 25, 1997. The termination by the Comptroller of the State of Florida
was provisionary upon First Independence adopting and complying with resolutions
adopted by the Board of Directors of First Independence on December 17, 1996,
which require First Independence to adopt and implement a plan to improve First
Independence's liquidity, prepare and monitor compliance with budget and
earnings forecast for 1997, and provide quarterly progress on First
Independence's compliance with the resolutions. Management of First Independence
believes that First Independence is in compliance with the resolutions.
MARKET AREA
In addition to its main office located in Fort Myers, First Independence
has two branch offices in Lee County, Florida, which are located on Fort Myers
Beach and Sanibel Island. Fort Myers Beach is situated on Estero Island, which
is seven miles long and three-quarters of a mile wide, with a year-round
population of 14,000. Sanibel Island is eleven miles long and two miles wide,
with a year-round population of 5,500. Both of these areas increase in
population during the winter months, due to the influx of tourists to the area.
While changing conditions involving the infrastructure requirements of
various geographic locations around the country have limited economic growth and
population expansion, First Independence's market area has continued to grow
because of the area's ability to attract new residents to its year-round climate
and its relatively stable economic environment. The major economic base in First
Independence's market area includes agriculture, services and government,
tourism, retail, and real estate development and construction businesses. First
Independence believes that its office locations are situated so as to take
advantage of the economic and demographic growth in the market area.
PROPERTIES
First Independence's main office is located at 16740 San Carlos Boulevard,
S.W., Fort Myers, in a two-story office building just north of Summerlin
Boulevard on San Carlos Boulevard. The new building was constructed in 1991,
with First Independence owning and occupying the entire 10,000 square feet. The
first floor houses the executive and loan offices, along with customer service
and the teller area. First Independence accommodates the public with three
drive-thru lanes. The second floor is comprised of the accounting department,
loan operations, and internal auditing, as well as the board room.
Management of First Independence believes its three locations to be
convenient to both commercial and individual customers and that such
accessibility is a competitive advantage. The Fort Myers Beach full-service
office is maintained at 6061 Estero Boulevard. Relocation of this branch was
effected on July 22, 1996, providing a 1,336 square foot facility, with three
drive-thru lanes and increased parking area. First Independence is leasing these
premises for a term of ten years, from 1996 to 2006, and has an option to renew
for an additional five years. The Sanibel office is currently located at 2495
Palm Ridge Road, under leasing terms of an initial five years, which commenced
in 1983, with three subsequent five-year extensions. First
72
<PAGE> 80
Independence has recently acquired a 1,600 square foot historic building on
Sanibel, known as the Schoolhouse Gallery, for the purpose of converting it to a
full-service banking facility with three drive-thru lanes. Relocation is
scheduled for late fall.
COMPETITION
All phases of First Independence's business are highly competitive and
subject to competitive pressures. While First Independence competes with local
commercial banks, numerous regional banks, credit unions, and savings and loan
associations, many with assets, capital, and lending limits larger than First
Independence, it remains competitive by providing its customers with the
individual and personal service of a community bank, and by maintaining a
reasonable fee structure. It is one of approximately 15 commercial banks that
have 114 offices located in Lee County. First Independence, along with other
commercial banks, also competes with respect to its lending activities, as well
as in attracting demand deposits. Larger institutions have the resources to
finance wide ranging advertising campaigns and to allocate their investment
assets to products of higher yields and demand. By virtue of their greater total
capital, such institutions have substantially higher lending limits than First
Independence (legal lending limits to an individual borrower are limited to a
percentage of First Independence's total capital). First Independence expects
that if the Merger is consummated these advantages will render First
Independence more competitive to benefit its growth and profitability, while
still maintaining its community bank semblance. It will continue to focus on
commercial customers, professionals and consumers, because First Independence
management believes these segments offer the greatest concentration of potential
business and have historically demonstrated a degree of loyalty in their banking
relationships.
PRINCIPAL HOLDERS OF COMMON STOCK
First Independence's authorized capital stock consists of 900,000 shares of
First Independence Common Stock, par value $5.00 per share, of which 529,167
shares are issued and outstanding as of the Record Date. There are 58,519 shares
of First Independence Common Stock reserved for issuance upon exercise of First
Independence Options and 199,940 shares of First Independence Common Stock
reserved for issuance upon exercise of First Independence Warrants.
The following table sets forth information as of the Record Date regarding
the ownership of First Independence Common Stock by each director and executive
officer of First Independence, by each person known to First Independence to be
the beneficial owner of more than five percent of the First Independence Common
Stock and by all directors and executive officers as a group. Unless otherwise
indicated, all persons shown in the table have sole voting and investment power
with regard to the shares shown.
<TABLE>
<CAPTION>
NAME AND POSITION SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP
------------------- ---------------------- ----------
<S> <C> <C>
Robert M. Taylor, Director.................................. 41,608(2) 7.66%
James E. Courtney, Chairman of the Board.................... 42,476(3) 7.76%
Edward H. Black, President/CEO, Director.................... 6,250(4) 1.17%
Daniel G. Reinfried, Director............................... 2,148 .41%
Ronald S. Stutzman, Director................................ 1,588 .30%
Gary V. Trippe, Director.................................... 5,000(5) .94%
George K. Watson, Director.................................. 2,630(6) .50%
Ronald W. York, Director.................................... 1,000(6) .19%
Martha J. Kelley, Senior Vice President..................... 4,582(7) .86%
Kenneth J. Iglesias, Senior Vice President.................. -- --
All Directors and executive officers as a group (10 persons,
including those names above).............................. 107,282 18.77%
</TABLE>
- ---------------
(1) The stock ownership information shown has been furnished to First
Independence by the named persons and group. Beneficial ownership as
reported in the table and elsewhere in this Proxy Statement has been
determined in accordance with Commission regulations and includes shares of
First Independence Bank Common Stock which may be acquired within 60 days
upon the exercise of outstanding stock options.
73
<PAGE> 81
(2) Includes 13,664 shares that may be acquired upon the exercise of First
Independence Warrants.
(3) Consists of 24,256 shares owned by his spouse and 18,220 shares that his
spouse may acquire upon the exercise of First Independence Warrants, as to
which shares Mr. Courtney disclaims beneficial ownership.
(4) Consists of shares that may be acquired upon the exercise of First
Independence Options.
(5) Consists of shares held as trustee.
(6) Held jointly with his spouse.
(7) Includes 4,332 shares that may be acquired upon the exercise of First
Independence Options.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Agreement by First Independence's shareholders requires the
affirmative vote of at least a majority of the total votes eligible to be cast
at the Special Meeting. In the event there are an insufficient number of shares
of First Independence Common Stock present in person or by proxy at the Special
Meeting to approve the Agreement, First Independence's Board of Directors
intends to adjourn the Special Meeting to a later date provided a majority of
the shares present and voting on the motion have voted in favor of such
adjournment. The place and date to which the Special Meeting would be adjourned
would be announced at the Special Meeting. Proxies voted against the Agreement
and abstentions will not be voted to adjourn the Special Meeting. Abstentions
and broker non-votes will not be voted on this matter but will not count as "no
votes." If it is necessary to adjourn the Special Meeting and the adjournment is
for a period of not more than 30 days from the original date of the Special
Meeting, no notice of the time and place of the adjourned meeting need be given
the shareholders, other than an announcement made at the Special Meeting.
The effect of any such adjournment would be to permit First Independence to
solicit additional proxies for approval of the Agreement. While such an
adjournment would not invalidate any proxies previously filed as long as the
record date for the adjourned meeting remained the same, including proxies filed
by shareholders voting against the Agreement, an adjournment would afford First
Independence the opportunity to solicit additional proxies in favor of the
Agreement.
OTHER MATTERS
The Board of Directors of First Independence is not aware of any business
to come before the Special Meeting other than those matters described above in
this Prospectus. If, however, any other matters not now known should properly
come before the Special Meeting, the proxy holders named in the accompanying
proxy will vote such proxy on such matters as determined by a majority of the
Board of Directors of First Independence.
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1998 annual meeting of stockholders, any stockholder proposal
to take action at such meeting must be received at BancGroup's main office at
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101, no later
than 120 calendar days in advance of the date of March 14, 1998.
LEGAL MATTERS
Certain legal matters regarding the shares of BancGroup Common Stock of
BancGroup offered hereby are being passed upon by the law firm of Miller,
Hamilton, Snider & Odom, L.L.C., Mobile, Alabama, of which John C. H. Miller,
Jr., a director of BancGroup, is a partner. Such firm received fees for legal
services performed in 1996 of $1,474,853. John C. H. Miller, Jr. beneficially
owns 40,480 shares of Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1996 of $41,000. Certain legal matters relating
to the Merger are being passed upon for First Independence by the law firm of
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., Orlando, Florida.
74
<PAGE> 82
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup and the
supplemental consolidated financial statements of BancGroup as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as experts in accounting and auditing.
It is not expected that a representative of such firm will be present at the
Special Meeting.
Brewer, Beemer, Kuehnhackl & Koon, P.A. serves as the independent certified
public accountants for First Independence. First Independence's financial
statements as of December 31, 1996 and 1995 and for each of the three years
ended December 31, 1996 are in this Prospectus in reliance upon the report of
such firm, are given on the authority of that firm as experts in accounting and
auditing. It is not expected that a representative of such firm will be present
at the Special Meeting.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF FIRST INDEPENDENCE PRIOR
TO THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO
THE SECRETARY OF FIRST INDEPENDENCE PRIOR TO THE SPECIAL MEETING OR BY ATTENDING
THE SPECIAL MEETING VOTING IN PERSON.
75
<PAGE> 83
FIRST INDEPENDENCE BANK OF FLORIDA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
December 31, 1996 and 1995:
Report of Independent Certified Public Accountants........ F-1
Statements of Financial Condition -- December 31, 1996 and
1995................................................... F-2
Statements of Operations -- Years Ended December 31, 1996,
1995 and 1994.......................................... F-3
Statements of Changes in Stockholders' Equity -- Years
Ended December 31, 1996, 1995 and 1994................. F-4
Statements of Cash Flows -- Years Ended December 31, 1996,
1995 and 1994.......................................... F-5
Notes to Financial Statements............................. F-6
March 31, 1997 and 1996:
Unaudited Statement of Financial Condition -- March 31,
1997................................................... F-19
Unaudited Statements of Income -- Three Months Ended March
31, 1997 and 1996...................................... F-20
Unaudited Statements of Cash Flows -- Three Months Ended
March 31, 1997 and 1996................................ F-21
Note to Unaudited Financial Statements.................... F-22
</TABLE>
76
<PAGE> 84
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of First Independence Bank of Florida
We have audited the accompanying statements of financial condition of First
Independence Bank of Florida as of December 31, 1996 and 1995, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Independence Bank of
Florida as of December 31, 1996 and 1995, and the results of its operations and
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
BREWER, BEEMER, KUEHNHACKL & KOON, P.A.
Orlando, Florida
February 13, 1997
F-1
<PAGE> 85
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 4,527,500 $ 3,175,215
Federal funds sold.......................................... 3,289,000 3,071,000
Investments available-for-sale.............................. 5,341,463 4,877,680
Loans, net.................................................. 46,553,727 33,236,262
Other real estate owned..................................... 606,300 1,928,293
Premises and equipment, net................................. 1,477,838 1,152,877
Accrued interest receivable................................. 368,968 320,107
Other assets................................................ 313,727 538,176
----------- -----------
TOTAL ASSETS...................................... $62,478,523 $48,299,610
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand
Noninterest bearing.................................... $11,258,372 $ 8,195,876
Interest bearing....................................... 3,982,918 3,284,321
Savings deposits.......................................... 3,249,404 4,256,761
NOW accounts.............................................. 6,785,389 7,247,234
Time deposits............................................. 32,412,038 20,809,929
----------- -----------
57,688,121 43,794,121
Accrued interest payable and other liabilities.............. 293,560 481,844
----------- -----------
Total liabilities................................. 57,981,681 44,275,965
----------- -----------
Stockholders' equity:
Common stock, $5 par value; 900,000 shares authorized;
529,167 and 529,107 shares issued and outstanding...... 2,645,835 2,645,535
Additional paid-in capital................................ 3,301,467 3,301,167
Net unrealized holding losses on investments
available-for-sale..................................... (24,533) (9,941)
Accumulated deficit....................................... (1,425,927) (1,913,116)
----------- -----------
Total stockholders' equity........................ 4,496,842 4,023,645
----------- -----------
Commitments and contingent liabilities...................... -- --
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $62,478,523 $48,299,610
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 86
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Loans.................................................... $3,491,859 $2,655,874 $2,289,544
Investment securities.................................... 290,024 439,526 325,411
Federal funds sold....................................... 134,018 180,017 88,079
---------- ---------- ----------
Total interest income............................ 3,915,901 3,275,417 2,703,034
---------- ---------- ----------
Interest expense:
Deposits................................................. 1,691,721 1,356,213 962,723
Other borrowings......................................... 618 1,332 2,648
---------- ---------- ----------
Total interest expense........................... 1,692,339 1,357,545 965,371
---------- ---------- ----------
Net interest income........................................ 2,223,562 1,917,872 1,737,663
Provision for loan losses.................................. 108,203 17,500 131,550
---------- ---------- ----------
Net interest income after provision for loan
losses......................................... 2,115,359 1,900,372 1,606,113
---------- ---------- ----------
Noninterest income:
Service charges.......................................... 260,122 181,301 224,514
Other.................................................... 342,361 230,043 180,238
---------- ---------- ----------
Total noninterest income......................... 602,483 411,344 404,752
---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits........................... 1,131,198 1,059,516 906,283
Occupancy and equipment.................................. 475,126 433,380 394,615
Other.................................................... 637,236 1,515,172 890,170
---------- ---------- ----------
Total noninterest expense........................ 2,243,560 3,008,068 2,191,068
---------- ---------- ----------
Income (loss) before income taxes.......................... 474,282 (696,352) (180,203)
Income tax benefit......................................... (12,907) -- --
---------- ---------- ----------
Net income (loss).......................................... $ 487,189 $ (696,352) $ (180,203)
========== ========== ==========
Earnings (loss) per share.................................. $ 0.92 $ (1.38) $ (0.55)
========== ========== ==========
Weighted average number of common shares outstanding....... 529,148 503,901 329,107
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 87
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
ADDITIONAL UNREALIZED
COMMON PAID-IN HOLDING ACCUMULATED
STOCK CAPITAL LOSSES DEFICIT
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993..................... $1,645,535 $2,361,517 $ -- $(1,036,561)
Unrealized depreciation on securities
available-for-sale, net of related
taxes..................................... -- -- (221,467) --
Net loss..................................... -- -- -- (180,203)
---------- ---------- --------- -----------
Balance, December 31, 1994..................... 1,645,535 2,361,517 (221,467) (1,216,764)
Issuance of 200,000 shares of common stock,
net of related issuance costs of
$60,350................................... 1,000,000 939,650 -- --
Unrealized appreciation on securities
available-for-sale, net of related
taxes..................................... -- -- 211,526 --
Net loss..................................... -- -- -- (696,352)
---------- ---------- --------- -----------
Balance, December 31, 1995..................... 2,645,535 3,301,167 (9,941) (1,913,116)
Exercise of stock warrants................... 300 300 -- --
Unrealized depreciation on securities
available-for-sale, net of related
taxes..................................... -- -- (14,592) --
Net income................................... -- -- -- 487,189
---------- ---------- --------- -----------
Balance, December 31, 1996..................... $2,645,835 $3,301,467 $ (24,533) $(1,425,927)
========== ========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 88
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss).................................. $ 487,189 $ (696,352) $ (180,203)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Provision for loan losses....................... 108,203 17,500 131,550
Deferred income tax expense..................... 12,500 -- --
Depreciation, amortization and accretion........ 190,896 70,744 88,111
Net realized gains on available-for-sale
securities.................................... -- (48,458) (424)
Net realized (gain) loss on other real estate... (39,011) 133,762 --
Writedown of other real estate owned............ 15,000 545,843 --
Net realized gain on sale of fixed assets....... 3,884 (313) --
Increase in accrued interest receivable......... (48,861) (59,311) (18,289)
Decrease (increase) in other assets............. 220,894 51,486 (80,581)
(Decrease) increase in accrued interest payable
and other liabilities......................... (188,288) 83,572 93,904
------------ ----------- -----------
Net Cash Provided by Operating
Activities............................... 762,406 98,473 34,068
------------ ----------- -----------
Cash Flows from Investing Activities
Net increase in Federal funds sold................. (218,000) (1,279,000) (249,000)
Net increase in loans.............................. (13,250,190) (9,560,038) (1,098,870)
Purchases of available-for-sale securities......... (3,601,300) (3,342,387) (3,959,330)
Proceeds from sales of available-for-sale
securities...................................... 16,350 5,088,631 1,774,065
Proceeds from maturities and calls of
available-for-sale securities................... 3,003,177 1,826,090 --
Proceeds from sale of other real estate owned...... 1,170,523 964,526 1,733,555
Net additions to premises and equipment............ (425,283) (65,819) (60,329)
------------ ----------- -----------
Net Cash Used for Investing Activities..... (13,304,723) (6,367,997) (1,859,909)
------------ ----------- -----------
Cash Flows from Financing Activities
Net increase (decrease) in noninterest bearing
deposits........................................ 3,062,496 1,420,540 (1,014,147)
Net decrease in interest bearing deposits.......... (770,605) (1,594,681) (1,995,368)
Net increase in time deposits...................... 11,602,111 4,656,799 4,046,507
Proceeds from issuance of stock.................... 1,939,650 --
Proceeds from exercise of stock warrants........... 600 --
------------ ----------- -----------
Net Cash Provided by Financing
Activities............................... 13,894,602 6,422,308 1,036,992
------------ ----------- -----------
Net increase (decrease) in cash and due
from banks............................... 1,352,285 152,784 (788,849)
------------ ----------- -----------
Cash and due from banks at beginning of
year..................................... 3,175,215 3,022,431 3,811,280
------------ ----------- -----------
Cash and due from banks at end of year..... $ 4,527,500 $ 3,175,215 $ 3,022,431
============ =========== ===========
Supplemental schedule of non-cash investing
activities
Change in net unrealized holding losses on
securities available-for-sale, net of taxes of
$8,943, $129,907 and $135,234, respectively..... $ 14,592 $ 211,526 $ 221,467
Loans transferred to other real estate owned....... $ 16,389 $ 575,975 $ 671,865
Other real estate owned transferred to loans....... $ 191,870 $ -- $ 106,618
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 89
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
First Independence Bank of Florida (the "Bank") is a state chartered bank
organized to offer a full range of banking services to individual and corporate
customers through its offices located in Lee County, Florida. The Bank is
subject to competition from other financial institutions and operates under the
principal supervision and regulation of the Federal Reserve Board and the
Comptroller of the State of Florida. Consequently, the Bank undergoes periodic
examinations by those regulatory authorities.
The following is a description of the significant accounting policies and
practices followed by the Bank, which conform with generally accepted accounting
principles and prevailing practices within the banking industry.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of financial condition and income
and expense for the periods presented. Actual results could differ significantly
from those estimates. Material estimates particularly susceptible to significant
change in the near term relate to the determination of the allowance for loan
losses and the evaluation of the carrying amount of real estate acquired through
foreclosure or in satisfaction of loans. In connection with the determination of
the allowance for loan losses and real estate owned, management generally
obtains independent appraisal of the value of significant properties.
INVESTMENT SECURITIES
The Bank has classified as available-for-sale those investment securities
which may be sold prior to maturity in connection with changes in market
interest rates, liquidity needs or other reasons. Securities in the
available-for-sale portfolio have been reflected at their aggregate fair value
in the accompanying statements of financial condition. Unrealized holding gains
or losses, net of related income tax effects, have been reflected as a separate
component of stockholders' equity.
Those investment securities for which the Bank has the positive intent and
ability to hold until their maturity are classified as held-to-maturity
securities. These securities are carried on an amortized cost basis.
Amortization of premiums and accretion of discounts are recognized in
interest income as yield adjustments, in a manner which approximates the
interest method. Realized gains and losses on disposition are recorded in
noninterest income on the trade date, based on the net proceeds from, and
adjusted carrying amount of the security sold, using the specific identification
method.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
amount outstanding, net of any charge-offs, the allowance for loan losses and
unamortized deferred loan origination fees and costs. Interest income is
recognized on a level yield basis.
The allowance for loan losses is established through a provision for loan
losses charged to operations. Loans are charged against the allowance for loan
losses when management believes that the collectibility of principal is
unlikely. Subsequent recoveries are added to the reserve. The allowance is an
amount that management believes will be adequate to absorb possible losses
inherent in existing loans and loan commitments, based on evaluations of the
collectibility of loans and prior loan loss experience.
Management evaluates the adequacy of the allowance quarterly, or more
frequently if considered necessary. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, loan concentrations, review of specific problem loans and
loan
F-6
<PAGE> 90
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
commitments, current and anticipated economic conditions that may affect the
borrowers' ability to repay, and the estimated or appraised value of any
underlying collateral.
Interest income on loans is accrued based upon the principal amount
outstanding. Loans on which the accrual of interest has been discontinued are
designated as nonaccrual or impaired loans. Accrual of interest on loans is
discontinued when either reasonable doubt exists as to the full, timely
collection of interest or principal or when a loan becomes contractually past
due by ninety days or more with respect to principal or interest. All interest
previously accrued but not collected is reversed against current period income
if, in the judgment of management, it is not considered fully collectible.
Income on such loans is then recognized only to the extent cash is received and
where the future collection of principal is probable. Accruals are resumed on
loans only when they are brought fully current with respect to principal and
interest and when, in the judgment of management, the loan is estimated to be
fully collectible as to both principal and interest.
Loan origination and commitment fees and certain direct loan origination
costs are deferred and the net amount amortized to interest income as a yield
adjustment over the contractual life of the related loan.
Effective January 1, 1995, the Bank adopted the provisions of Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan ("SFAS 114") as amended by Statement of Financial Accounting Standards
No. 118, Accounting by Creditors for Impairment of a Loan, Income Recognition
and Disclosure ("SFAS 118"). A loan is considered to be impaired when, based on
current information and events, management believes it probable that the Bank
will be unable to collect all amounts due, both principal and interest,
according to the contractual terms of the loan agreement. SFAS 114 and 118
require that impaired loans within the scope of the statements be measured based
on the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of the underlying collateral if the loan is
collateral dependent. Interest income on impaired loans is recognized only to
the extent cash is received and where the future collection of principal is
probable. Adoption of SFAS 114 and 118 did not have a material impact on the
Bank's financial position or results of operations.
OTHER REAL ESTATE OWNED
Other real estate owned consists of properties acquired through foreclosure
or by deed in lieu of foreclosure. At the time of acquisition, such properties
are recorded at the lesser of the Bank's net investment in the related loan or
the fair value of the property as determined by independent appraisal. Gains and
losses on the sale of other real estate owned, write-downs resulting from
periodic reevaluation of the property and revenues and expenses associated with
holding the properties are charged to other noninterest income and expense.
Legal expenses and other direct costs associated with foreclosure actions are
also included in the accompanying statements of operations in other noninterest
expense.
A substantial amount of the Bank's loans are secured by real estate located
throughout Southwest Florida. In addition, all other real estate owned is
located in this area. Consequently, the ultimate recovery of the carrying amount
of foreclosed property is subject to changes in market conditions within this
region.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Improvements to leased property are amortized over the shorter of
the estimated useful lives of the improvements or the life of the related lease.
It is the policy of the Bank to provide depreciation based on the estimated
useful life of individual assets, calculated using the straight line method.
F-7
<PAGE> 91
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Estimated useful lives of premises and equipment range as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Bank building............................................... 32
Leasehold improvements...................................... 2-10
Land and improvements....................................... 2-10
Furniture and equipment..................................... 1-15
</TABLE>
INCOME TAXES
The Bank uses the liability method of accounting for deferred income taxes.
Consequently, income tax benefit or expense includes Federal and state income
taxes currently payable or receivable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. Temporary differences which give rise to significant deferred tax
assets and liabilities relate to net operating loss carryforwards, net
unrealized depreciation on securities available-for-sale, loans and the
allowance for loan losses, other real estate owned, fixed assets and deferred
compensation. The effective tax benefit or expense rate differs from the
combined statutory Federal and state rate primarily due to the effect of
recognition of net operating losses carried forward less related valuation
allowance.
CASH EQUIVALENTS
For the purpose of presentation in the consolidated statements of cash
flows, cash and cash equivalents include cash on hand and deposits with other
financial institutions which are included in the balance sheet caption "Cash and
Due from Banks."
RECLASSIFICATIONS
Management of the Bank periodically revises its classification of certain
items within the financial statements in order to provide a more meaningful
presentation of the Bank's financial position, results of operations and cash
flows. In those cases where revised presentation has been adopted in the 1996
financial statements, the corresponding 1995 and 1994 balances have also been
reclassified to enhance comparability between periods.
(2) REGULATORY MATTERS
Effective May 1, 1992, the Bank entered into an agreement (the "Agreement")
with the Federal Reserve Bank of Atlanta and the Comptroller of the State of
Florida which imposes certain restrictions and requirements on the Bank. The
Agreement, among other things, prohibits the payment of dividends by the Bank
and requires the Bank to establish or revise various policies and procedures
related to capital adequacy, lending, other real estate, asset/liability
management and other functions.
Failure of the Bank to achieve and maintain compliance with the provisions
of the agreement may subject the Bank to additional regulatory enforcement
action or further restrictions on the Bank's operations or activities.
Effective December 9, 1996, the Comptroller of the State of Florida
released the Bank from the restrictions imposed above. Effective February 25,
1997, the Federal Reserve Bank of Atlanta also released the Bank from those
restrictions.
Effective December 19, 1992, as required by the FDIC Improvement Act of
1991, the federal regulatory agencies of banks and bank holding companies
adopted standards for determining a financial institution's capital category for
purposes of regulatory enforcement. A financial institution will be classified
according to the lowest category in which any of its three separate capital
ratios (computed as defined in the standards)
F-8
<PAGE> 92
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
falls. Failure to meet the minimum capital requirements can initiate
mandatory -- and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Bank's financial
statements and operations. The capital categories as established by the
regulatory agencies, as well as the capital ratios of the Bank at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
TOTAL TIER 1
RISK BASED RISK BASED LEVERAGE
CATEGORY CAPITAL RATIO RATIO RATIO
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Well capitalized (minimum ratios)....................... 10% 6% 5%
Adequately capitalized (minimum ratios)................. 8% 4% 4%
Undercapitalized (less than)............................ 8% 4% 4%
Significantly undercapitalized (less than).............. 6% 3% 3%
First Independence Bank:
December 31, 1996..................................... 11% 10% 8%
December 31, 1995..................................... 14% 12% 9%
</TABLE>
Florida Banking Statutes limit the amount of dividends that may be paid by
the Bank without prior approval of the Bank's regulatory agency. The Bank did
not have sufficient retained earnings available for the payment of dividends at
December 31, 1996 or 1995.
The Bank is required to maintain reserve balances with the Federal Reserve
Bank based on a specified percentage of deposits, less cash on hand. No
additional reserves were required to be maintained on-hand or at the Federal
Reserve Bank at December 31, 1996 or 1995.
(3) INVESTMENT SECURITIES AVAILABLE-FOR-SALE
The amortized cost of securities and their approximate fair values at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996 --
U.S. Government and agency securities.... $4,589,745 $ 3,378 $(34,209) $4,558,914
Mortgage-backed securities............... 633,021 -- (7,972) 625,049
Equity securities........................ 157,500 -- -- 157,500
---------- ------- -------- ----------
$5,380,266 $ 3,378 $(42,181) $5,341,463
========== ======= ======== ==========
1995 --
U.S. Government and agency securities.... $3,962,611 $10,199 $(13,891) $3,958,919
Mortgage-backed securities............... 768,288 -- (11,577) 756,711
Equity securities........................ 162,050 -- -- 162,050
---------- ------- -------- ----------
$4,892,949 $10,199 $(25,468) $4,877,680
========== ======= ======== ==========
</TABLE>
During the years ended December 31, 1995 and 1994, the Bank realized gross
gains of $57,833 and $424, respectively, on the sale of debt securities. During
1995, the Bank realized gross losses of $9,375 on the sale of debt securities.
At December 31, 1996, investment securities with a carrying amount and
market value of approximately $500,000 were pledged to secure public deposits or
for other purposes required or permitted by law. In addition, at this same date,
investment securities with a carrying amount and market value of approximately
$633,000 and $625,000 respectively, were pledged as collateral on a Federal
funds borrowing arrangement available to the Bank; however, at that date there
were no borrowings outstanding.
F-9
<PAGE> 93
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled maturities of debt securities at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 999,122 $1,002,500
Due from one to five years.................................. 3,000,000 2,987,956
Due from five to ten years.................................. 590,623 569,040
Due after ten years......................................... 157,500 157,500
Mortgage-backed securities.................................. 633,021 624,467
---------- ----------
$5,380,266 $5,341,463
========== ==========
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans included in the loan portfolio are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Mortgage:
Construction.............................................. $ 2,348,000 $ 1,580,000
Non-construction.......................................... 27,964,984 21,066,418
Commercial and industrial................................... 12,096,311 7,920,037
Household, family and personal.............................. 4,944,310 3,371,836
----------- -----------
47,353,605 33,938,291
Less:
Allowance for loan losses................................. (689,817) (643,142)
Unearned discount and net deferred loan fees and costs.... (110,061) (58,887)
----------- -----------
$46,553,727 $33,236,262
=========== ===========
</TABLE>
While the loan portfolio is diversified among the various categories
presented above, the Bank's lending activities are intentionally restricted to
borrowers located primarily in southwest Florida. Consequently, the ability of
the Bank's borrowers to honor their contractual obligations to repay is
significantly influenced by the general economic conditions of this area.
A concentration of credit risk results when the Bank has a significant
credit exposure to an individual or a group engaged in similar activities or
having similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. At December 31, 1996 and 1995, no concentration of loans within any
portfolio category to any group of borrowers engaged in similar activities or in
a similar business exceeded 10% of total loans, except that as of these dates
loans collateralized by mortgages on real estate represented 64% and 67%,
respectively, of the loan portfolio and were to borrowers in varying activities
and businesses.
Related parties include directors, officers, shareholders who own more than
10% of the outstanding shares and their affiliates. Loans to related parties
approximated $3,090,000 at December 31, 1996 and $2,079,000 at December 31,
1995. Such loans were made in the ordinary course of business on substantially
the same terms and conditions, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated customers.
In the opinion of management, these loans do not involve more than normal credit
risk or possess other unfavorable features.
F-10
<PAGE> 94
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended December 31, 1996, 1995, and 1994, the activity in
loans and lines of credit to related parties was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year....................... $2,079,000 $1,226,000 $1,112,000
New loans.......................................... 1,498,000 957,000 581,000
Other changes...................................... -- 188,000 12,000
Repayments......................................... (487,000) (292,000) (479,000)
---------- ---------- ----------
Balance at end of year................... $3,090,000 $2,079,000 $1,226,000
========== ========== ==========
</TABLE>
As of December 31, 1996 and 1995, these individuals and entities had
approximately $1,769,000 and $1,027,000, respectively, of funds on deposit in
the Bank.
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Balance at beginning of year.......................... $643,142 $696,644 $ 747,494
Provision charged to operations....................... 108,203 17,500 131,550
Loans charged off..................................... (88,124) (99,440) (243,611)
Recoveries............................................ 26,596 28,438 61,211
-------- -------- ---------
Balance at end of year...................... $689,817 $643,142 $ 696,644
======== ======== =========
</TABLE>
As discussed in Note 1, the Company adopted the provisions of SFAS 114, as
amended by SFAS 118, related to impaired loans, effective January 1, 1995. As of
December 31, 1996 and 1995, the total recorded investment in impaired loans
approximated $62,000 and $92,000 respectively. At December 31, 1996 and 1995,
the Bank had recorded an allowance for loan losses of approximately $11,000 and
$23,000 related to $22,000 and $92,000 of its impaired loans, respectively. No
specific allowance for loan loss had been recorded for the remaining $40,000 of
investment in impaired loans as of December 31, 1996.
The recorded investment in impaired loans averaged $57,000 and $85,000
during the year ended December 31, 1996 and 1995, respectively. No interest
income was recognized on impaired loans during the year ended December 31, 1996
and approximately $2,000 was recognized in 1995.
(5) OTHER REAL ESTATE OWNED
Activity in the allowance for losses on foreclosed real estate was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Balance at beginning of year..................... $ 522,710 $ 38,000 $ 25,000
Provision charged to operations.................. 15,000 532,710 243,000
Charge-offs, net of recoveries................... (481,038) (48,000) (230,000)
--------- -------- ---------
Balance at end of year......................... $ 56,672 $522,710 $ 38,000
========= ======== =========
</TABLE>
F-11
<PAGE> 95
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
---------- -----------
<S> <C> <C>
Buildings................................................ $ 900,275 $ 887,976
Land and improvements.................................... 290,731 289,845
Leasehold improvements................................... 234,216 98,786
Furniture and equipment.................................. 909,143 1,081,836
---------- -----------
2,334,365 2,358,443
Less accumulated depreciation and amortization........... (856,527) (1,205,566)
---------- -----------
$1,477,838 $ 1,152,877
========== ===========
</TABLE>
Depreciation and amortization expense related to premises and equipment
totalled $96,426 in 1996, $94,191 in 1995 and $96,800 in 1994.
(7) DEPOSITS
As of December 31, 1996, time deposits included contractual maturities as
follows:
<TABLE>
<CAPTION>
AMOUNT
YEAR ENDING DECEMBER 31, MATURING
- ------------------------ -----------
<S> <C>
1997........................................................ $28,600,445
1998........................................................ 2,508,805
1999........................................................ 1,302,788
-----------
Total time deposits............................... $32,412,038
===========
</TABLE>
Deposit accounts with negative balances aggregating $68,188 and $49,257 as
of December 31, 1996 and December 31, 1995, respectively, are included in
consumer loans.
Included in deposits are time deposits issued in amounts of $100,000 or
more totalling $5,847,052 and $4,092,163 at December 31, 1996 and 1995,
respectively.
Interest paid on deposits totalled $1,911,755 in 1996, $1,326,650 in 1995
and $953,374 in 1994.
(8) INCOME TAXES
The income tax benefit recorded for the year ended December 31, 1996
results primarily from the refund received related to overpayment of taxes paid
in prior years, and consists of the following:
<TABLE>
<S> <C>
Current benefit -- Federal.................................. $(25,407)
Deferred expense............................................ 12,500
--------
$(12,907)
========
</TABLE>
No deferred income tax benefit was recorded in the accompanying 1995 or
1994 statements of operations since a valuation allowance was established to
reduce the value of the Bank's net operating loss carryforward to that amount
which, based on the Bank's history of operating results and expectations for the
future, is more likely than not to be fully realized.
F-12
<PAGE> 96
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended December 31, 1996, 1995 and 1994, a reconciliation of
expected federal tax expense or benefit (calculated by applying appropriate
statutory federal income tax rates) to the net income tax expense or benefit
included in the accompanying statements of operations is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- --------------
AMOUNT % AMOUNT % AMOUNT %
--------- --- --------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Expected expense using statutory
federal rates....................... $ 161,000 34 $(237,000) (34) $(61,000) (34)
Increase (decrease) in valuation
allowance........................... (244,543) (52) 205,000 29 61,000 34
Other, net............................ 70,636 15 32,000 5 -- --
--------- --- --------- --- -------- ---
Total income tax benefit.... $ (12,907) (3) $ -- -- $ -- --
========= === ========= === ======== ===
</TABLE>
At December 31, 1996 and 1995, the Bank's deferred tax assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Gross deferred tax assets:
Excess book loan loss provisions.......................... $ 144,240 $ 162,597
Deferred compensation..................................... 29,803 123,535
Other real estate owned................................... 18,278 176,696
Net operating loss carryforward........................... 160,622 135,059
Tax credit carryforwards.................................. 74,235 74,235
Securities available for sale............................. 14,270 5,327
Other, net................................................ 5,645 12,136
--------- ---------
447,093 689,585
Valuation allowance......................................... (288,096) (532,639)
Deferred tax liability -- property and equipment............ (52,810) (47,202)
--------- ---------
Net deferred tax asset............................ $ 106,187 $ 109,744
========= =========
</TABLE>
At December 31, 1996 and 1995, the Bank has net operating loss
carryforwards for tax reporting purposes totalling approximately $694,000 and
$269,000, respectively. These carryforwards expire if unused at various dates
through 2011. At the same dates, the Bank also has general business credit
carryforwards of approximately $60,000 which expire at various dates through
2000, and minimum tax credit carryforwards of approximately $14,000, which do
not expire.
No income taxes were paid in 1996 or 1995. Income taxes of $18,000 were
paid in 1994.
(9) STOCK OPTIONS AND WARRANTS
In 1989, the Bank adopted a noncompensatory stock option plan which grants
all eligible employees the option to purchase a specified number of shares of
stock at a price per share to be determined by the board of directors. Under
this plan, the Bank may grant options to its employees for up to 45,000 shares
of its common stock. Generally, employees are eligible to participate in the
plan after two years of employment. However, at the date the plan was adopted,
all employees with one year or more of service were considered eligible.
Generally, forty percent of the options are exercisable after two years of
employment or from the date of grant, whichever is sooner, and an additional
twenty percent are exercisable for each additional year of employment. As of
December 31, 1996, 17,342 of these options were exercisable at a price of $11.25
per share.
During 1996, the Bank granted options to purchase 25,000 shares of stock to
the Banks' President. This agreement allows for the purchase of these shares at
a price of $10 per share for a maximum period of ten years. None of these
options were exercisable as of December 31, 1996.
F-13
<PAGE> 97
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
These 1996 options will become exercisable according to the following
schedule:
<TABLE>
<CAPTION>
PERCENTAGE
EXERCISABLE AS OF
----------- -----------------
<S> <C>
25%........................................................ February 20, 1997
50%........................................................ January 1, 1998
75%........................................................ January 1, 1999
100%........................................................ January 1, 2000
</TABLE>
The Bank applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized in the
accompanying statements of operations.
The following table summarizes stock option activity for the years
presented:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------- ----------------
<S> <C> <C>
Option shares outstanding at December 31, 1993............. 45,000 $11.25
Option shares granted.................................... --
Option shares forfeited.................................. --
-------
Option shares outstanding at December 31, 1994............. 45,000 11.25
Option shares granted.................................... --
Option shares forfeited.................................. (5,748) 11.25
-------
Option shares outstanding at December 31, 1995............. 39,252 11.25
Option shares granted.................................... 25,000 10.00
Option shares forfeited.................................. (21,910) 11.25
-------
Option shares outstanding at December 31, 1996............. 42,342 10.52
=======
</TABLE>
In 1995, the Bank sold 200,000 shares of common stock which were
accompanied by 200,000 nontransferrable common stock purchase warrants. Each
warrant allows the holder to purchase one share of Bank stock, on or before
November 1, 1998 for an amount equal to the greater of $10 or the book value of
the common stock as of the last day of the calendar quarter preceding the date
such warrant is exercised, subject to antidilution adjustments.
During 1996, sixty warrants were exercised, leaving 199,940 outstanding as
of December 31, 1996. No warrants were exercised during 1995 or 1994.
(10) DEFERRED COMPENSATION PLANS
Effective January 1, 1990, the Bank adopted an Executives' Deferred
Compensation Plan and a Directors' Deferred Compensation Plan (the "Plans"),
which provided defined benefits payable over 15 years to certain key executives
and all members of the Board of Directors upon retirement, death or disability.
The Plans were not funded and the Bank provided for the projected benefit
obligation by charges to earnings over the estimated service lives of the
participants.
At December 31,1995, the actuarial present value of the accumulated and
projected benefit obligation was approximately $328,000, based on a 9% discount
rate. Substantially all of the benefit obligation was vested. These amounts are
included in other liabilities in the accompanying statements of financial
condition. Service cost related to the plans totalled approximately $50,000 in
1995 and 1994. Interest cost approximated $26,000 in 1995 and $20,000 in 1994.
In connection with the above plans, the Bank maintained life insurance
policies in force on certain key executives and each of its directors. The Bank
was the named beneficiary of the policies which provided aggregate death
benefits on the insureds of approximately $1,238,000 at December 31, 1995. The
aggregate
F-14
<PAGE> 98
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
cash surrender value of the policies at December 31, 1995 was approximately
$210,000. Premiums paid during 1995 for these policies net of the related
increase in cash surrender value, amounted to approximately $9,000 each year,
and were charged to other operating expense.
Effective January 1, 1996, the plans were terminated by the Bank with the
consent of the participants. The Bank settled all then remaining obligations to
the participants through lump-sum cash payments which totalled approximately
$190,000. In addition, the Bank surrendered its life insurance policies on the
participants in return for cash value of approximately $210,000.
In connection with the termination of the Plans, the Bank established a
retirement agreement with its then President and Chairman. The agreement
provides for payments of approximately $37,000 per year for fourteen years,
commencing in 1997. The present value of the benefit obligation is being
recorded as expense in level amounts of approximately $86,000 per year, in each
of 1996, 1997 and 1998.
(11) COMMITMENTS AND CONTINGENT LIABILITIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Bank is party to financial
instruments not reflected in the accompanying financial statements. These
financial instruments consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Unfunded loan commitments................................... $4,355,248 $6,132,000
Performance and financial standby letters of credit......... 133,904 100,000
</TABLE>
These financial instruments are recorded in the financial statements when
they are funded or related fees are incurred or receivable. The Bank's exposure
to credit loss in the event of nonperformance by the other party to these
financial instruments is represented by the contractual amount of those
instruments. The credit and collateral policies in extending these commitments
are essentially the same as those required by the Bank for the financial
instruments which are included in the accompanying statements of financial
condition.
The Bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained by the Bank, if any, is based upon
management's credit evaluation of the borrower. Such collateral may include real
estate, receivables, inventory, vehicles and equipment or other types of assets.
Since the Bank's loan commitments often expire without being drawn upon,
the total amount of these commitments does not necessarily represent a required
future use of the Bank's cash or cash equivalents.
LEASE COMMITMENTS
The Bank leases certain buildings and equipment under noncancelable
operating leases. These leases contain varying renewal options and require the
Bank to pay real estate taxes, insurance and other costs.
F-15
<PAGE> 99
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum rental commitments at December 31, 1996 under
noncancelable operating leases are summarized as follows:
<TABLE>
<CAPTION>
GROSS
YEAR ENDING DECEMBER 31, RENTALS
- ------------------------ --------
<S> <C>
1997........................................................ $153,595
1998........................................................ 130,198
1999........................................................ 72,279
2000........................................................ 56,668
2001........................................................ 55,693
Thereafter.................................................. 323,124
--------
Total future minimum rentals................................ $791,557
========
</TABLE>
Rental expense included in operations for the years ended December 31,
1996, 1995 and 1994, approximated $91,173, $140,804 and $138,000, respectively.
LEGAL MATTERS
The Bank is party to various legal actions and claims arising in the normal
course of business. Management believes that the resolution of these matters
will not have a material adverse effect on the results of operations or
financial position of the Bank.
PURCHASE COMMITMENTS
During 1996, the Bank examined the economic feasibility of upgrading their
existing data processing hardware and software. At the conclusion of this
process, they made certain commitments to purchase new computer hardware and
software to be installed during 1997. The amount of this commitment totalled
approximately $56,000.
During 1996, the Bank entered into a contract to purchase certain real
estate in Sanibel, Florida to be used as a new branch location. This contract is
subject to various contingencies which must be satisfied prior to the closing of
the transaction. The total purchase commitment for this contract is
approximately $530,000.
(12) RELATED PARTY TRANSACTIONS
During 1996 the Bank entered into an agreement to lease one branch location
from the immediate family of a director of the Bank. This agreement calls for
monthly payments, for a period of ten years, which are subject to cost of living
adjustments beginning in 1998. Payments under the terms of this agreement during
1996 totalled $18,500. Management believes that the terms of this agreement are
substantially the same as those which could have been obtained from unrelated
parties.
F-16
<PAGE> 100
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(13) OTHER NONINTEREST EXPENSE
Other noninterest expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
-------- ---------- --------
<S> <C> <C> <C>
Other real estate owned expense, including losses
on sale and writedowns.......................... $ 50,660 $ 828,169 $321,850
Postage........................................... 44,788 40,548 36,294
Deferred compensation expense..................... 86,000 54,300 43,300
Office supplies................................... 56,798 61,834 45,970
Examinations and assessments...................... 54,839 106,473 115,597
Other professional fees........................... 30,000 32,000 60,443
Other............................................. 314,151 391,848 266,716
-------- ---------- --------
Total other noninterest expense................. $637,236 $1,515,172 $890,170
======== ========== ========
</TABLE>
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly condensed results of operations are as follows:
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- --------- -------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT FOR NET INCOME PER SHARE)
<S> <C> <C> <C> <C> <C>
Interest income.................................. $ 862 $ 899 $ 944 $1,211 $3,916
Interest expense................................. 361 372 439 520 1,692
----- ----- ----- ------ ------
Net interest income.............................. 501 527 505 691 2,224
Provision for loan loss.......................... -- -- 43 65 108
----- ----- ----- ------ ------
Net interest income after provision for loan
loss........................................... 501 527 462 626 2,116
Noninterest income............................... 272 128 159 43 602
Noninterest expense.............................. 515 557 564 608 2,244
----- ----- ----- ------ ------
Income before taxes.............................. 258 98 57 61 474
Income tax benefit............................... -- -- -- (13) (13)
----- ----- ----- ------ ------
Net income....................................... $ 258 $ 98 $ 57 $ 74 $ 487
===== ===== ===== ====== ======
Net income per share............................. $0.49 $0.19 $0.11 $ 0.14 $ 0.92
----- ----- ----- ------ ------
</TABLE>
F-17
<PAGE> 101
FIRST INDEPENDENCE BANK OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995
----------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ ------
(AMOUNTS IN THOUSANDS EXCEPT
FOR NET INCOME (LOSS) PER SHARE)
<S> <C> <C> <C> <C> <C>
Interest income...................................... $ 762 $ 797 $ 824 $ 892 $3,275
Interest expense..................................... 293 314 369 381 1,357
----- ----- ----- ------ ------
Net interest income.................................. 469 483 455 511 1,918
Provision for loan loss.............................. -- 17 -- 1 18
----- ----- ----- ------ ------
Net interest income after provision for loan loss.... 469 466 455 510 1,900
Noninterest income................................... 117 148 159 (13) 411
Noninterest expense.................................. 554 594 610 1,250 3,008
----- ----- ----- ------ ------
Income before taxes.................................. 32 20 4 (753) (697)
Income tax benefit................................... -- -- -- -- --
----- ----- ----- ------ ------
Net income........................................... $ 32 $ 20 $ 4 $ (753) $ (697)
===== ===== ===== ====== ======
Net income (loss) per share.......................... $0.08 $0.04 $0.01 $(1.42) $(1.38)
----- ----- ----- ------ ------
</TABLE>
F-18
<PAGE> 102
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C>
ASSETS
Cash and due from banks..................................... $ 6,664,738
Federal funds sold.......................................... 9,167,000
Investments available-for-sale.............................. 7,292,984
Loans, net.................................................. 48,375,805
Other real estate owned..................................... 606,300
Premises and equipment, net................................. 1,485,916
Accrued interest receivable................................. 438,862
Other assets................................................ 348,880
-----------
Total assets...................................... $74,380,485
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand --
Noninterest bearing.................................... $16,746,415
Interest bearing....................................... 9,009,342
Savings deposits.......................................... 3,184,982
NOW accounts.............................................. 9,027,330
Time deposits............................................. 31,352,001
-----------
69,320,070
Accrued interest payable and other liabilities.............. 350,121
-----------
Total liabilities................................. 69,670,191
-----------
Stockholders' equity:
Common stock, $5 par value; 900,000 shares authorized;
529,167 shares issued and outstanding.................. 2,645,835
Additional paid-in capital................................ 3,301,467
Net unrealized holding losses on investments
available-for-sale..................................... (42,064)
Accumulated deficit....................................... (1,194,944)
-----------
Total stockholders' equity........................ 4,710,294
-----------
Commitments and contingent liabilities...................... --
-----------
Total liabilities and stockholders' equity........ $74,380,485
===========
</TABLE>
See accompanying note to unaudited financial statements.
F-19
<PAGE> 103
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- --------
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans..................................................... $1,091,539 $793,253
Investment securities..................................... 107,101 69,442
Federal funds sold........................................ 74,138 48,227
---------- --------
Total interest income............................. 1,272,778 910,922
---------- --------
Interest expense on deposits................................ 531,310 360,639
---------- --------
Net interest income......................................... 741,468 550,283
Provision for loan losses................................... -- --
---------- --------
Net interest income after provision for loan
losses.......................................... 741,468 550,283
---------- --------
Noninterest income:
Service fees.............................................. 85,342 39,121
Other..................................................... 26,458 172,607
---------- --------
Total noninterest income.......................... 111,800 211,728
---------- --------
Noninterest expense:
Salaries and employee benefits............................ 323,063 254,842
Occupancy and equipment................................... 128,742 112,094
Other..................................................... 170,481 144,912
---------- --------
Total noninterest expense......................... 622,286 511,848
---------- --------
Income before income tax benefit............................ 230,982 250,163
Income tax benefit.......................................... -- (12,907)
---------- --------
Net income........................................ $ 230,982 $263,070
========== ========
</TABLE>
See accompanying note to unaudited financial statements.
F-20
<PAGE> 104
FIRST INDEPENDENCE BANK OF FLORIDA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 230,982 $ 263,070
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................. -- --
Depreciation, amortization and accretion.................. 30,428 23,422
Net realized gains on available-for-sale securities....... -- (15,833)
(Increase) decrease in accrued interest receivable........ (69,894) 313
(Increase) decrease in other assets....................... (24,407) 220,324
Increase (decrease) in accrued interest payable and other
liabilities............................................ 56,562 (285,165)
----------- -----------
Net cash provided by operating activities......... 223,671 206,131
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in Federal funds sold............... (5,878,000) 369,000
Net increase in loans....................................... (1,822,078) (2,723,918)
Purchases of available-for-sale securities.................. (4,002,400) (1,589,500)
Proceeds from sales and maturities of available-for-sale
securities................................................ 2,022,155 1,060,156
Proceeds from sale of other real estate owned............... -- 482,338
Net additions to premises and equipment..................... (38,059) (24,034)
----------- -----------
Net cash used for investing activities............ (9,718,382) (2,425,958)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest bearing deposits................ 5,488,043 3,263,978
Net increase (decrease) in interest bearing deposits........ 6,143,906 (100,634)
----------- -----------
Net cash provided by financing activities......... 11,631,949 3,163,344
----------- -----------
Net increase in cash and due from banks..................... 2,137,238 943,517
Cash and due from banks at beginning of period.............. 4,527,500 3,175,215
----------- -----------
Cash and due from banks at end of period.................... $ 6,664,738 $ 4,118,732
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Change in net unrealized holding losses on securities
available-for-sale, net of taxes of $10,746 and $15,896,
respectively.............................................. $ 17,531 $ 25,936
Loans transferred to other real estate owned................ $ -- $ 28,848
</TABLE>
F-21
<PAGE> 105
FIRST INDEPENDENCE BANK OF FLORIDA
NOTE TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NOTE 1 -- BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Bank, the financial
statements reflect all adjustments which are of a normal recurring nature and
which are necessary to present fairly the financial position of the Bank as of
March 31, 1997 and the results of operations for the three months ended March
31, 1997 and 1996, and cash flows for the three months ended March 31, 1997 and
1996. The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results which may be expected for the entire
fiscal year.
F-22
<PAGE> 106
APPENDIX A
FIRST AMENDMENT
DATED JULY 7, 1997
TO
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
COLONIAL BANK
AND
FIRST INDEPENDENCE BANK OF FLORIDA
DATED AS OF
MAY 8, 1997
<PAGE> 107
THIS FIRST AMENDMENT IS DATED JULY 7, 1997, TO THE AGREEMENT AND PLAN OF
MERGER dated as of May 8, 1997, by and among FIRST INDEPENDENCE BANK OF FLORIDA
("Acquired Bank"), a Florida state bank, COLONIAL BANK ("Colonial Bank"), an
Alabama banking corporation and the COLONIAL BANCGROUP, INC. ("Bancgroup"), a
Delaware corporation (the "Agreement").
WHEREAS, the parties to the Agreement wish to amend the Agreement in
certain respects;
IT IS AGREED, as follows:
1. All terms not otherwise defined herein shall have the meanings
given to them in the Agreement.
2. Except as otherwise stated herein, all provisions of the Agreement
shall remain in full force and effect.
3. Section 3.1(c) of the Agreement is hereby deleted in its entirety
and in lieu thereof the following Section 3.1(c) shall be substituted:
"(c)(i). On the Effective Date, and except as provided in section
(c)(ii) below, BancGroup shall assume the Warrants and each such Warrant
shall cease to represent a right to acquire Acquired Bank common stock
and shall, instead, represent the right to acquire BancGroup Common
Stock on substantially the same terms except as specified below in this
section. The number of shares of BancGroup Common Stock to be issued
pursuant to such Warrants shall equal the number of shares of Acquired
Bank common stock subject to such Warrants multiplied by the Exchange
Ratio, provided that no fraction of shares of BancGroup Common Stock
shall be issued and the number of shares of BancGroup Common Stock to be
issued upon the exercise of Warrants, if a fractional share exists,
shall equal the number of whole shares obtained by rounding to the
nearest whole number, giving account to such fraction, or by paying for
such fraction in cash, based upon the Market Value. The exercise price
for the acquisition of the BancGroup Common Stock shall be the exercise
price for each share of Acquired Bank common stock, immediately prior to
the Effective Date, subject to such Warrants divided by the Exchange
Ratio, adjusted appropriately for any rounding to whole shares that may
be done.
(ii) In lieu of the foregoing, no later than five days prior to the
Effective Date, the holders of Warrants may provide a notice to Acquired
Bank that they wish to surrender their Warrants to BancGroup, effective
at the Effective Date, and to receive an amount of BancGroup Common
Stock in exchange therefor equal to the difference between the total
value of the shares of BancGroup Common Stock to be issued pursuant to
such Warrant (based upon the number of shares of BancGroup Common Stock
to be issued pursuant to the Warrant multiplied by the Market Value)
less the aggregate exercise price of such Warrant immediately following
the Effective Date, divided by the Market Value. No fractions of shares
shall be issued and fractions shall be paid in cash at the Market
Value."
4. Section 10.10 of the Agreement is hereby deleted in its entirety
and in lieu thereof the following Section 10.10 shall be substituted:
"10.10 Exchange of Warrants. BancGroup shall have received certification
from Acquired Bank that holders of the Warrants holding no less than 93 percent
of such Warrants have either given notice to surrender (and have surrendered)
such Warrants in accordance with Section 3.1(c) (ii) hereof, or exercised such
Warrants in accordance with their terms prior to the Effective Date."
A-i
<PAGE> 108
IN WITNESS WHEREOF, Acquired Bank, BancGroup and Colonial Bank have caused
this First Amendment to be signed by their respective duly authorized officers
as of the date first above written.
<TABLE>
<S> <C>
ATTEST: FIRST INDEPENDENCE BANK OF FLORIDA
By: /s/ EDWARD H. BLACK
By: /s/ JAMES E. COURTNEY
- ----------------------------------------------------- -------------------------------------------------
Its: President & CEO Its: Chairman
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ DONNA R. PIEL By: /s/ W. FLAKE OAKLEY, IV
------------------------------------------------- -------------------------------------------------
Its: Assistant Secretary Its: Chief Financial Officer
(CORPORATE SEAL)
ATTEST: COLONIAL BANK
By: /s/ DONNA R. PIEL By: /s/ W. FLAKE OAKLEY, IV
------------------------------------------------- -------------------------------------------------
Its: Secretary Its: Chief Financial Officer
(CORPORATE SEAL)
</TABLE>
A-ii
<PAGE> 109
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
COLONIAL BANK
AND
FIRST INDEPENDENCE BANK OF FLORIDA
DATED AS OF
MAY 8, 1997
A-iii
<PAGE> 110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................ A-1
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law.............................................. A-1
2.2 Corporate Existence......................................... A-1
2.3 Articles of Incorporation and Bylaws........................ A-1
2.4 Resulting Corporation's Officers and Board.................. A-2
2.5 Stockholder Approval........................................ A-2
2.6 Further Acts................................................ A-2
2.7 Effective Date and Closing.................................. A-2
ARTICLE 3 -- CONVERSION OF ACQUIRED BANK STOCK
3.1 Conversion of Acquired Bank Stock........................... A-2
3.2 Surrender of Acquired Bank Stock............................ A-3
3.3 Fractional Shares........................................... A-3
3.4 Adjustments................................................. A-3
3.5 BancGroup Stock............................................. A-3
3.6 Dissenting Rights........................................... A-3
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF BANCGROUP
4.1 Organization................................................ A-4
4.2 Capital Stock............................................... A-4
4.3 Financial Statements; Taxes................................. A-4
4.4 No Conflict with Other Instrument........................... A-5
4.5 Absence of Material Adverse Change.......................... A-5
4.6 Approval of Agreements...................................... A-5
4.7 Tax Treatment............................................... A-5
4.8 Title and Related Matters................................... A-5
4.9 Subsidiaries................................................ A-6
4.10 Contracts................................................... A-6
4.11 Litigation.................................................. A-6
4.12 Compliance.................................................. A-6
4.13 Registration Statement...................................... A-6
4.14 SEC Filings................................................. A-7
4.15 Form S-4.................................................... A-7
4.16 Brokers..................................................... A-7
4.17 Government Authorization.................................... A-7
4.18 Absence of Regulatory Communications........................ A-7
4.19 Disclosure.................................................. A-7
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ACQUIRED BANK
5.1 Organization................................................ A-7
5.2 Capital Stock............................................... A-8
5.3 Subsidiaries................................................ A-8
5.4 Financial Statements; Taxes................................. A-8
5.5 Absence of Certain Changes or Events........................ A-9
5.6 Title and Related Matters................................... A-10
5.7 Commitments................................................. A-10
5.8 Charter and Bylaws.......................................... A-10
5.9 Litigation.................................................. A-10
</TABLE>
A-iv
<PAGE> 111
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.10 Material Contract Defaults.................................. A-11
5.11 No Conflict with Other Instrument........................... A-11
5.12 Governmental Authorization.................................. A-11
5.13 Absence of Regulatory Communications........................ A-11
5.14 Absence of Material Adverse Change.......................... A-11
5.15 Insurance................................................... A-11
5.16 Pension and Employee Benefit Plans.......................... A-11
5.17 Buy-Sell Agreement.......................................... A-12
5.18 Brokers..................................................... A-12
5.19 Approval of Agreements...................................... A-12
5.20 Disclosure.................................................. A-12
5.21 Registration Statement...................................... A-12
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-12
5.23 Environmental Matters....................................... A-12
5.24 Transfer of Shares.......................................... A-13
5.25 Collective Bargaining....................................... A-13
5.26 Labor Disputes.............................................. A-13
5.27 Derivative Contracts........................................ A-13
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-13
6.2 Additional Covenants of Acquired Bank....................... A-16
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-18
7.2 Press Release............................................... A-18
7.3 Mutual Disclosure........................................... A-18
7.4 Access to Properties and Records............................ A-18
7.5 Notice of Adverse Changes................................... A-18
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-19
8.2 Regulatory Authority Approval............................... A-19
8.3 Litigation.................................................. A-19
8.4 Registration Statement...................................... A-19
8.5 Tax Opinion................................................. A-19
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED BANK
9.1 Representations, Warranties and Covenants................... A-20
9.2 Adverse Changes............................................. A-20
9.3 Closing Certificate......................................... A-20
9.4 Opinion of Counsel.......................................... A-21
9.5 NYSE Listing................................................ A-21
9.6 Other Matters............................................... A-21
9.7 Material Events............................................. A-21
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-21
10.2 Adverse Changes............................................. A-21
10.3 Closing Certificate......................................... A-21
10.4 Opinion of Counsel.......................................... A-22
10.5 Controlling Shareholders.................................... A-22
10.6 Other Matters............................................... A-22
10.7 Dissenters.................................................. A-22
10.8 Material Events............................................. A-22
</TABLE>
A-v
<PAGE> 112
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
10.9 Pooling of Interests........................................ A-22
10.10 Exchange of Warrants........................................ A-22
10.11 Severance Agreements........................................ A-22
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES........ A-22
ARTICLE 12 -- NOTICES.............................................. A-23
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-23
13.2 Termination................................................. A-23
13.3 Damages..................................................... A-24
13.4 Acquisition Proposal; Termination and Fee................... A-24
ARTICLE 14 -- DEFINITIONS.......................................... A-24
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-28
15.2 Benefit..................................................... A-28
15.3 Governing Law............................................... A-28
15.4 Counterparts................................................ A-28
15.5 Headings.................................................... A-28
15.6 Severability................................................ A-29
15.7 Construction................................................ A-29
15.8 Return of Information....................................... A-29
15.9 Equitable Remedies.......................................... A-29
15.10 Attorneys' Fees............................................. A-29
15.11 No Waiver................................................... A-29
15.12 Remedies Cumulative......................................... A-29
15.13 Entire Contract............................................. A-29
</TABLE>
A-vi
<PAGE> 113
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
8th day of May 1997, by and between FIRST INDEPENDENCE BANK OF FLORIDA
("Acquired Bank"), a Florida state bank, COLONIAL BANK ("Colonial Bank"), a
Florida state banking corporation and THE COLONIAL BANCGROUP, INC.
("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Bank operates as a Florida state bank with its principal
office in Fort Myers, Florida; and
WHEREAS, BancGroup is a bank holding company with a Subsidiary bank,
Colonial Bank, that conducts or will conduct business in Alabama, Florida,
Georgia and Tennessee; and
WHEREAS, Acquired Bank wishes to merge with Colonial Bank as of the
Effective Date; and
WHEREAS, it is the intention of BancGroup, Colonial Bank and Acquired Bank
that such Merger shall qualify for federal income tax purposes as a
"reorganization" within the meaning of section 368(a) of the Code, as defined
herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Parties hereto agree as follows:
ARTICLE 1
NAME
1.1 Name. The name of the corporation resulting from the Merger shall be
"Colonial Bank."
ARTICLE 2
MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective Date, Acquired Bank shall be merged
with and into Colonial Bank (herein referred to as the "Resulting Corporation"
whenever reference is made to it as of the time of merger or thereafter). The
Merger shall be undertaken pursuant to the provisions of and with the effect
provided in the ABCA and, to the extent applicable, the FBC. The offices and
facilities of Acquired Bank and of Colonial Bank shall become the offices and
facilities of the Resulting Corporation.
2.2 Corporate Existence. On the Effective Date, the corporate existence of
Acquired Bank and of Colonial Bank shall, as provided in the ABCA and the FBC,
as applicable, be merged into and continued in the Resulting Corporation, and
the Resulting Corporation shall be deemed to be the same corporation as Acquired
Bank and Colonial Bank. All rights, franchises and interests of Acquired Bank
and Colonial Bank, respectively, in and to every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
the Resulting Corporation by virtue of the Merger without any deed or other
transfer. The Resulting Corporation on the Effective Date, and without any order
or other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interests, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by Acquired
Bank and Colonial Bank, respectively, on the Effective Date.
2.3 Articles of Incorporation and Bylaws. On the Effective Date, the
certificate of incorporation and bylaws of the Resulting Corporation shall be
the articles of incorporation and bylaws of Colonial Bank as they exist
immediately before the Effective Date.
A-1
<PAGE> 114
2.4 Resulting Corporation's Officers and Board. The board of directors and
the officers of the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of Colonial Bank as of the Effective
Date.
2.5 Stockholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Bank at the Stockholders Meeting to be held as promptly
as practicable consistent with the satisfaction of the conditions set forth in
this Agreement. Upon approval by the requisite vote of the shareholders of
Acquired Bank as required by applicable Law, the Merger shall become effective
as soon as practicable thereafter in the manner provided in section 2.7 hereof.
2.6 Further Acts. If, at any time after the Effective Date, the Resulting
Corporation shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Acquired Bank or Colonial Bank, acquired
as a result of the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, Colonial Bank and its officers and directors shall execute and
deliver all such proper deeds, assignments and assurances in law and do all acts
necessary or proper to vest, perfect or confirm title to, and possession of,
such property or rights in the Resulting Corporation and otherwise to carry out
the purposes of this Agreement; and the proper officers and directors of the
Resulting Corporation are fully authorized in the name of Acquired Bank or
Colonial Bank, or otherwise, to take any and all such action.
2.7 Effective Date and Closing. Subject to the terms of all requirements
of Law and the conditions specified in this Agreement, the Merger shall become
effective on the date specified in the Articles of Merger to be issued by the
appropriate authority under the ABCA or the FBC, as applicable (such time being
herein called the "Effective Date"). Assuming all other conditions to the
Closing have been or will be satisfied as of the Closing, the Closing shall take
place at the offices of BancGroup, in Montgomery, Alabama, at 11:00 a.m. on a
date specified by BancGroup that shall be as soon as reasonably practicable
after the later to occur of the Stockholder Meeting or all required regulatory
approvals under Section 8.2, or at such other place and time that the Parties
may mutually agree.
ARTICLE 3
CONVERSION OF ACQUIRED BANK STOCK
3.1 Conversion of Acquired Bank Stock. (a) On the Effective Date, each
share of common stock of Acquired Bank outstanding and held by Acquired Bank's
shareholders (the "Acquired Bank Stock"), shall be converted by operation of law
and without any action by any holder thereof (subject to section 3.3 hereof),
into such number of shares of BancGroup Common Stock (the "Merger
Consideration") equal to $20.71 divided by the Market Value (the "Exchange
Ratio"). The "Market Value" shall represent the per share market value of the
BancGroup Common Stock at the Effective Date and shall be determined by
calculating the average of the closing prices of the Common Stock of BancGroup
as reported by the NYSE on each of the ten (10) consecutive trading days ending
on the trading day five calendar days preceding the Effective Date.
(b)(i) On the Effective Date, BancGroup shall assume all Acquired Bank
Options outstanding, and each such option shall cease to represent a right to
acquire Acquired Bank common stock and shall, instead, represent the right to
acquire BancGroup Common Stock on substantially the same terms applicable to the
Acquired Bank Options except as specified below in this section. The number of
shares of BancGroup Common Stock to be issued pursuant to such options shall
equal the number of shares of Acquired Bank common stock subject to such
Acquired Bank Options multiplied by the Exchange Ratio, provided that no
fractions of shares of BancGroup Common Stock shall be issued and the number of
shares of BancGroup Common Stock to be issued upon the exercise of Acquired Bank
Options, if a fractional share exists, shall equal the number of whole shares
obtained by rounding to the nearest whole number, giving account to such
fraction, or by paying for such fraction in cash, based upon the Market Value.
The exercise price for the acquisition of BancGroup Common Stock shall be the
exercise price for each share of Acquired Bank common stock subject to such
options divided by the Exchange Ratio, adjusted appropriately for any rounding
to whole shares that may be done. It is intended that the assumption by
BancGroup of the Acquired Bank
A-2
<PAGE> 115
Options shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Code as to any stock option
which is an "incentive stock option." Schedule 3.1 hereto sets forth the names
of all persons holding Acquired Bank Options, the number of shares of Acquired
Bank common stock subject to such options, the exercise price and the expiration
date of such options.
(ii) BancGroup shall file at its expense a registration statement with the
SEC on Form S-8 or such other appropriate form (including the Form S-4 to be
filed in connection with the Merger) with respect to the shares of BancGroup
Common Stock to be issued pursuant to such options and shall use its reasonable
best efforts to maintain the effectiveness of such registration statement for so
long as such options remain outstanding. Such shares shall also be registered or
qualified for sale under the securities laws of any state in which registration
or qualification is necessary.
(c) No later than five days prior to the Effective Date, the holders of
Warrants will have agreed to exchange and will have exchanged such Warrants for
Acquired Bank Stock. For each share of Acquired Bank Stock represented by the
Warrant, the holder thereof shall receive an amount of Acquired Bank Stock based
upon the Warrant Exchange Ratio. As an example, if the Warrant Exercise Price is
equal to $10.00, then the Warrant Value would be equal to $10.71 for each share.
Under this example, the Warrant Exchange Ratio would equal .5171 (10.71 /
20.71), and for every share represented by the Warrant the holder would receive
.5171 shares of Acquired Bank Stock.
(ii) Upon the exchange of Warrants for Acquired Bank Stock, Acquired Bank
shall issue a certificate representing Acquired Bank Stock to holders of
Warrants to evidence such exchange.
3.2 Surrender of Acquired Bank Stock. After the Effective Date, each
holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Bank Stock who is entitled to receive BancGroup
Common Stock shall be entitled, upon surrender to BancGroup of their certificate
or certificates representing shares of Acquired Bank Stock (or an affidavit or
affirmation by such holder of the loss, theft, or destruction of such
certificate or certificates in such form as BancGroup may reasonably require
and, if BancGroup reasonably requires, a bond of indemnity in form and amount,
and issued by such sureties, as BancGroup may reasonably require), to receive in
exchange therefor a certificate or certificates representing the number of whole
shares of BancGroup Common Stock into and for which the shares of Acquired Bank
Stock so surrendered shall have been converted, such certificates to be of such
denominations and registered in such names as such holder may reasonably
request. Until so surrendered and exchanged, each such outstanding certificate
which, prior to the Effective Date, represented shares of Acquired Bank Stock
and which is to be converted into BancGroup Common Stock shall for all purposes
evidence ownership of the BancGroup Common Stock into and for which such shares
shall have been so converted, except that no dividends or other distributions
with respect to such BancGroup Common Stock shall be made until the certificates
previously representing shares of Acquired Bank Stock shall have been properly
tendered.
3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Acquired Bank Stock having a
fractional interest arising upon the conversion of such shares into shares of
BancGroup Common Stock shall, at the time of surrender of the certificates
previously representing Acquired Bank Stock, be paid by BancGroup an amount in
cash equal to the Market Value of such fractional share.
3.4 Adjustments. In the event that prior to the Effective Date BancGroup
Common Stock shall be changed into a different number of shares or a different
class of shares by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of the BancGroup
Common Stock, an appropriate and proportionate adjustment shall be made in the
number of shares of BancGroup Common Stock into which the Acquired Bank Stock
shall be converted.
3.5 BancGroup Stock. The shares of Common Stock of BancGroup issued and
outstanding immediately before the Effective Date shall continue to be issued
and outstanding shares of BancGroup after the Effective Date.
3.6 Dissenting Rights. Any shareholder of Acquired Bank who shall not have
voted in favor of this Agreement and who has complied with the applicable
procedures set forth in the FBC, relating to rights of
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dissenting shareholders, shall be entitled to receive payment for the fair value
of his Acquired Bank Stock. If after the Effective Date a dissenting shareholder
of Acquired Bank fails to perfect, or effectively withdraws or loses, his right
to appraisal and payment for his shares of Acquired Bank Stock, BancGroup shall
issue and deliver the consideration to which such holder of shares of Acquired
Bank Stock is entitled under Section 3.1 (without interest) upon surrender of
such holder of the certificate or certificates representing shares of Acquired
Bank Stock held by him.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Acquired Bank as
follows:
4.1 Organization. (a) BancGroup is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. BancGroup
has the necessary corporate powers to carry on its business as presently
conducted and is qualified to do business in every jurisdiction in which the
character and location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure to qualify
could, individually or in the aggregate, have a Material Adverse Effect.
(b) Colonial Bank is a Florida state banking corporation duly organized,
validly existing and in good standing under the Laws of the State of Florida.
Colonial Bank has the necessary corporate powers to carry on its business as
presently conducted. It is the present intention of Colonial Bank and BancGroup
to merge Colonial Bank into BancGroup's Alabama subsidiary (the "Alabama
Subsidiary") on or around July 1, 1997. The Alabama Subsidiary also operates
under the name, "Colonial Bank." Following such merger the Alabama Subsidiary
will assume all obligations of Colonial Bank, including those contemplated under
this Agreement.
4.2 Capital Stock. (a) The authorized capital stock of BancGroup consists
of (A) 100,000,000 shares of Common Stock, $2.50 par value per share, of which
as of March 1, 1997, 38,955,210 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights (not
counting additional shares subject to issue pursuant to stock option and other
plans and convertible debentures), and (B) 1,000,000 shares of Preference Stock,
$2.50 par value per share, none of which are issued and outstanding. The shares
of BancGroup Common Stock to be issued in the Merger are duly authorized and,
when so issued, will be validly issued and outstanding, fully paid and
nonassessable, will have been registered under the 1933 Act, and will have been
registered or qualified under the securities laws of all jurisdictions in which
such registration or qualification is required, based upon information provided
by Acquired Bank.
(b) The authorized capital stock of each Subsidiary of BancGroup is validly
issued and outstanding, fully paid and nonassessable, and each Subsidiary is
wholly owned, directly or indirectly, by BancGroup.
4.3 Financial Statements; Taxes. (a) BancGroup has delivered to Acquired
Bank copies of the following financial statements of BancGroup.
(i) Consolidated balance sheets as of December 31, 1995, and December
31, 1996;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1994, 1995 and 1996;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1994, 1995 and 1996; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1994, 1995 and 1996.
All such financial statements are in all material respects in accordance with
the books and records of BancGroup and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, all as more particularly set forth in the
notes to such statements. Each of the consolidated balance sheets presents
fairly as of its date the consolidated financial condition of BancGroup and its
Subsidiaries. Except as and to the extent reflected or reserved against in such
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balance sheets (including the notes thereto), BancGroup did not have, as of the
dates of such balance sheets, any material Liabilities or obligations (absolute
or contingent) of a nature customarily reflected in a balance sheet or the notes
thereto. The statements of consolidated income, shareholders' equity and changes
in consolidated financial position present fairly the results of operations and
changes in financial position of BancGroup and its Subsidiaries for the periods
indicated.
(b) All Tax returns required to be filed by or on behalf of BancGroup have
been timely filed (or requests for extensions therefor have been timely filed
and granted and have not expired), and all returns filed are complete and
accurate in all material respects. All Taxes shown on these returns to be due
and all additional assessments received have been paid. The amounts recorded for
Taxes on the balance sheets provided under section 4.3(a) are, to the Knowledge
of BancGroup, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign or other Taxes (including any interest or
penalties) of BancGroup accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which BancGroup
may at such dates have been liable in its own right or as transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of BancGroup, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liabilities of any sort have been proposed by any governmental representative
and no agreements for extension of time for the assessment of any material
amount of Tax have been entered into by or on behalf of BancGroup. BancGroup has
withheld from its employees (and timely paid to the appropriate governmental
entity) proper and accurate amounts for all periods in material compliance with
all Tax withholding provisions of applicable federal, state, foreign and local
Laws (including without limitation, income, social security and employment Tax
withholding for all types of compensation).
4.4 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which BancGroup or any of its Subsidiaries
is a party or by which they or their Assets may be bound; will not conflict with
any provision of the restated certificate of incorporation or bylaws of
BancGroup or the articles of incorporation or bylaws of any of its Subsidiaries;
and will not violate any provision of any Law, regulation, judgment or decree
binding on them or any of their Assets.
4.5 Absence of Material Adverse Change. Since the date of the most recent
balance sheet provided under section 4.3(a)(i) above, there have been no events,
changes or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BancGroup.
4.6 Approval of Agreements. The board of directors of Colonial Bank has
approved this Agreement and the transactions contemplated by it. This Agreement
constitutes the legal, valid and binding obligation of Colonial Bank and
BancGroup, enforceable against them in accordance with its terms. Approval of
this Agreement by the stockholders of BancGroup is not required by applicable
Law. Subject to the matters referred to in section 8.2, and subject to
BancGroup's board approval of the shares to be issued in the Merger, BancGroup
has full power, authority and legal right to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. BancGroup has no
Knowledge of any fact or circumstance under which the appropriate regulatory
approvals required by section 8.2 will not be granted without the imposition of
material conditions or material delays.
4.7 Tax Treatment. BancGroup has no present plan to sell or otherwise
dispose of any of the Assets of Acquired Bank, subsequent to the Merger, and
BancGroup intends to continue the historic business of Acquired Bank.
4.8 Title and Related Matters. BancGroup has good and marketable title to
all the properties, interests in properties and Assets, real and personal,
reflected in the most recent balance sheet referred to in section 4.3(a), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes of such balance sheet, (ii) liens for current Taxes not yet due and
payable and (iii) such imperfections
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of title and easements as do not materially detract from or interfere with the
present use of the properties subject thereto or affected thereby, or otherwise
materially impair present business operations at such properties. To the
Knowledge of BancGroup, the material structures and equipment of BancGroup
comply in all material respects with the requirements of all applicable Laws.
4.9 Subsidiaries. Each Subsidiary of BancGroup has been duly incorporated
and is validly existing as a corporation in good standing under the Laws of the
jurisdiction of its incorporation and each Subsidiary has been duly qualified as
a foreign corporation to transact business and is in good standing under the
Laws of each other jurisdiction in which it owns or leases properties, or
conducts any business so as to require such qualification and in which the
failure to be duly qualified could have a Material Adverse Effect upon BancGroup
and its Subsidiaries considered as one enterprise; each of the banking
Subsidiaries of BancGroup has its deposits fully insured by the Federal Deposit
Insurance Corporation to the extent provided by the Federal Deposit Insurance
Act; and the businesses of the non-bank Subsidiaries of BancGroup are permitted
to subsidiaries of registered bank holding companies.
4.10 Contracts. Neither BancGroup nor any of its Subsidiaries is in
Default in any material respect under the terms of any material contract,
agreement, lease or other commitment which is or may be material to the
business, operations, properties or assets, or the condition, financial or
otherwise, of such company and, to the knowledge of BancGroup, there is no event
which, with notice or lapse of time, or both, may be or become an event of
Default under any such material contract, agreement, lease or other commitment
in respect of which adequate steps have not been taken to prevent such a Default
from occurring.
4.11 Litigation. Except as disclosed in or reserved for in BancGroup's
financial statements, there is no Litigation before or by any court or Agency,
domestic or foreign, now pending, or, to the Knowledge of BancGroup, threatened
against or affecting BancGroup or any of its Subsidiaries (nor is BancGroup
aware of any facts which could give rise to any such Litigation) which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which may have any Material Adverse Effect or prospective Material
Adverse Effect, or which is likely to materially and adversely affect the
properties or Assets thereof or which is likely to materially affect or delay
the consummation of the transactions contemplated by this Agreement; all pending
legal or governmental proceedings to which BancGroup or any Subsidiary is a
party or of which any of their properties is the subject which are not described
in the Registration Statement, including ordinary routine litigation incidental
to the business, are, considered in the aggregate, not material; and neither
BancGroup nor any of its Subsidiaries have any contingent obligations which
could be considered material to BancGroup and its Subsidiaries considered as one
enterprise which are not disclosed in the Registration Statement as it may be
amended or supplemented. To the Knowledge of BancGroup, each of BancGroup and
its Subsidiaries has complied in all material respects with all material
applicable Laws and Regulations including those imposing Taxes, of any
applicable jurisdiction and of all states, municipalities, other political
subdivisions and agencies, in respect of the ownership of its properties and the
conduct of its business, which, if not complied with, would have a Material
Adverse Effect on BancGroup and its Subsidiaries taken as a whole.
4.12 Compliance. BancGroup and its Subsidiaries, in the conduct of their
businesses, are to the Knowledge of BancGroup, in material compliance with all
material federal, state or local Laws applicable to their or the conduct of
their businesses.
4.13 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Stockholders' Meeting, the Registration
Statement, including the Proxy Statement which shall constitute a part thereof,
will comply in all material respects with the requirements of the 1933 Act and
the rules and regulations thereunder, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection shall not apply to statements in or omissions from the Proxy
Statement made in reliance upon and in conformity with information furnished in
writing to BancGroup by Acquired Bank or any of its representatives expressly
for use in the Proxy Statement or information included in the Proxy Statement
regarding the business of Acquired Bank, its operations, Assets and capital.
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4.14 SEC Filings. (a) BancGroup has heretofore delivered to Acquired Bank
copies of BancGroup's: (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; (ii) 1996 Annual Report to Shareholders; and (iii) all
reports on Form 8-K, filed by BancGroup with the SEC since December 31, 1996.
Since December 31, 1996, BancGroup has timely filed all reports and registration
statements and the documents required to be filed with the SEC under the rules
and regulations of the SEC and all such reports and registration statements or
other documents have complied in all material respects, as of their respective
filing dates and effective dates, as the case may be, with all the applicable
requirements of the 1933 Act and the 1934 Act. As of the respective filing and
effective dates, none of such reports or registration statements or other
documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The documents incorporated by reference into the Registration
Statement, at the time they were filed with the SEC, complied in all material
respects with the requirements of the 1934 Act and Regulations thereunder and
when read together and with the other information in the Registration Statement
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time the Registration Statement becomes effective
or at the time of the Stockholders Meeting.
4.15 Form S-4. The conditions for use of a registration statement on SEC
Form S-4 set forth in the General Instructions on Form S-4 have been or will be
satisfied with respect to BancGroup and the Registration Statement.
4.16 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired Bank and without the intervention of any other person,
either as a result of any act of BancGroup or otherwise in such manner as to
give rights to any valid claim against BancGroup for finders fees, brokerage
commissions or other like payments.
4.17 Government Authorization. BancGroup and its Subsidiaries have all
Permits that, to the Knowledge of BancGroup and its Subsidiaries, are or will be
legally required to enable BancGroup or any of its Subsidiaries to conduct their
businesses in all material respects as now conducted by each of them.
4.18 Absence of Regulatory Communications. Neither BancGroup nor any of
its Subsidiaries is subject to, or has received during the past three (3) years,
any written communication directed specifically to it from any Agency to which
it is subject or pursuant to which such Agency has imposed or has indicated it
may impose any material restrictions on the operations of it or the business
conducted by it or in which such Agency has raised a material question
concerning the condition, financial or otherwise, of such company.
4.19 Disclosure. No representation or warranty, or any statement or
certificate furnished or to be furnished to Acquired Bank by BancGroup, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED BANK
Acquired Bank represents, warrants and covenants to and with BancGroup, as
follows:
5.1 Organization. Acquired Bank is a Florida state bank. Each Acquired
Bank Company is duly organized, validly existing and in good standing under the
respective Laws of its jurisdiction of incorporation and has all requisite power
and authority to carry on its business as it is now being conducted and is
qualified to do business in every jurisdiction in which the character and
location of the Assets owned by it or the nature of the business transacted by
it requires qualification or in which the failure to qualify could,
individually, or in the aggregate, have a Material Adverse Effect.
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5.2 Capital Stock. (i) As of the date of this Agreement, the authorized
capital stock of Acquired Bank consisted of 900,000 shares of common stock,
$5.00 par value per share, 529,167 shares of which are issued and outstanding.
All of such shares which are outstanding are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Acquired Bank has 59,342
shares of its common stock subject to exercise at any time pursuant to Acquired
Bank Options, and 199,940 shares of common stock subject to issuance pursuant to
Warrants. Except for the foregoing, Acquired Bank does not have any other
arrangements or commitments obligating it to issue shares of its capital stock
or any securities convertible into or having the right to purchase shares of its
capital stock.
5.3 Subsidiaries. Acquired Bank has no direct Subsidiaries.
5.4 Financial Statements; Taxes. (a) Acquired Bank has delivered to
BancGroup copies of the following financial statements of Acquired Bank:
(i) Statements of financial condition as of December 31, 1995 and
1996;
(ii) Statements of income for each of the three years ended December
31, 1994, 1995 and 1996;
(iii) Statements of stockholders' equity for each of the three years
ended December 31, 1994, 1995, and 1996; and
(iv) Statements of cash flows for the three years ended December 31,
1994, 1995 and 1996.
All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Bank and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except for changes required by GAAP, all
as more particularly set forth in the notes to such statements. Each of such
balance sheets presents fairly as of its date the financial condition of
Acquired Bank. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), Acquired Bank did not have, as of
the date of such balance sheets, any material Liabilities or obligations
(absolute or contingent) of a nature customarily reflected in a balance sheet or
the notes thereto. The statements of income, stockholders' equity and cash flows
present fairly the results of operation, changes in shareholders equity and cash
flows of Acquired Bank for the periods indicated.
(b) Except as set forth on Schedule 5.4(b), all Tax returns required to be
filed by or on behalf of Acquired Bank have been timely filed (or requests for
extensions therefor have been timely filed and granted and have not expired),
and all returns filed are complete and accurate in all material respects. All
Taxes shown on these returns to be due and all additional assessments received
have been paid. The amounts recorded for Taxes on the balance sheets provided
under section 5.4(a) are, to the Knowledge of Acquired Bank, sufficient in all
material respects for the payment of all unpaid federal, state, county, local,
foreign and other Taxes (including any interest or penalties) of Acquired Bank
accrued for or applicable to the period ended on the dates thereof, and all
years and periods prior thereto and for which Acquired Bank may at such dates
have been liable in its own right or as a transferee of the Assets of, or as
successor to, any other corporation or other party. No audit, examination or
investigation is presently being conducted or, to the Knowledge of Acquired
Bank, threatened by any taxing authority which is likely to result in a material
Tax Liability, no material unpaid Tax deficiencies or additional liability of
any sort have been proposed by any governmental representative and no agreements
for extension of time for the assessment of any material amount of Tax have been
entered into by or on behalf of Acquired Bank. Acquired Bank has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect.
(c) Each Acquired Bank Company has withheld from its employees (and timely
paid to the appropriate governmental entity) proper and accurate amounts for all
periods in material compliance with all Tax withholding provisions of applicable
federal, state, foreign and local Laws (including without limitation, income,
social security and employment Tax withholding for all types of compensation).
Each Acquired Bank Company is in compliance with, and its records contain all
information and documents (including properly completed IRS Forms W-9) necessary
to comply with, all applicable information reporting and Tax
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withholding requirements under federal, state and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under section 3406 of the Code.
5.5 Absence of Certain Changes or Events. Except as set forth on Schedule
5.5, since the date of the most recent balance sheet provided under section
5.4(a)(i) above, no Acquired Bank Company has
(a) issued, delivered or agreed to issue or deliver any stock, bonds
or other corporate securities (whether authorized and unissued or held in
the treasury) except shares of common stock issued upon the exercise of
existing Acquired Bank Options, the Warrants and shares issued as
director's qualifying shares;
(b) borrowed or agreed to borrow any funds or incurred, or become
subject to, any Liability (absolute or contingent) except borrowings,
obligations (including purchase of federal funds) and Liabilities incurred
in the ordinary course of business and consistent with past practice;
(c) paid any material obligation or Liability (absolute or contingent)
other than current Liabilities reflected in or shown on the most recent
balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent
with past practice;
(d) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem,
directly or indirectly, or otherwise acquire, any of its outstanding
securities;
(e) except in the ordinary course of business, sold or transferred, or
agreed to sell or transfer, any of its Assets, or canceled, or agreed to
cancel, any debts or claims;
(f) except in the ordinary course of business, entered or agreed to
enter into any agreement or arrangement granting any preferential rights to
purchase any of its Assets, or requiring the consent of any party to the
transfer and assignment of any of its Assets;
(g) suffered any Losses or waived any rights of value which in either
event in the aggregate are material considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any Contract, agreement or license to which it
is a party if such amendment or termination is material considering its
business as a whole;
(i) except in accordance with normal and usual practice, made any
accrual or arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice, increased the
rate of compensation payable to or to become payable to any of its officers
or employees or made any material increase in any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice or had Knowledge or reason to believe that any of
its substantial customers has terminated or intends to terminate its
relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;
(l) failed to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations;
(m) entered into any other material transaction other than in the
ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action described in
clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired Bank
Company, without the express written approval of BancGroup, will do any of
the things listed in clauses (a) through (n) of this section 5.5 except as
permitted therein or as contemplated in this Agreement, and no Acquired
Bank Company
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will enter into or amend any material Contract, other than Loans or
renewals thereof entered into in the ordinary course of business, without
the express written consent of BancGroup.
5.6 Title and Related Matters.
(a) Title. Except as set forth in Schedule 5.6(a), Acquired Bank has
good and marketable title to all the properties, interest in properties and
Assets, real and personal, reflected in the most recent balance sheet
referred to in section 5.4(a)(i), or acquired after the date of such
balance sheet (except properties, interests and Assets sold or otherwise
disposed of since such date, in the ordinary course of business), free and
clear of all mortgages, Liens, pledges, charges or encumbrances except (i)
mortgages and other encumbrances referred to in the notes to such balance
sheet, (ii) Liens for current Taxes not yet due and payable and (iii) such
imperfections of title and easements as do not materially detract from or
interfere with the present use of the properties subject thereto or
affected thereby, or otherwise materially impair present business
operations at such properties. To the Knowledge of Acquired Bank, the
material structures and equipment of each Acquired Bank Company comply in
all material respects with the requirements of all applicable Laws.
(b) Leases. Schedule 5.6(b) sets forth a list and description of all
real and personal property owned or leased by any Acquired Bank Company,
either as lessor or lessee.
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation
schedule of each Acquired Bank Company's fixed Assets as of April 30, 1997.
(d) Computer Hardware and Software. Schedule 5.6(d) contains a
description of all agreements relating to data processing computer software
and hardware now being used in the business operations of any Acquired Bank
Company. Acquired Bank is not aware of any defects, irregularities or
problems with any of its computer hardware or software which renders such
hardware or software unable to satisfactorily perform the tasks and
functions to be performed by them in the business of any Acquired Bank
Company.
5.7 Commitments. Except as set forth in Schedule 5.7, no Acquired Bank
Company is a party to any oral or written (i) Contracts for the employment of
any officer or employee which is not terminable on 30 days' (or less) notice,
(ii) profit sharing, bonus, deferred compensation, savings, stock option,
severance pay, pension or retirement plan, agreement or arrangement, (iii) loan
agreement, indenture or similar agreement relating to the borrowing of money by
such party, (iv) guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection, and guaranties made in
the ordinary course of business, (v) consulting or other similar material
Contracts, (vi) collective bargaining agreement, (vii) agreement with any
present or former officer, director or shareholder of such party, or (viii)
other Contract, agreement or other commitment which is material to the business,
operations, property, prospects or Assets or to the condition, financial or
otherwise, of any Acquired Bank Company. Complete and accurate copies of all
Contracts, plans and other items so listed have been made or will be made
available to BancGroup for inspection.
5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the articles of incorporation and bylaws of each Acquired Bank Company,
including all amendments thereto, as currently in effect. There will be no
changes in such articles of incorporation or bylaws prior to the Effective Date,
without the prior written consent of BancGroup.
5.9 Litigation. Except as set forth on Schedule 5.9, there is no
Litigation (whether or not purportedly on behalf of Acquired Bank) pending or,
to the Knowledge of Acquired Bank, threatened against or affecting any Acquired
Bank Company (nor does Acquired Bank have Knowledge of any facts which are
likely to give rise to any such Litigation) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
which involves the possibility of any judgment or Liability not fully covered by
insurance in excess of a reasonable deductible amount or which may have a
Material Adverse Effect on Acquired Bank, and no Acquired Bank Company is in
Default with respect to any judgment, order, writ, injunction, decree, award,
rule or regulation of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, which Default would have a
Material Adverse Effect on Acquired Bank. To the Knowledge of Acquired Bank,
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each Acquired Bank Company has complied in all material respects with all
material applicable Laws and Regulations including those imposing Taxes, of any
applicable jurisdiction and of all states, municipalities, other political
subdivisions and Agencies, in respect of the ownership of its properties and the
conduct of its business, which, if not complied with, would have a Material
Adverse Effect on Acquired Bank.
5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Bank Company is in Default in any material respect under the terms of
any material Contract, agreement, lease or other commitment which is or may be
material to the business, operations, properties or Assets, or the condition,
financial or otherwise, of such company and, to the Knowledge of Acquired Bank,
there is no event which, with notice or lapse of time, or both, may be or become
an event of Default under any such material Contract, agreement, lease or other
commitment in respect of which adequate steps have not been taken to prevent
such a Default from occurring.
5.11 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of or constitute a Default under any material Contract,
indenture, mortgage, deed of trust or other material agreement or instrument to
which any Acquired Bank Company is a party and will not conflict with any
provision of the charter or bylaws of any Acquired Bank Company.
5.12 Governmental Authorization. Each Acquired Bank Company has all
Permits that, to the Knowledge of Acquired Bank, are or will be legally required
to enable any Acquired Bank Company to conduct its business in all material
respects as now conducted by each Acquired Bank Company.
5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Bank Company is subject to, nor has any Acquired Bank Company
received during the past three years, any written communication directed
specifically to it from any Agency to which it is subject or pursuant to which
such Agency has imposed or has indicated it may impose any material restrictions
on the operations of it or the business conducted by it or in which such Agency
has raised any material question concerning the condition, financial or
otherwise, of such company.
5.14 Absence of Material Adverse Change. To the Knowledge of Acquired
Bank, since the date of the most recent balance sheet provided under section
5.4(a)(i), there have been no events, changes or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on any Acquired Bank Company.
5.15 Insurance. Each Acquired Bank Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Bank reasonably believes to be
adequate for the type of business conducted by such company. No Acquired Bank
Company is liable for any material retroactive premium adjustment. All insurance
policies and bonds are valid, enforceable and in full force and effect, and no
Acquired Bank Company has received any notice of any material premium increase
or cancellation with respect to any of its insurance policies or bonds. Within
the last three years, and except as set forth on Schedule 5.15, no Acquired Bank
Company has been refused any insurance coverage which it has sought or applied
for, and it has no reason to believe that existing insurance coverage cannot be
renewed as and when the same shall expire, upon terms and conditions as
favorable as those presently in effect, other than possible increases in
premiums that do not result from any extraordinary loss experience. All policies
of insurance presently held or policies containing substantially equivalent
coverage will be outstanding and in full force with respect to each Acquired
Bank Company at all times from the date hereof to the Effective Date.
5.16 Pension and Employee Benefit Plans. (a) To the Knowledge of Acquired
Bank, all employee benefit plans of each Acquired Bank Company have been
established in compliance with, and such plans have been operated in material
compliance with, all applicable Laws. Except as set forth in Schedule 5.16, no
Acquired Bank Company sponsors or otherwise maintains a "pension plan" within
the meaning of section 3(2) of ERISA or any other retirement plan other than the
401(k) plan of Acquired Bank that is intended to qualify under section 401 of
the Code, nor do any unfunded Liabilities exist with respect to any employee
benefit plan, past or present. To the Knowledge of Acquired Bank, no employee
benefit plan, any trust created
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thereunder or any trustee or administrator thereof has engaged in a "prohibited
transaction," as defined in section 4975 of the Code, which may have a Material
Adverse Effect on the condition, financial or otherwise, of any Acquired Bank
Company.
(b) To the Knowledge of Acquired Bank, no amounts payable to any employee
of any Acquired Bank Company will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code and regulations thereunder.
5.17 Buy-Sell Agreement. Except as set forth in Schedule 5.17, to the
Knowledge of Acquired Bank, there are no agreements among any of its
shareholders granting to any person or persons a right of first refusal in
respect of the sale, transfer, or other disposition of shares of outstanding
securities by any shareholder of Acquired Bank, any similar agreement or any
voting agreement or voting trust in respect of any such shares.
5.18 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by Acquired
Bank directly with BancGroup and without the intervention of any other person,
either as a result of any act of Acquired Bank, or otherwise, in such manner as
to give rise to any valid claim against Acquired Bank for a finder's fee,
brokerage commission or other like payment.
5.19 Approval of Agreements. The board of directors of Acquired Bank has
approved this Agreement and the transactions contemplated by this Agreement and
has authorized the execution and delivery by Acquired Bank of this Agreement.
Subject to the matters referred to in section 8.2, Acquired Bank has full power,
authority and legal right to enter into this Agreement, and, upon appropriate
vote of the shareholders of Acquired Bank in accordance with this Agreement,
Acquired Bank shall have full power, authority and legal right to consummate the
transactions contemplated by this Agreement.
5.20 Disclosure. No representation or warranty, nor any statement or
certificate furnished or to be furnished to BancGroup by Acquired Bank, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.
5.21 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Stockholders Meeting, the Registration
Statement, including the Proxy Statement which shall constitute part thereof,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this section shall only apply to
statements in or omissions from the Proxy Statement relating to descriptions of
the business of Acquired Bank, its Assets, properties, operations, and capital
stock or to information furnished in writing by Acquired Bank or its
representatives expressly for inclusion in the Proxy Statement.
5.22 Loans; Adequacy of Allowance for Loan Losses. All reserves for loan
losses shown on the most recent financial statements furnished by Acquired Bank
have been calculated in accordance with prudent and customary banking practices
and are adequate in all material respects to reflect the risk inherent in the
loans of Acquired Bank. Acquired Bank has no Knowledge of any fact which is
likely to require a future material increase in the provision for loan losses or
a material decrease in the loan loss reserve reflected in such financial
statements. Each loan reflected as an Asset on the financial statements of
Acquired Bank is the legal, valid and binding obligation of the obligor of each
loan, enforceable in accordance with its terms subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights generally and to general equitable principles.
Acquired Bank does not have in its portfolio any loan exceeding its legal
lending limit, and except as disclosed on Schedule 5.22, Acquired Bank has no
known significant delinquent, substandard, doubtful, loss, nonperforming or
problem loans.
5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired Bank, each Acquired Bank Company is in material compliance
with all Laws and other governmental requirements relating to the generation,
management, handling, transportation, treatment, disposal, storage, delivery,
discharge, release or emission of any waste, pollution, or toxic, hazardous or
other substance (the "Environmental Laws"), and Acquired Bank has no Knowledge
that any Acquired Bank Company has not complied with all regulations and
requirements promulgated by the Occupational Safety and Health
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Administration that are applicable to any Acquired Bank Company. To the
Knowledge of Acquired Bank, there is no Litigation pending or threatened with
respect to any violation or alleged violation of the Environmental Laws. To the
Knowledge of Acquired Bank, with respect to Assets of or owned by any Acquired
Bank Company, including any Loan Property, (i) there has been no spillage,
leakage, contamination or release of any substances for which the appropriate
remedial action has not been completed; (ii) no owned or leased property is
contaminated with or contains any hazardous substance or waste; and (iii) there
are no underground storage tanks on any premises owned or leased by any Acquired
Bank Company. Acquired Bank has no Knowledge of any facts which might suggest
that any Acquired Bank Company has engaged in any management practice with
respect to any of its past or existing borrowers which could reasonably be
expected to subject any Acquired Bank Company to any Liability, either directly
or indirectly, under the principles of law as set forth in United States v.
Fleet Factors Corp., 901 F.2d 1550 (11th Cir. 1990) or any similar principles.
Moreover, to the Knowledge of Acquired Bank, no Acquired Bank Company has
extended credit, either on a secured or unsecured basis, to any person or other
entity engaged in any activities which would require or requires such person or
entity to obtain any Permits which are required under any Environmental Law
which has not been obtained.
5.24 Transfer of Shares. Acquired Bank has no Knowledge of any plan or
intention on the part of Acquired Bank's shareholders to sell or otherwise
dispose of any of the BancGroup Common Stock to be received by them in the
Merger that would reduce such shareholders' ownership to a number of shares
having, in the aggregate, a fair market value of less than fifty (50%) percent
of the total fair market value of Acquired Bank common stock outstanding
immediately before the Merger.
5.25 Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of undertakings or other arrangements, formal or
informal, between any Acquired Bank Company and any union or labor organization
covering any of Acquired Bank Company's employees and none of said employees are
represented by any union or labor organization.
5.26 Labor Disputes. To the Knowledge of Acquired Bank, each Acquired Bank
Company is in material compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours. No Acquired Bank Company is or has been engaged in any unfair labor
practice, and, to the Knowledge of Acquired Bank, no unfair labor practice
complaint against any Acquired Bank Company is pending before the National Labor
Relations Board. Relations between management of each Acquired Bank Company and
the employees are amicable and there have not been, nor to the Knowledge of
Acquired Bank, are there presently, any attempts to organize employees, nor to
the Knowledge of Acquired Bank, are there plans for any such attempts.
5.27 Derivative Contracts. No Acquired Bank Company is a party to or has
agreed to enter into a swap, forward, future, option, cap, floor or collar
financial contract, or any other interest rate or foreign currency protection
contract or derivative security not included in Acquired Bank's financial
statements delivered under section 5.4 hereof which is a financial derivative
contract (including various combinations thereof).
ARTICLE 6
ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup. BancGroup covenants to and with
Acquired Bank as follows:
(a) Registration Statement and Other Filings. BancGroup shall prepare
and file with the SEC the Registration Statement on Form S-4 (or such other
form as may be appropriate) and all amendments and supplements thereto, in
form reasonably satisfactory to Acquired Bank and its counsel, with respect
to the Common Stock to be issued pursuant to this Agreement. BancGroup
shall use reasonable good faith efforts to prepare all necessary filings
with any Agencies which may be necessary for approval to consummate the
transactions contemplated by this Agreement. BancGroup shall provide to
counsel for Acquired Bank (i) copies of drafts of all filings made pursuant
to this section 6.1(a) in advance of filing, (ii) copies of documents as
filed, and (iii) copies of any correspondence between BancGroup and any
Agencies, including the SEC, respecting the filings made pursuant to this
section 6.1(a).
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(b) Blue Sky Permits. BancGroup shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary
state securities Law or "blue sky" Permits and approvals required to carry
out the transactions contemplated by this Agreement.
(c) Financial Statements. BancGroup shall furnish to Acquired Bank:
(i) As soon as practicable and in any event within forty-five (45)
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated statements of
operations of BancGroup for such period and for the period beginning at
the commencement of the fiscal year and ending at the end of such
quarterly period, and a consolidated statement of financial condition of
BancGroup as of the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding periods ending in
the preceding fiscal year, subject to changes resulting from year-end
adjustments;
(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to BancGroup by independent auditors in connection with each
annual, interim or special audit of the books of BancGroup made by such
accountants;
(iii) As soon as practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such
regular and periodic reports as BancGroup may file with the SEC or any
other Agency; and
(iv) With reasonable promptness, such additional financial data as
Acquired Bank may reasonably request.
(d) No Control of Acquired Bank by BancGroup. Notwithstanding any
other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Acquired Bank shall
continue to reside solely in Acquired Bank's officers and board of
directors.
(e) Listing. Prior to the Effective Date, BancGroup shall use its
reasonable efforts to list the shares of BancGroup Common Stock to be
issued in the Merger on the NYSE or other quotations system on which such
shares are primarily traded.
(f) Employee Benefit Matters. (i) On the Effective Date, all
employees of any Acquired Bank Company shall, at BancGroup's option, either
become employees of the Resulting Corporation or its Subsidiaries or be
entitled to severance benefits in accordance with Colonial Bank's severance
policy as of the date of this Agreement, except as stated otherwise below
in paragraph (ii). All employees of any Acquired Bank Company who become
employees of the Resulting Corporation or its Subsidiaries on the Effective
Date shall be entitled, to the extent permitted by applicable Law, to
participate in all benefit plans of Colonial Bank to the same extent as
Colonial Bank employees, except as stated otherwise in this section.
Employees of any Acquired Bank Company who become employees of the
Resulting Corporation or its Subsidiaries on the Effective Date shall be
allowed to participate as of the Effective Date in the medical and dental
benefits plan of Colonial Bank as new employees of Colonial Bank, and the
time of employment of such employees who are employed at least 30 hours per
week with any Acquired Bank Company as of the Effective Date shall be
counted as employment under such dental and medical plans of Colonial Bank
for purposes of calculating any 30 day waiting period and pre-existing
condition limitations. To the extent permitted by applicable Law, the
period of service with the appropriate Acquired Bank Company of all
employees who become employees of the Resulting Corporation or its
Subsidiaries on the Effective Date shall be recognized only for vesting and
eligibility purposes under Colonial Bank's benefit plans. In addition, if
the Effective Date falls within an annual period of coverage under any
group health plan of the Resulting Corporation and its Subsidiaries, each
such Acquired Bank Company employee shall be given credit for covered
expenses paid by that employee under comparable employee benefit plans of
the Acquired Bank Company during the applicable coverage period through the
Effective Date towards satisfaction of any annual deductible limitation and
out-of-pocket maximum that may apply under that group health plan of the
Resulting Corporation and its Subsidiaries.
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(ii) As stated in section 6.1(f)(i), employees of Acquired Bank shall
be entitled to severance benefits in accordance with Colonial Bank's
severance policy, except that such severance policy shall be modified and
shall apply to employees of Acquired Bank who become employees of the
Resulting Corporation, as follows: (a) if an employee has worked less than
one year at the time of termination, such employee shall receive a
severance payment equal to one month's salary; (b) if an employee has
worked more than one year at the time of termination, and is terminated
within the first 12 months after the Closing Date, such employee shall
receive a severance payment equal to six month's salary; and (c) if an
employee has worked more than two years and is terminated after 12 months
and before the end of 24 months from the Closing Date, such employee shall
receive a severance payment equal to three months' salary. For these
purposes, employment at Acquired Bank shall be counted as employment at the
Resulting Bank to determine the period of time the employee has been
employed.
(g) Indemnification. (i) Subject to the conditions set forth in the
succeeding paragraph, for a period of six years after the Effective Date
BancGroup shall, and shall cause Colonial Bank to, indemnify, defend and
hold harmless each person entitled to indemnification from the Acquired
Bank (each being an "Indemnified Party") against all liabilities arising
out of actions or omissions occurring upon or prior to the Effective Date
(including without limitation the transactions contemplated by this
Agreement) to the extent authorized under the articles of incorporation and
bylaws of Acquired Bank and Florida Law.
(ii) Any Indemnified Party wishing to claim indemnification under this
subsection (g), upon learning of any such liability or Litigation, shall
promptly notify BancGroup thereof. In the event of any such Litigation
(whether arising before or after the Effective Date) (i) BancGroup or
Colonial Bank shall have the right to assume the defense thereof with
counsel reasonably acceptable to such Indemnified Party and, upon
assumption of such defense, BancGroup shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if BancGroup or Colonial Bank elects
not to assume such defense or counsel for the Indemnified Parties advises
that there are substantive issues which raise conflicts of interest between
BancGroup and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and BancGroup or Colonial Bank shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that BancGroup
shall be obligated pursuant to this subsection to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation;
and (iii) BancGroup shall not be liable for any settlement effected without
its prior consent; and provided further that BancGroup and Colonial Bank
shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law.
(iii) In consideration of and as a condition precedent to the
effectiveness of the indemnification obligations provided by BancGroup in
this section to a director or officer of the Acquired Bank, such director
or officer of the Acquired Bank shall have delivered to BancGroup on or
prior to the Effective Date a letter in form reasonably satisfactory to
BancGroup concerning claims such directors or officers may have against
Acquired Bank. In the letter, the directors or officers shall: (i)
acknowledge the assumption by BancGroup as of the Effective Date of all
Liability (to the extent Acquired Bank is so liable) for claims for
indemnification arising under section 6.1(g) hereof; (ii) affirm that they
do not have nor are they aware of any claims they might have (other than
those referred to in the following clause (iii)) against Acquired Bank;
(iii) identify any claims or any facts or circumstances of which they are
aware that could give rise to a claim for indemnification under section
6.1(g)(i) hereof; and (iv) release as of the Effective Date any and all
claims that they may have against any Acquired Bank Company other than (A)
those referred to in the foregoing clause (iii) and disclosed in the letter
of the director or officer, (B) claims by third parties which have not yet
been asserted against such director or officer (other than claims arising
from facts and circumstances of which such director or officer is aware but
which are not disclosed in such director or executive officer's letter),
(C) claims by third parties arising from any transaction contemplated by
this Agreement or disclosed in any schedule to this Agreement, and
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(D) claims by third parties arising in the ordinary course of business of
any Acquired Bank Company after the date of the letter.
(iv) Acquired Bank hereby represents and warrants to BancGroup that it
has no Knowledge of any claim, pending or threatened, or of any facts or
circumstances that could give rise to any obligation by BancGroup to
provide the indemnification required by this section 6.1(g) other than as
disclosed in the letters of the directors and executive officers referred
to in section 6.1(g)(iii) hereof or described in any schedule to this
Agreement and claims arising from any transaction contemplated by this
Agreement.
6.2 Additional Covenants of Acquired Bank. Acquired Bank covenants to and
with BancGroup as follows:
(a) Operations. (i) Acquired Bank will conduct its business and the
business of each Acquired Bank Company in a proper and prudent manner and
will use its best efforts to maintain its relationships with its
depositors, customers and employees. No Acquired Bank Company will engage
in any material transaction outside the ordinary course of business or make
any material change in its accounting policies or methods of operation, nor
will Acquired Bank permit the occurrence of any change or event which would
render any of the representations and warranties in Article 5 hereof untrue
in any material respect at and as of the Effective Date with the same
effect as though such representations and warranties had been made at and
as of such Effective Date. Acquired Bank shall contact any person who may
be required to execute an undertaking under Section 10.5 hereof to request
such undertaking and shall take all such reasonable steps as are necessary
to obtain such undertaking. Acquired Bank will take no action that would
prevent or impede the Merger from qualifying (i) for pooling of interests
accounting treatment or (ii) as a tax-free reorganization with the meaning
of Section 368 of the Code.
(ii) If requested by BancGroup, Acquired Bank shall use its best
efforts to cause all officers and directors that own any stock of Acquired
Bank and all other shareholders of Acquired Bank who own more than five
percent (5%) of Acquired Bank's outstanding shares of common stock, to
execute an acknowledgment that such person has no present plan, intention,
or binding commitment to sell or otherwise dispose of the BancGroup Common
Stock to be received in the Merger within twelve (12) months after the
Effective Date.
(b) Stockholders Meeting; Best Efforts. Acquired Bank will cooperate
with BancGroup in the preparation of the Registration Statement and any
regulatory filings and will cause the Stockholders Meeting to be held for
the purpose of approving the Merger as soon as practicable after the
effective date of the Registration Statement, and will use its best efforts
to bring about the transactions contemplated by this Agreement, including
stockholder approval of this Agreement, as soon as practicable unless this
Agreement is terminated as provided herein.
(c) Prohibited Negotiations. Except with respect to this Agreement
and the transactions contemplated hereby, no Acquired Bank Company nor any
affiliate thereof nor any investment banker, attorney, accountant, or other
representative (collectively, "Representatives") retained by an Acquired
Bank Company shall directly or indirectly solicit any Acquisition Proposal
by any Person. Except to the extent necessary to comply with the fiduciary
duties of Acquired Bank's Board of Directors as advised in writing by
counsel to such Board of Directors, no Acquired Bank Company or any
Representative thereof shall furnish any non-public information that it is
not legally obligated to furnish, negotiate with respect to, or enter into
any Contract with respect to, any Acquisition Proposal, and the Acquired
Bank shall direct and use its reasonable efforts to cause all of its
Representatives not to engage in any of the foregoing, but Acquired Bank
may communicate information about such an Acquisition Proposal to its
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised in writing by counsel to such
Board of Directors. Acquired Bank shall promptly notify BancGroup orally
and in writing in the event that it receives any inquiry or proposal
relating to any such Acquisition Proposal. Acquired Bank shall immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any Persons other than BancGroup conducted heretofore
with respect to any of the foregoing.
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(d) Director Recommendation. The members of the Board of Directors of
Acquired Bank agree to support publicly the Merger.
(e) Shareholder Voting. Acquired Bank shall on the date of execution
of this Agreement obtain and submit to BancGroup an agreement from certain
of its directors substantially in the form set forth in Exhibit A.
(f) Financial Statements and Monthly Status Reports. Acquired Bank
shall furnish to BancGroup:
(i) As soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year, consolidated statements of operations of Acquired
Bank for such period and for the period beginning at the commencement of
the fiscal year and ending at the end of such quarterly period, and a
consolidated statement of financial condition of Acquired Bank as of the
end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding periods ending in the preceding
fiscal year, subject to changes resulting from year-end adjustments;
(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to Acquired Bank by independent auditors in connection with
each annual, interim or special audit of the books of Acquired Bank made
by such accountants;
(iii) As soon a practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such
regular and periodic reports as Acquired Bank may file with the SEC or
any other Agency;
(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request; and
(v) Within 10 calendar days after the end of each month (or, if the
financial statements referred to in clause (d) are not then available,
as soon as possible thereafter) commencing with the next calendar month
following the date of this Agreement and ending at the Effective Date, a
written description of (a) the actions taken during the preceding month
with respect to its compliance or non-compliance with the terms of this
section 6.2, together with its then current estimate of the
out-of-pocket costs and expenses incurred or reasonably accruable in
connection with the transactions contemplated by this Agreement; (b) the
status, as of the date of the report, of all existing or threatened
litigation against any Acquired Bank Company; (c) copies of minutes of
any meeting of the board of directors of any Acquired Bank Company and
any committee thereof occurring in the month for which such report is
made, including all documents presented to the directors at such
meetings; and (d) monthly financial statements, including a balance
sheet and income statement.
(g) Fiduciary Duties. Prior to the Effective Date, (i) no director or
officer (each an "Executive") of any Acquired Bank Company shall, directly
or indirectly, own, manage, operate, join, control, be employed by or
participate in the ownership, proposed ownership, management, operation or
control of or be connected in any manner with, any business, corporation or
partnership which is competitive to the business of any Acquired Bank
Company, (ii) all Executives, at all times, shall satisfy their fiduciary
duties to Acquired Bank and its Subsidiaries, and (iii) such Executives
shall not (except as required in the course of his or her employment with
any Acquired Bank Company) communicate or divulge to, or use for the
benefit of himself or herself or any other person, firm, association or
corporation, without the express written consent of Acquired Bank, any
confidential information which is possessed, owned or used by or licensed
by or to any Acquired Bank Company or confidential information belonging to
third parties which any Acquired Bank Company shall be under obligation to
keep secret or which may be communicated to, acquired by or learned of by
the Executive in the course of or as a result of his or her employment with
any Acquired Bank Company.
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(h) Certain Practices. At the request of BancGroup, (i) Acquired Bank
shall consult with BancGroup and advise BancGroup through its Orlando bank
of all of the Acquired Bank's loan requests over $250,000 that are not
single-family residential loan requests or of any other loan request
outside the normal course of business, and (ii) Acquired Bank will consult
with BancGroup to coordinate various business issues on a basis mutually
satisfactory to Acquired Bank and BancGroup. Acquired Bank shall not be
required to undertake any of such activities, however, except as such
activities may be in compliance with existing Law and Regulations.
ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided, BancGroup and Acquired Bank each agrees to use its best efforts
promptly to take, or cause to be taken, all actions and do, or cause to be done,
all things necessary, proper or advisable under applicable Laws or otherwise,
including, without limitation, promptly making required deliveries of
stockholder lists and stock transfer reports and attempting to obtain all
necessary Consents and waivers and regulatory approvals, including the holding
of any regular or special board meetings, to consummate and make effective, as
soon as practicable, the transactions contemplated by this Agreement. The
officers of each Party to this Agreement shall fully cooperate with officers and
employees, accountants, counsel and other representatives of the other Parties
not only in fulfilling the duties hereunder of the Party of which they are
officers but also in assisting, directly or through direction of employees and
other persons under their supervision or control, such as stock transfer agents
for the Party, the other Parties requiring information which is reasonably
available from such Party.
7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion, deems such
disclosure required by Law. In that event, such Party shall provide to the other
Party the text of such disclosure sufficiently in advance to enable the other
Party to have a reasonable opportunity to comment thereon.
7.3 Mutual Disclosure. Each Party hereto agrees to promptly furnish to
each other Party hereto its public disclosures and filings not precluded from
disclosure by Law including but not limited to call reports, Form 8-K, Form 10-Q
and Form 10-K filings, Y-3 applications, reports on Form Y-6, quarterly or
special reports to shareholders, Tax returns, Form S-8 registration statements
and similar documents.
7.4 Access to Properties and Records. Each Party hereto shall afford the
officers and authorized representatives of the other Party full access to the
Assets, books and records of such Party in order that such other Parties may
have full opportunity to make such investigation as they shall desire of the
affairs of such Party and shall furnish to such Parties such additional
financial and operating data and other information as to its businesses and
Assets as shall be from time to time reasonably requested. All such information
that may be obtained by any such Party will be held in confidence by such party,
will not be disclosed by such Party or any of its representatives except in
accordance with this Agreement, and will not be used by such Party for any
purpose other than the accomplishment of the Merger as provided herein.
7.5 Notice of Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Acquired Bank to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction, in the sole discretion of the Party relying upon such conditions,
on or before the Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:
8.1 Approval by Shareholders. At the Stockholders Meeting, this Agreement
and the matters contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of the issued and
outstanding voting securities of Acquired Bank as is required by applicable Law
and Acquired Bank's articles of incorporation and bylaws.
8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and Acquired Bank, shall have
been entered by the Board of Governors of the Federal Reserve System and other
appropriate bank regulatory Agencies (i) granting the authority necessary for
the consummation of the transactions contemplated by this Agreement and (ii)
satisfying all other requirements prescribed by Law. No Order, Consent or
approval so obtained which is necessary to consummate the transactions as
contemplated hereby shall be conditioned or restricted in a manner which in the
reasonable good faith judgment of the Board of Directors of BancGroup would so
materially adversely impact the economic benefits of the transaction as
contemplated by this Agreement so as to render inadvisable the consummation of
the Merger.
8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority pursuant to
the 1934 Act, with respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory authority; and
all approvals or authorizations for the offer of BancGroup Common Stock shall
have been received or obtained pursuant to any applicable state securities Laws,
and no stop order or proceeding with respect to the transactions contemplated
hereby shall be pending or threatened under any such state Law.
8.5 Tax Opinion. An opinion of Coopers & Lybrand L.L.P., shall have been
received in form and substance reasonably satisfactory to the Acquired Bank and
BancGroup to the effect that (i) the Merger will constitute a "reorganization"
within the meaning of section 368 of the Code; (ii) no gain or loss will be
recognized by BancGroup or Acquired Bank; (iii) no gain or loss will be
recognized by the shareholders of Acquired Bank who receive shares of BancGroup
Common Stock except to the extent of any taxable "boot" received by such persons
from BancGroup, and except to the extent of any dividends received from Acquired
Bank prior to the Effective Date; (iv) the basis of the BancGroup Common Stock
received in the Merger will be equal to the sum of the basis of the shares of
Acquired Bank common stock exchanged in the Merger and the amount of gain, if
any, which was recognized by the exchanging Acquired Bank shareholder, including
any portion treated as a dividend, less the value of taxable boot, if any,
received by such shareholder in the Merger; (v) the holding period of the
BancGroup Common Stock will include the holding period of the shares of Acquired
Bank common stock exchanged therefor if such shares of Acquired Bank common
stock were capital assets in the hands of the exchanging Acquired Bank
shareholder; and (vi) cash received by an Acquired Bank shareholder in lieu of a
fractional share interest of BancGroup Common Stock will be treated as having
been received as a distribution in full payment in exchange for the fractional
share interest of BancGroup Common Stock which he or she would otherwise be
entitled to receive and will qualify as capital
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gain or loss (assuming the Acquired Bank common stock was a capital asset in his
or her hands as of the Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRED BANK
The obligations of Acquired Bank to cause the transactions contemplated by
this Agreement to be consummated shall be subject to the satisfaction on or
before the Effective Date of all the following conditions except as Acquired
Bank may waive such conditions in writing:
9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Bank, all representations and
warranties of BancGroup contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of such Effective Date, and BancGroup shall have
performed in all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective Date. The merger of
Colonial Bank into the Alabama Subsidiary shall not be deemed to make any
Representations, Warranties, and Covenants materially untrue.
9.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 4.3(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition or affairs of BancGroup
which in their total effect constitute a Material Adverse Effect, nor shall
there have been any material changes in the Laws governing the business of
BancGroup which would impair the rights of Acquired Bank or its shareholders
pursuant to this Agreement.
9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Bank shall have received a certificate from the
President or a Vice President and from the Secretary or Assistant Secretary of
BancGroup dated as of the Closing certifying that:
(a) the Board of Directors of BancGroup has duly adopted resolutions
approving the substantive terms of this Agreement and authorizing the
consummation of the transactions contemplated by this Agreement and such
resolutions have not been amended or modified and remain in full force and
effect;
(b) each person executing this Agreement on behalf of BancGroup is an
officer of BancGroup holding the office or offices specified therein and
the signature of each person set forth on such certificate is his or her
genuine signature;
(c) the certificate of incorporation and bylaws of BancGroup
referenced in section 4.4 hereof remain in full force and effect;
(d) such persons have no knowledge of a basis for any material claim,
in any court or before any Agency or arbitration or otherwise against, by
or affecting BancGroup or the business, prospects, condition (financial or
otherwise), or Assets of BancGroup which would prevent the performance of
this Agreement or the transactions contemplated by this Agreement or
declare the same unlawful or cause the rescission thereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Bank's shareholders, or any amendments or revisions thereto so
delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made (it being understood that such persons need not express a
statement as to information concerning or provided by Acquired Bank for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 9 insofar as they relate
to BancGroup have been satisfied.
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9.4 Opinion of Counsel. Acquired Bank shall have received an opinion of
Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, dated as of the
Closing, substantially in the form set forth in Exhibit B hereto.
9.5 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.6 Other Matters. There shall have been furnished to such counsel for
Acquired Bank certified copies of such corporate records of BancGroup and copies
of such other documents as such counsel may reasonably have requested for such
purpose.
9.7 Material Events. There shall have been no determination by the board
of directors of Acquired Bank that the transactions contemplated by this
Agreement have become impractical because of any state of war, declaration of a
banking moratorium in the United States or a general suspension of trading on
the NYSE or any other exchange on which BancGroup Common Stock may be traded.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BANCGROUP
The obligations of BancGroup to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction on or before
the Effective Date of all of the following conditions except as BancGroup may
waive such conditions in writing:
10.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of BancGroup, all representations and
warranties of Acquired Bank contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of the Effective Date, and Acquired Bank shall
have performed in all material respects all agreements and covenants required by
this Agreement to be performed by it on or prior to the Effective Date.
10.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 5.4(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition, or affairs of Acquired
Bank which constitute a Material Adverse Effect, nor shall there have been any
material changes in the Laws governing the business of Acquired Bank which would
impair BancGroup's rights pursuant to this Agreement.
10.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, BancGroup shall have received a certificate from
Acquired Bank executed by the President or Vice President and from the Secretary
or Assistant Secretary of Acquired Bank dated as of the Closing certifying that:
(a) the Board of Directors of Acquired Bank has duly adopted
resolutions approving the substantive terms of this Agreement and
authorizing the consummation of the transactions contemplated by this
Agreement and such resolutions have not been amended or modified and remain
in full force and effect;
(b) the shareholders of Acquired Bank have duly adopted resolutions
approving the substantive terms of the Merger and the transactions
contemplated thereby and such resolutions have not been amended or modified
and remain in full force and effect;
(c) each person executing this Agreement on behalf of Acquired Bank is
an officer of Acquired Bank holding the office or offices specified therein
and the signature of each person set forth on such certificate is his or
her genuine signature;
(d) the articles of incorporation and bylaws of Acquired Bank and the
Bank referenced in section 5.8 hereof remain in full force and effect and
have not been amended or modified since the date hereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Bank's shareholders, or any amendments or revisions thereto so
delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
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which they were made (it being understood that such persons need only
express a statement as to information concerning or provided by Acquired
Bank for inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Bank have been satisfied.
10.4 Opinion of Counsel. BancGroup shall have received an opinion of
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., counsel to Acquired Bank,
dated as of the Closing, substantially as set forth in Exhibit C hereto.
10.5 Controlling Shareholders. Each shareholder of Acquired Bank who may
be an "affiliate" of Acquired Bank, within the meaning of Rule 145 of the
general rules and regulations under the 1933 Act shall have executed and
delivered an agreement satisfactory to BancGroup to the effect that such person
shall not make a "distribution" (within the meaning of Rule 145) of the Common
Stock which he receives upon the Effective Date and that such Common Stock will
be held subject to all applicable provisions of the 1933 Act and the rules and
regulations of the SEC thereunder, and that such person will not sell or
otherwise reduce risk relative to any shares of BancGroup Common Stock received
in the Merger until financial results concerning at least 30 days of post-Merger
combined operations have been published by BancGroup within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies.
Acquired Bank recognizes and acknowledges that BancGroup Common Stock issued to
such persons may bear a legend evidencing the agreement described above.
10.6 Other Matters. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of Acquired Bank and copies
of such other documents as such counsel may reasonably have requested for such
purpose.
10.7 Dissenters. The number of shares as to which shareholders of Acquired
Bank have exercised dissenters rights of appraisal under section 3.6 does not
exceed 10 percent of the outstanding shares of common stock of Acquired Bank.
10.8 Material Events. There shall have been no determination by the board
of directors of BancGroup that the transactions contemplated by this Agreement
have become impractical because of any state of war, declaration of a banking
moratorium in the United States or general suspension of trading on the NYSE or
any exchange on which BancGroup Common Stock may be traded.
10.9 Pooling of Interests. BancGroup shall have received the written
opinion of Coopers & Lybrand L.L.P., that the Merger will qualify for the
pooling of interests method of accounting under generally accepted accounting
principles.
10.10 Exchange of Warrants. BancGroup shall have received certification
from Acquired Bank that holders of Warrants holding no less than 93 percent of
such Warrants have exchanged such Warrants for Acquired Bank Stock in accordance
with Section 3.1(c) hereof.
10.11 Severance Agreements. On or before the Closing, Edward H. Black
shall have entered into a severance agreement with Colonial Bank mutually
acceptable to such person and Colonial Bank.
ARTICLE 11
TERMINATION OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4 and 5 of this
Agreement or in any closing certificate pursuant to Articles 9 and 10 shall
terminate and be extinguished at and shall not survive the Effective Date. All
covenants, agreements and undertakings required by this Agreement to be
performed by any Party hereto following the Effective Date shall survive such
Effective Date and be binding upon such Party. If the Merger is not consummated,
all representations, warranties, obligations, covenants, or agreements hereunder
or in any certificate delivered hereunder relating to the transaction which is
not consummated shall be deemed to be terminated or extinguished, except that
Sections 7.2, 7.4, 6.2(c)(ii), 13.3, 13.4, Article 11, Article 15, any
applicable definitions of Article 14, shall survive. Items disclosed in the
Exhibits and Schedules
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attached hereto are incorporated into this Agreement and form a part of the
representations, warranties, covenants or agreements to which they relate.
Information provided in such Exhibits and Schedules is provided only in response
to the specific section of this Agreement which calls for such information.
ARTICLE 12
NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at the
time given or mailed, first class postage prepaid:
(a) If to Acquired Bank to Edward H. Black, at First Independence Bank
of Florida, 16740 San Carlos Boulevard, SW, Fort Myers, Florida 33908,
facsimile (941) 466-6000, and James E. Courtney, 1779 Venus Drive, Sanibel,
Florida 33957, facsimile (941) 395-2996, with copies to John P. Greeley,
Esq., Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., Suite 800 Citrus
Center, 255 South Orange Avenue, Orlando, Florida 32801, facsimile
407-843-2448, or as may otherwise be specified by Acquired Bank in writing
to BancGroup.
(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce Street,
Suite 803, Montgomery, Alabama, 36104, facsimile (334) 240-5069, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, L.L.C., One
Commerce Street, Suite 802, Montgomery, Alabama 36104, facsimile (334) 265-
4533, or as may otherwise be specified in writing by BancGroup to Acquired
Bank.
ARTICLE 13
AMENDMENT OR TERMINATION
13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup and Acquired Bank before or after approval of the transactions
contemplated herein by the shareholders of Acquired Bank.
13.2 Termination. This Agreement may be terminated at any time prior to or
on the Effective Date whether before or after action thereon by the shareholders
of Acquired Bank, as follows:
(a) by the mutual consent of the respective boards of directors of
Acquired Bank and BancGroup;
(b) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching Party
the ability to refuse to consummate the Merger under the standard set forth
in section 10.1 of this Agreement in the case of BancGroup and section 9.1
of this Agreement in the case of Acquired Bank;
(c) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement in Article 9 as to Acquired Bank or
Article 10 as to BancGroup shall not have been satisfied in full;
(d) by the board of directors of either BancGroup or Acquired Bank if
all transactions contemplated by this Agreement shall not have been
consummated on or prior to December 31, 1997, if the failure to consummate
the transactions provided for in this Agreement on or before such date is
not
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caused by any breach of this Agreement by the Party electing to terminate
pursuant to this section 13.2(d); or
(e) upon payment to BancGroup of the fee as provided in Section 13.4
hereof.
13.3 Damages. In the event of termination pursuant to section 13.2,
Acquired Bank and BancGroup shall not be liable for damages for any breach of
warranty or representation contained in this Agreement made in good faith, and,
in that case, the expenses incurred shall be borne as set forth in section 15.1
hereof.
13.4 Acquisition Proposal; Termination and Fee. During the term of this
Agreement, if (i) an Acquisition Proposal (other than the Merger contemplated by
this Agreement) is submitted to and approved by the shareholders of Acquired
Bank at any time prior to the Effective Date; or (ii) an Acquisition Proposal
(other than the Merger contemplated by this Agreement) is received by Acquired
Bank or is made directly to the shareholders of Acquired Bank at any time prior
to the termination of this Agreement under Section 13.2(b), (c), or (d) (except
for a termination by Acquired Bank for a breach of this Agreement by BancGroup)
and the Merger is not closed as contemplated by this Agreement, then Acquired
Bank shall pay to BancGroup a termination fee in an amount equal to $675,000 in
cash, as liquidated damages, and not as a penalty, and, upon the payment in full
thereof, this Agreement shall be terminated and no Party shall have any further
liability under this Agreement (except as set forth in Section 13.3).
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement:
ABCA The Alabama Business Corporation Act.
Acquired Bank First Independence Bank of Florida, a Florida state
bank.
Acquired Bank Company Shall mean Acquired Bank, any Subsidiary of
Acquired Bank, or any person or entity acquired as
a Subsidiary of Acquired Bank in the future and
owned by Acquired Bank at the Effective Date.
Acquired Bank Options Options respecting the issuance of a maximum of
59,342 shares of Acquired Bank common stock
pursuant to Acquired Bank's stock option plans.
Acquired Bank Stock Shares of common stock, par value $5.00 per share,
of Acquired Bank.
Acquisition Proposal Shall mean, with respect to a Party, any tender
offer or exchange offer or any proposal for a
merger, acquisition of all of the stock or assets
of, or other business combination involving such
Party or any of its Subsidiaries or the acquisition
of a substantial equity interest in, or a
substantial portion of the assets of, such Party or
any of its Subsidiaries.
Agencies Shall mean, collectively, the Federal Trade
Commission, the United States Department of
Justice, the Board of the Governors of the Federal
Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all
state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, HUD,
the VA, the FHA, the GNMA, the FNMA, the FHLMC, the
NYSE, and the SEC.
Agreement Shall mean this Agreement and Plan of Merger and
the Exhibits and Schedules delivered pursuant
hereto and incorporated herein by reference.
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Alabama Subsidiary Colonial Bank, an Alabama state banking
corporation, which is a wholly owned subsidiary of
BancGroup.
Assets Of a Person shall mean all of the assets,
properties, businesses and rights of such Person of
every kind, nature, character and description,
whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise
relating to or utilized in such Person's business,
directly or indirectly, in whole or in part,
whether or not carried on the books and records of
such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and
wherever located.
BancGroup The Colonial BancGroup, Inc., a Delaware
corporation with its principal offices in
Montgomery, Alabama.
Closing The closing of the transactions contemplated hereby
as described in section 2.7 of this Agreement.
Code The Internal Revenue Code of 1986, as amended.
Common Stock BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.
Consent Any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or
Permit.
Contract Any written or oral agreement, arrangement,
authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any
kind or character, or other document to which any
Person is a party or that is binding on any Person
or its capital stock, Assets or business.
Default Shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii)
any occurrence of any event that with the passage
of time or the giving of notice or both would
constitute a breach or violation of or default
under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the
passage of time or the giving of notice would give
rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any
Contract, Order or Permit.
Effective Date Means the date and time at which the Merger becomes
effective as defined in section 2.7 hereof.
Environmental Laws Means the laws, regulations and governmental
requirements referred to in section 5.23 hereof.
ERISA The Employee Retirement Income Security Act of
1974, as amended.
Exchange Ratio The ratio obtained by dividing $20.71 by the Market
Value.
Exhibits A through C, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be
referred to in this Agreement and any other related
instrument or document without being attached
hereto.
FBC The Florida Banking Code.
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Knowledge Means the actual knowledge of the Chairman,
President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, General
Counsel or any Senior or Executive Vice President
of BancGroup, in the case of knowledge of
BancGroup, or of Acquired Bank and the Bank, in the
case of knowledge of Acquired Bank.
Law Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including those promulgated, interpreted or
enforced by any Agency.
Liability Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including costs of investigation,
collection and defense), deficiency, guaranty or
endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts
presented for collection or deposit in the ordinary
course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
Lien Any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or
other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property
interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii)
Liens in the form of easements and restrictive
covenants on real property which do not materially
adversely affect the use of such property by the
current owner thereof.
Litigation Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding relating to or affecting a Party,
its business, its Assets (including Contracts
related to it), or the transactions contemplated by
this Agreement.
Loan Property Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect to
such property.
Loss Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of business),
liabilities, costs, expenses (including without
limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of
defense or investigation), and interest on any
amount payable to a third party as a result of the
foregoing.
Market Value Shall represent the per share market value of the
BancGroup Common Stock at the Effective Date and
shall be determined by calculating the average of
the closing prices of the Common Stock of BancGroup
as reported by the NYSE on each of the ten (10)
consecutive trading days
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ending on the trading day five calendar days
preceding the Effective Date.
material For purposes of this Agreement shall be determined
in light of the facts and circumstances of the
matter in question; provided that any specific
monetary amount stated in this Agreement shall
determine materiality in that instance.
Material Adverse Effect On a Party shall mean an event, change or
occurrence which has a material adverse impact on
(i) the financial position, Assets, business, or
results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability
of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement,
provided that "material adverse impact" shall not
be deemed to include the impact of (x) changes in
banking and similar laws of general applicability
or interpretations thereof by courts or
governmental authorities, (y) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, and (z) the Merger and
compliance with the provisions of this Agreement on
the operating performance of the Parties.
Merger The merger of Acquired Bank with BancGroup as
contemplated in this Agreement.
Merger Consideration The distribution of BancGroup Common Stock for each
share of Acquired Bank Stock (and cash for
fractional shares) as provided in section 3.1(a)
hereof.
NYSE The New York Stock Exchange.
Order Any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal,
state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or
Agency.
Party Shall mean Acquired Bank, or BancGroup, and
"Parties" shall mean Acquired Bank, Colonial Bank
and BancGroup.
Permit Any federal, state, local, and foreign governmental
approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or
right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.
Person A natural person or any legal, commercial or
governmental entity, such as, but not limited to, a
corporation, general partnership, joint venture,
limited partnership, limited liability company,
trust, business association, group acting in
concert, or any person acting in a representative
capacity.
Proxy Statement The proxy statement used by Acquired Bank to
solicit the approval of its stockholders of the
transactions contemplated by this Agreement, which
shall include the prospectus of BancGroup relating
to the issuance of the BancGroup Common Stock to
the shareholders of Acquired Bank.
Registration Statement The registration statement on Form S-4, or such
other appropriate form, to be filed with the SEC by
BancGroup, and which has been agreed to by Acquired
Bank, to register the shares of BancGroup Common
Stock
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offered to stockholders of the Bank pursuant to his
Agreement, including the Proxy Statement.
Resulting Corporation BancGroup, as the surviving corporation resulting
from the Merger.
SEC United States Securities and Exchange Commission.
Stockholders Meeting The special meeting of stockholders of Acquired
Bank called to approve the transactions
contemplated by this Agreement.
Subsidiaries Shall mean all those corporations, banks,
associations, or other entities of which the entity
in question owns or controls 5% or more of the
outstanding equity securities either directly or
through an unbroken chain of entities as to each of
which 5% or more of the outstanding equity
securities is owned directly or indirectly by its
parent; provided, however, there shall not be
included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.
Tax or Taxes Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.
Warrants The Acquired Bank's Nontransferable Stock Purchase
Warrants respecting the issuance of 199,940 shares
of Acquired Bank common stock.
Warrant Exchange Ratio Means the Warrant Value divided by $20.71.
Warrant Exercise Price Means the greater of $10.00 or the per share book
value of Acquired Bank's common stock shown on the
quarterly financial statements of Acquired Bank
next preceding the date of exercise of the Warrant.
Warrant Value Means $20.71 less the Warrant Exercise Price.
1933 Act The Securities Act of 1933, as amended.
1934 Act The Securities Exchange Act of 1934, as amended.
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in connection with
this Agreement and the transactions contemplated hereby.
15.2 Benefit. This Agreement shall inure to the benefit of and be binding
upon Acquired Bank, Colonial Bank and BancGroup, and their respective
successors. This Agreement shall not be assignable by any Party without the
prior written consent of the other Party.
15.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with the Laws of the State of Alabama.
15.4 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such counterpart shall
become effective when one counterpart has been signed by each Party thereto.
15.5 Headings. The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement or considered in construing the provisions thereof.
A-28
<PAGE> 141
15.6 Severability. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being severable,
shall remain in full force and effect in such circumstance or situation and the
term or provision shall remain valid and in effect in any other circumstances or
situation.
15.7 Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party's counsel has drafted any portion of this Agreement.
15.8 Return of Information. In the event of termination of this Agreement
prior to the Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public documents, work papers
and other materials obtained from the other Party in connection with the
transactions contemplated in this Agreement and shall keep such information
confidential, not disclose such information to any other person or entity, and
not use such information in connection with its business.
15.9 Equitable Remedies. The parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party may be without an
adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.
15.10 Attorneys' Fees. If any Party hereto shall bring an action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its costs and expenses incurred in
connection with such action (including fees, disbursements and expenses of
attorneys and costs of investigation).
15.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or Default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of any such right,
power or remedy, or an acquiescence in any similar breach or Default; nor shall
any waiver of any single breach or Default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Agreement must be in writing and be executed by the Parties
to this Agreement and shall be effective only to the extent specifically set
forth in such writing.
15.12 Remedies Cumulative. All remedies provided in this Agreement, by law
or otherwise, shall be cumulative and not alternative.
15.13 Entire Contract. This Agreement and the documents and instruments
referred to herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings with respect to the subject
matter of this Agreement.
A-29
<PAGE> 142
IN WITNESS WHEREOF, Acquired Bank and BancGroup have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
<TABLE>
<S> <C>
ATTEST: FIRST INDEPENDENCE BANK OF FLORIDA
By: /s/ EDWARD H. BLACK By: /s/ JAMES E. COURTNEY
------------------------------------------------- -------------------------------------------------
Its: President & CEO Its: Chairman
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ DONNA PIEL By: /s/ W. FLAKE OAKLEY
------------------------------------------------- -------------------------------------------------
Its: Assistant Secretary Its: Chief Financial Officer
(CORPORATE SEAL)
COLONIAL BANK
By: /s/ W. FLAKE OAKLEY
-------------------------------------------------
Its: Chief Financial Officer
(CORPORATE SEAL)
</TABLE>
A-30
<PAGE> 143
APPENDIX B
658.44 APPROVAL BY STOCKHOLDERS; RIGHTS OF DISSENTERS; PREEMPTIVE RIGHTS
(1) The department shall not issue a certificate of merger to a resulting
bank or trust company unless the plan of merger and merger agreement, as adopted
by a majority of the entire board of directors of each constituent bank or trust
company, and as approved by each appropriate federal regulatory agency and by
the department, has been approved;
(a) By the stockholders of each constituent national bank as provided
by, and in accordance with the procedures required by, the laws of the
United States applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative vote or
written consent of the holders of at least a majority of the shares
entitled to vote thereon of each constituent state bank or state trust
company, unless any class of shares of any constituent state bank or state
trust company is entitled to vote thereon as a class, in which event as to
such constituent state bank or state trust company the plan of merger and
merger agreement shall be approved by the stockholders upon receiving the
affirmative vote or written consent of the holders of a majority of the
shares of each class of shares entitled to vote thereon as a class and of
the total shares entitled to vote thereon. Such vote of stockholders of a
constituent state bank or state trust company shall be at an annual or
special meeting of stockholders or by written consent of the stockholders
without a meeting as provided in s. 607.0704.
Approval by the stockholders of a constituent bank or trust company of a
plan of merger and merger agreement shall constitute the adoption by the
stockholders of the articles of incorporation of the resulting state bank or
trust company as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent action
by, the stockholders of each constituent state bank or state trust company shall
be given to each stockholder of record, whether or nor entitled to vote, and
whether the meeting is an annual or a special meeting or whether the vote is to
be by written consent pursuant to s. 607.0704, and the notice shall state that
the purpose or one of the purposes of the meeting, or of the proposed action by
the stockholders without a meeting, is to consider the proposed plan of merger
and merger agreement. Except to the extent provided otherwise with respect to
stockholders of a resulting bank or trust company pursuant to subsection (7),
the notice shall also state that dissenting stockholders will be entitled to
payment in cash of the value of only those shares held by the stockholders:
(a) Which at a meeting of the stockholders are voted against the
approval of the plan of merger and merger agreement;
(b) As to which, if the proposed action is to be by written consent of
stockholders pursuant to s. 607.0704, such written consent is not given by
the holder thereof; or
(c) With respect to which the holder thereof has given written notice
to the constituent state bank or trust company, at or prior to the meeting
of the stockholders or on or prior to the date specified for action by the
stockholders without a meeting pursuant to s. 607.0704 in the notice of
such proposed action, that the stockholder dissents from the plan of merger
and merger agreement.
Hereinafter in this section, the term "dissenting shares" means and
includes only those shares, which may be all or less than all the shares of any
class owned by a stockholder, described in paragraphs (a), (b), and (c).
(3) On or promptly after the effective date of the merger, the resulting
state bank or trust company, or a bank holding company which, as set out in the
plan of merger or merger agreement, is offering shares rights, obligations, or
other securities or property in exchange for shares of the constituent banks or
trust companies, may fix an amount which it considers to be not more than the
fair market value of the shares of a constituent bank or trust company and which
it will pay to the holders of dissenting shares of that constituent bank or
trust company and, if it fixes such amount, shall offer to pay such amount to
the holders of all dissenting shares of that constituent bank or trust company.
The amount payable pursuant to any such offer which is accepted by
B-1
<PAGE> 144
the holders of dissenting shares, and the amount payable to the holders of
dissenting shares pursuant to an appraisal, shall constitute a debt of the
resulting state bank or state trust company.
(4) The owners of dissenting shares who have accepted an offer made
pursuant to subsection (3) shall be entitled to receive the amount so offered
for such shares in cash upon surrendering the stock certificates representing
such shares at any time within 30 days after the effective date of the merger,
and the owners of dissenting shares, the value of which is to be determined by
appraisal, shall be entitled to receive the value of such shares in cash upon
surrender of the stock certificates representing such shares at any time within
30 days after the value of such shares has been determined by appraisal made on
or after the effective date of the merger.
(5) The value of dissenting shares of each constituent state bank or state
trust company, the owners of which have not accepted an offer for such shares
made pursuant to subsection (3), shall be determined as of the effective date of
the merger by three appraisers, one to be selected by the owners of at least
two-thirds of such dissenting shares, one to be selected by the board of
directors of the resulting state bank, and the third to be selected by the two
so chosen. The value agreed upon by any two of the appraisers shall control and
be final and binding on all parties. If, within 90 days from the effective date
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
dissenting shares, the department shall cause an appraisal of such dissenting
shares to be made which will be final and binding on all parties. The expenses
of appraisal shall be paid by the resulting state bank or trust company.
(6) Upon the effective date of the merger, all the shares of stock of every
class of each constituent bank or trust company, whether or not surrendered by
the holders thereof, shall be void and deemed to be canceled, and no voting or
other rights of any kind shall pertain thereto of to the holders thereof except
only such rights as may be expressly provided in the plan of merger and merger
agreement or expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the
constituent banks and trust companies and expressly provided in the plan of
merger and merger agreement, subsections (3), (4), and (5) are not applicable to
a resulting bank or trust company or to the shares or holders of shares of a
resulting bank or trust company the cash, shares, rights, obligations, or other
securities or property of which, in whole or in part, is provided in the plan of
merger or merger agreement to be exchanged for the shares of the other
constituent banks or trust companies.
(8) The stock, rights, obligations, and other securities of a resulting
bank or trust company may be issued as provided by the terms of the plan of
merger and merger agreement, free from any preemptive rights of the holders of
any of the shares of stock or of any of the rights, obligations, or other
securities of such resulting bank or trust company or of any of the constituent
banks or trust companies.
(9) After approval of the plan of merger and merger agreement by the
stockholders as provided in subsection (1), there shall be filed with the
department, within 30 days after the time limit in s. 658.43(5), a fully
executed counterpart of the plan of merger and merger agreement as so approved
if it differs in any respect from any fully executed counterpart thereof
theretofore filed with the department, and copies of the resolutions approving
the same by the stockholders of each constituent bank or trust company,
certified by the president, or chief executive officer if other than the
president, and the cashier or corporate secretary of each constituent bank or
trust company, respectively, with the corporate seal impressed thereon.
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<PAGE> 145
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to section 145 of the Delaware General Corporation Law, as
amended, and the Restated Certificate of Incorporation of the Registrant,
officers, directors, employees, and agents of the Registrant are entitled to
indemnification against liabilities incurred while acting in such capacities on
behalf of the Registrant, including reimbursement of certain expenses. In
addition, the Registrant maintains an officers and directors insurance policy
pursuant to which certain officers and all directors of the Registrant are
entitled to indemnification against certain liabilities, including
reimbursement of certain expenses, and the Registrant has indemnity agreements
("Indemnification Agreements") with certain officers and all of its directors
pursuant to which such persons may be indemnified by the Registrant against
certain liabilities, including expenses.
The Indemnification Agreements are intended to provide additional
indemnification to directors and officers of BancGroup beyond the specific
provisions of the Delaware General Corporation Law. Under the Delaware General
Corporation Law, a company may indemnify its directors and officers in
circumstances other than those under which indemnification and the advance of
expenses are expressly permitted by applicable statutory provisions.
Under the Delaware General Corporation Law, a director, officer,
employee or agent of a corporation (i) must be indemnified by the corporation
for all expenses incurred by him (including attorneys' fees) when he is
successful on the merits or otherwise in defense of any action, suit or
proceeding brought by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, (ii) may be indemnified by the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement of any such proceeding (other than a proceeding by
or in the right of the corporation) even if he is not successful on the merits
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the corporation (and, in the case of a
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful), and (iii) may be indemnified by the corporation for expenses
(including attorneys' fees) incurred by him in the defense or settlement of a
proceeding brought by or in the right of the corporation, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation; provided that no indemnification may be made
under the circumstances described in clause (iii) if the director, officer,
employee or agent is adjudged liable to the corporation, unless a court
determines that, despite the adjudication of liability but in view of all of
the circumstances, he is fairly and reasonably entitled to indemnification for
the expenses which the court shall deem proper. The indemnification described
in clauses (ii) and (iii) above (unless ordered by a court) may be made only as
authorized in a specific case upon determination by (i) a majority of a quorum
of disinterested directors, (ii) independent legal counsel in a written
opinion, or (iii) the stock holders, that indemnification is proper in the
circumstances because the applicable standard of conduct has been met.
Expenses (including attorneys' fees) incurred by an officer or director in
defending a proceeding may be advanced by the corporation prior to the final
disposition of the proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay the advance if it is ultimately determined
that he is not entitled to be indemnified by the corporation. Expenses
(including attorneys' fees) incurred by other employees and agents may be
advanced by the corporation upon terms and conditions deemed appropriate by the
board of directors.
The indemnification provided by the Delaware General Corporation Law
has at least two limitations that are addressed by the Indemnification
Agreements: (i) BancGroup is under no obligation to advance expenses to a
director or officer, and (ii) except in the case of a proceeding in which a
director or officer is successful on the merits or otherwise, indemnification
of a director or officer is discretionary rather than mandatory.
The Indemnification Agreements, therefore, cover any and all expenses
(including attorneys' fees and
<PAGE> 146
all other charges paid or payable in connection therewith) incurred in
connection with investigating, defending, being a witness or participating in
(including an appeal), or preparing to defend, be a witness in or participate
in, any threatened, pending or completed action, suit or proceeding, or any
inquiry or investigation, whether civil, criminal, administrative or otherwise,
related to the fact that such director or officer is or was a director,
officer, employee or agent of BancGroup or is or was serving at the request of
BancGroup as a director, officer, employee, agent, partner, committee member or
fiduciary of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, or by reason of anything done or not done by
such director or officer in any such capacity.
The Indemnification Agreements also provide for the prompt advancement
of all expenses incurred in connection with any proceeding and obligate the
director or officer to reimburse BancGroup for all amounts so advanced if it is
subsequently determined, as provided in the Indemnification Agreements, that
the director or officer is not entitled to indemnification.
The Indemnification Agreements further provide that the director or
officer is entitled to indemnification for, and advancement of, all expenses
(including attorneys' fees) incurred in any proceeding seeking to collect from
BancGroup an indemnity claim or advancement of expenses under the
Indemnification Agreements, BancGroup's Certificate of Incorporation, or the
Delaware General Corporation Law, regardless of whether the director or officer
is successful in such proceeding.
The Indemnification Agreements impose upon BancGroup the burden of
proving that the director or officer is not entitled to indemnification in any
particular case, and the Indemnification Agreements negate certain presumptions
which might otherwise be drawn against a director or officer in certain
circumstances. Further, the Indemnification Agreements provide that if
BancGroup pays a director or officer pursuant to an Indemnification Agreement,
BancGroup will be subrogated to such director's or officer's rights to recover
from third parties.
The Indemnification Agreements stipulate that a director's or
officer's rights under such contracts are not exclusive of any other indemnity
rights a director or officer may have; however, the Indemnification Agreements
prevent double payment. The Indemnification Agreements require the maintenance
of directors' and officers' liability insurance if such insurance can be
maintained on terms, including rates, satisfactory to BancGroup.
The benefits of the Indemnification Agreements would not be available
if (i) the action with respect to which indemnification is sought was initiated
or brought voluntarily by the officer or director (other than an action to
enforce the right to indemnification under the Indemnification Agreements);
(ii) the officer or director is paid for such expense or liability under an
insurance policy; (iii) the proceeding is for an accounting of profits pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended; (iv) the
conduct of the officer or director is adjudged as constituting an unlawful
personal benefit, or active or deliberate dishonesty or willful fraud or
illegality; or (v) a court determines that indemnification or advancement of
expenses is unlawful under the circumstances.
The Indemnification Agreements would provide indemnification for
liabilities arising under the Securities Act of 1933, as amended. BancGroup
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such act and is,
therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits that are included in Part
II of the Registration Statement. Such exhibits are
separately indexed elsewhere in the Registration Statement.
<PAGE> 147
DESCRIPTION
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:
(A) Agreement and Plan of Merger among The Colonial BancGroup,
Inc., Colonial Bank and First Independence Bank of Florida,
dated as of May 8, 1997 and amended as of July 7, 1997,
included in the Prospectus portion of this Registration
Statement at Appendix A and incorporated herein by reference.
(B) First Independence Bank of Florida Stock Option Plan and forms
of Stock Option Agreement.
(C) First Independence Bank Nontransferable Stock Purchase
Warrant.
Exhibit 4 Instruments defining the rights of security holders:
(A)(1) Article 4 of the Restated Certificate of Incorporation of the
Registrant filed as Exhibit 4.1 to the Registrant's Current Report on
Form 8-K, dated February 21, 1995, and incorporated herein by
reference.
(A)(2) Amendment to Article 4 of Registrant's Restated Certificate of
Incorporation, dated April 16, 1997, filed as Exhibit 4(A)(2) to the
Registrant's Registration Statement on Form S-4 (File No. 333-26217),
effective May 9, 1997, and incorporated herein by reference.
(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21, 1995, and incorporated herein by reference.
(C) Dividend Reinvestment and Class A Common Stock Purchase Plan
of the Registrant dated January 15, 1986, and Amendment No. 1
thereto dated as of June 10, 1986, filed as Exhibit 4(C) to
the Registrant's Registration Statement on Form S-4 (File No.
33-07015), effective July 15, 1986, and incorporated herein by
reference.
(D) Trust Indenture dated as of March 25, 1986, included as
Exhibit 4 to the Registrant's Amendment No. 1 to Registration
Statement on Form S-2, file number 33-4004, effective March
25, 1986, and incorporated herein by reference.
(E) All other instruments defining the rights of holders of
long-term debt of the Registrant and its subsidiaries - not
filed pursuant to clause 4(iii) of Item 601(b) of Regulation
S-K, to be furnished upon request of the Commission.
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.
Exhibit 8 Tax Opinion of Coopers & Lybrand L.L.P.
Exhibit 23 Consents of experts and counsel:
3
<PAGE> 148
(A) Consent of Coopers & Lybrand L.L.P.
(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.
(C) Consent of Consent of Brewer, Beemer, Kuehnhackl & Koon, P.A.
Exhibit 24 Power of Attorney, filed as Exhibit 24 to the registrant's
Registration Statement on Form S-4, Registration No.
333-20291, and incorporated herein by reference.
Exhibit 99 Additional exhibits:
(A) Form of Proxy of First Independence Bank of Florida
(b) Financial Statement Schedules
The financial statement schedules required to be included
pursuant to this Item are not included herein because they are
not applicable or the required information is shown in the
financial statements or notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned hereby undertakes as follows as required by
Item 512 of Regulation S-K:
(1) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus
which is a part of this Registration Statement, by
any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus
will contain the information called for by the
applicable registration form with respect to
reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately above, or (ii) that
purports to meet the requirements of section 10(a)(3)
of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement
and will not be used until such amendment is
effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post- effective amendment shall be deemed to be a new
Registration Statement relating to such securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors,
officers, and controlling persons of the Registrant,
the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the
successful defense of any action,
4
<PAGE> 149
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
Form S-4, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding
to the request.
(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
(d) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration relating to the securities offered
therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(e) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
5
<PAGE> 150
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Montgomery, Alabama, on the 25th of July, 1997.
THE COLONIAL BANCGROUP, INC.
By: /s/ Robert E. Lowder
--------------------------
Robert E. Lowder
Its Chairman of the Board
of Directors, Chief
Executive Officer, and
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Robert E. Lowder Chairman of the Board **
- --------------------------- of Directors, President
Robert E. Lowder and Chief Executive
Officer
/s/ W. Flake Oakley, IV Chief Financial **
- --------------------------- Officer, Secretary
W. Flake Oakley, IV and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
Director
- --------------------------
Lewis Beville
* Director **
- --------------------------
Young J. Boozer
* Director **
- --------------------------
William Britton
6
<PAGE> 151
* Director **
- --------------------------
Jerry J. Chesser
* Director **
- --------------------------
Augustus K. Clements, III
* Director **
- -------------------------
Robert C. Craft
* Director **
- --------------------------
Patrick F. Dye
* Director **
- -------------------------
Clinton O. Holdbrooks
* Director **
- -------------------------
D. B. Jones
* Director **
- -------------------------
Harold D. King
* Director **
- -------------------------
John Ed Mathison
* Director **
- -------------------------
Milton E. McGregor
* Director **
- -------------------------
John C. H. Miller, Jr.
7
<PAGE> 152
* Director **
- -------------------------
Joe D. Mussafer
* Director **
- -------------------------
William E. Powell
* Director **
- -------------------------
J. Donald Prewitt
* Director **
- -------------------------
Jack H. Rainer
Director
- -------------------------
Jimmy Rane
* Director **
- -------------------------
Frances E. Roper
Director
- -------------------------
Simuel Sippial
* Director **
- -------------------------
Ed V. Welch
* The undersigned, acting pursuant to a power of attorney, has signed
this Registration Statement on Form S-4 for and on behalf of the
persons indicated above as such persons' true and lawful
attorney-in-fact and in their names, places and stead, in the
capacities indicated above and on the date indicated below.
/s/ W. Flake Oakley, IV
- --------------------------
W. Flake Oakley, IV
Attorney-in-Fact
** Dated: July 25, 1997
8
<PAGE> 153
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_________________________
EXHIBITS TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
THE COLONIAL BANCGROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
9
<PAGE> 154
EXHIBIT INDEX
EXHIBIT PAGE
- ------- ----
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:
(A) Agreement and Plan of Merger among The Colonial BancGroup,
Inc., Colonial Bank and First Independence Bank of Florida,
dated as of May 8, 1997 and amended as of July 7, 1997,
included in the Prospectus portion of this registration
statement at Appendix A and incorporated herein by reference.
(B) First Independence Bank of Florida Stock Option Plan and forms
of Stock Option Agreement.
(C) First Independence Bank Nontransferable Stock Purchase
Warrant.
Exhibit 4 Instruments defining the rights of security holders:
(A)(1) Article 4 of the Restated Certificate of Incorporation of the
Registrant filed as Exhibit 4.1 to the Registrant's Current Report on
Form 8-K, dated February 21, 1995, including the amendment to Article
4 noted at Exhibit 4(B) above, and incorporated herein by reference.
(A)(2) Amendment to Article 4 or Registrant's Restated Certificate of
Incorporation, dated April 16, 1997, filed as Exhibit 4(A)(2) to the
Registrant's Registration Statement on Form S-4 (File No. 333-26217),
effective May 9, 1997, and incorporated herein by reference.
(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21, 1995, and incorporated herein by reference.
(C) Dividend Reinvestment and Class A Common Stock Purchase Plan
of the Registrant dated January 15, 1986, and Amendment No. 1
thereto dated as of June 10, 1986, filed as Exhibit 4(C) to
the Registrant's Registration Statement on Form S-4 (File No.
33- 07015), effective July 15, 1986, and incorporated herein
by reference.
(D) Trust Indenture dated as of March 25, 1986, included as
Exhibit 4 to the Registrant's Amendment No. 1 to Registration
Statement on Form S-2, file number 33-4004, effective March
25, 1986, and incorporated herein by reference.
(E) All other instruments defining the rights of holders of
long-term debt of the Registrant and its subsidiaries - not
filed pursuant to clause 4(iii) of Item 601(b) of Regulation
S-K to be furnished upon request of the Commission.
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.
10
<PAGE> 155
Exhibit 8 Tax Opinion of Coopers & Lybrand L.L.P.
Exhibit 23 Consents of experts and counsel:
(A) Consent of Coopers & Lybrand L.L.P.
(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.
(C) Consent of Brewer, Beemer, Kuehnhackl & Koon, P.A.
Exhibit 24 Power of Attorney, filed as Exhibit 24 to the registrant's
Registration Statement on Form S-4, Registration No.
333-20291, and incorporated herein by reference.
Exhibit 99 Additional exhibits:
(A) Form of Proxy of First Independence Bank of Florida.
11
<PAGE> 1
EXHIBIT 2(B)
FIRST INDEPENDENCE BANK OF FLORIDA STOCK OPTION PLAN AND FORMS
OF STOCK OPTION AGREEMENT.
12
<PAGE> 2
FIRST INDEPENDENCE BANK OF FLORIDA
STOCK OPTION PLAN
1. Purpose. This Stock Option Plan (hereinafter referred to as
this "Plan") is intended to promote the best interests of the Bank and its
shareholders by enabling the Bank to attract and retain persons of ability as
employees, furnishing an incentive to employees of the Bank by providing them
with an equity participation in the Bank and rewarding those employees who
contribute to the operating progress and earning power of the Bank.
2. Definitions. The following terms shall have the following
meanings when used herein unless the context clearly otherwise requires:
2.1 "Bank" means First Independence Bank of Florida, a
Florida corporation, and any subsidiary corporation, as defined in Section
425(f) of the Code, to which the Board of Directors of First Independence Bank
of Florida has determined to extend the application of this Plan.
2.2 "Board of Directors" means the Board of Directors of
the Bank.
2.3 "Code" means the Internal Revenue Code of 1986, as
amended, or any successor provisions.
2.4 "Effective Date" of this Plan is April 11, 1989.
2.5 "Eligible Employee" means each employee of the Bank
who has completed two consecutive Years of Employment as of a Plan Entry Date.
2.6 "Exercise Price" means the price at which a share of
Option Stock may be purchased by a particular Participant pursuant to the
exercise of an Option, as determined in accordance with Section 7 hereof.
2.7 "Option" means the right of a Participant to purchase
shares of Option Stock in accordance with the terms of this Plan and the Stock
Option Agreement between such Participant and the Bank.
2.8 "Option Stock" means Common Stock of the Bank issued
pursuant to this Plan.
2.9 "Participant" means any Eligible Employee who is
designated (in accordance with the provisions of Section 5 hereof) to be
granted an Option and who is a party to a Stock Option Agreement.
2.10 "Plan Entry Date" means the Effective Date and each
January 1 after the Effective Date.
2.11 "Stock Option Agreement" means an agreement by and
between a Participant and the Bank setting forth the specific terms and
conditions of an Option as well as the specific terms and conditions under
which Option Stock may be purchased by such Participant pursuant to the
exercise of such Option. Such Stock Option Agreement shall be subject to the
provisions of this Plan (which shall be incorporated by reference therein) and
shall contain such provisions as the Board of Directors, in its sole
discretion, may authorize.
2.12 "Vesting Computation Date" means the Effective Date
and each January 1 and July 1 after the Effective Date.
13
<PAGE> 3
2.13 "Year of Employment" means the period of twelve (12)
consecutive months beginning on an employee's commencement of employment by the
Bank and ending on the first anniversary of that date.
3. Adoption and Administration of Plan. This Plan shall become
effective upon the Effective Date, subject to its adoption by the Board of
Directors, approval of the shareholders of the Bank, and approval by the
Florida Department of Banking and Finance in accordance with applicable Florida
law. This plan shall be administered by the Board of Directors, and except as
set forth in Sections 4, 5.4, 6.3, and 7 hereof, any action taken by the Board
of Directors with respect to the implementation, interpretation or
administration of this Plan shall be final, conclusive and binding. However,
to the extent not prohibited by the laws of the State of Florida, the Charter
of the Bank, the Bylaws of the Bank, or the Code, the Board of Directors may
delegate (by resolutions adopted prior to or after the effectiveness of this
Plan) any or all of its responsibilities hereunder to such administrative
committee of the Board of Directors as the Board of Directors shall designate
and, in the event of such designation, all references herein or in any Stock
Option Agreement to the Board of Directors shall, to the extent applicable, be
deemed to refer to and include such administrative committee.
4. Total Number of Shares of Option Stock. The number of shares
of Option Stock which may be issued in the aggregate by the Bank under this
Plan pursuant to the exercise of Options granted hereunder shall not be more
than twenty-two thousand five hundred (22,500), which number may be increased
only in accordance with Florida law following resolution adopted by the Board
of Directors and approved by the shareholders of the Bank. Such shares of
Option Stock may be issued out of the authorized and unissued or reacquired
Common Stock of the Bank, as determined by the Board of Directors or its
designated administrative committee. No fractional shares of Option Stock
shall be issued pursuant to the exercise of an Option. Any shares subject to
an Option which expires or is terminated unexercised as to such shares may
again be subject to an Option under this Plan. To the extent there shall be
any adjustment pursuant to the provisions of Section 11, the aforesaid number
of shares shall be appropriately so adjusted.
5. Eligibility and Awards. The Board of Directors shall
designate, at any time and from time to time thereafter:
5.1 The Eligible Employees of the Bank who shall be
granted an Option;
5.2 The number of shares of Option Stock which each
Eligible Employee so designated may purchase pursuant to the exercise of an
Option;
5.3 The Exercise Price for each designated Eligible
Employee;
5.4 The other terms of the Option of each designated
Eligible Employee; and
5.5 The restrictions, if any, applicable to the shares of
Option Stock which each Eligible Employee so designated may purchase.
6. Grant, Exercise Rights and Termination of Options.
6.1 As soon as practicable after a designation is made by
the Board of Directors, pursuant to Section 5 hereof, the appropriate officer
or officers of the Bank shall give notice (written or oral) to such effect to
each Eligible Employee of the Bank so designated, which notice shall be
accompanied by a copy of copies of the Stock Option Agreement to be executed by
such Eligible Employee.
6.2 Upon receipt of the notice specified in Section 6.1,
an Eligible Employee so designated shall have an Option, and shall thereby
become and be a Participant, only upon the due execution by such Eligible
Employee and the Bank of a Stock Option Agreement (in such number as the Board
of
14
<PAGE> 4
Directors shall determine) within such number of days from the giving of such
notice as shall be specified in such notice (unless waived by the Bank).
6.3 An Option of a Participant may be exercised during
the period such Option is in effect and as set forth herein and in the Stock
Option Agreement, and only if compliance with all applicable Federal and state
securities laws can be effected, and may be exercised only by:
6.3.1 Such Participant's completion, execution and delivery
to the Bank of a notice of exercise and an "investment letter" (if required by
the Bank) as supplied by the Bank; and
6.3.2 The payment to the Bank of the aggregate Exercise
Price, as provided under Section 8, for the shares of Option Stock to be
purchased pursuant to such exercise (as shall be specified by such Participant
in such notice) in accordance with the terms of this Plan and the Stock Option
Agreement.
6.4 Except as specifically provided by a duly executed
Stock Option Agreement or unless waived by the Board of Directors, an Option or
any of the rights thereunder may be exercised by such Participant only, and may
not be transferred or assigned, voluntarily, involuntarily or by any operation
of law (including, without limitation, the laws of bankruptcy, intestacy,
descent and distribution and succession).
6.5 Notwithstanding any terms of provisions of this Plan
to the contrary, the Board of Directors may delegate to the appropriate officer
of the Bank the authority to prepare, execute and deliver any Stock Option
Agreement reflecting any Option granted under this Plan; provided, however,
that any such Stock Option Agreement shall be consistent with the terms and
conditions of this Plan.
7. Purchase Price of Option Stock. The determination of the Exercise
Price shall be made by the Board of Directors, in its sole discretion, it being
understood that the Exercise Price may not be less than the greater of the par
value or one hundred percent (100%) of the fair market value of the shares of
Common Stock of the Bank on the date that such Option shall be granted. The
fair market value of the shares of Common Stock of the Bank shall be determined
for the purposed of this Plan by the Board of Directors in accordance with the
Code, and such determination by the Board of Directors shall be final,
conclusive and binding upon each Participant and the Bank for all purposes of
this Plan.
8. Payment for Shares of Option Stock. Payment by each Participant
for the shares of Option Stock purchased hereunder shall be made by cash or
cashier's check or in accordance with the terms of any Stock Option Agreement
executed by such Participant.
9. Costs and Expenses. All costs and expenses with respect to the
adoption, implementation, interpretation and administration of this Plan shall
be borne by the Bank; however, except as otherwise specifically provided in
this Plan or the applicable Stock Option Agreement between the Bank and a
Participant, the Bank shall not be obligated to pay any costs or expenses
(including legal fees) incurred by any Participant in connection with any Stock
Option Agreement, this Plan or any Option or Option Stock held by the
Participant.
10. No Prior Right of Award. Nothing in this Plan shall be deemed to
give any officer or employee of the Bank, or such person's legal
representatives or assigns, or any other person or entity claiming under or
through such person, any contract or other right to participate in the benefits
of this Plan. Nothing in this Plan shall be construed as consisting a
commitment, guarantee, agreement or understanding of any kind or nature that
the Bank shall continue to employ any individual (whether or not a
Participant). This Plan shall not effect in any way the right of the Bank to
terminate the employment of any individual (whether or not a Participant) at
any time and for any reason whatsoever. No change of a Participant's duties as
an employee of the Bank shall result in a modification of the terms of any
rights of such Participant under this Plan or any Stock Option Agreement
executed by such Participant.
15
<PAGE> 5
11. Changes in Capital Structure. Subject to any required action by
the shareholders of the Bank and the provisions of Florida law, the number of
shares of Option Stock covered by any Option which has not then been fully
authorized or reserved for issuance hereunder (whether such shares are
unissued, reacquired or subject to an Option that expired, was surrendered or
terminated unexercised as to such shares), as well as the Exercise Price then
existing under each Option then in effect, shall be proportionately adjusted
for:
11.1 A division, combination or reclassification of any of
the shares of Common Stock of the Bank; or
11.2 A dividend payable in shares of Common Stock of the
Bank.
12. Amendment or Termination of Plan. Except as otherwise provided
herein and with the approval of the Florida Department of Banking and Finance,
this Plan may be amended or terminated in whole or in part by the Board of
Directors (in its sole discretion), but no such action shall adversely affect
or alter any right or obligation with respect to any Option or Stock Option
Agreement then in effect, except to the extent that any such action shall be
required or desirable (in the opinion of the Bank or its counsel) in order to
comply with the Code or any rule or regulation promulgated or proposed
thereunder.
13. Burden and Benefit. The terms and provisions of this Plan shall
be binding upon, and shall inure to the benefit of, each Participant and such
Participant's executors and administrators, estate, heirs and personal and
legal representatives.
14. Headings. The headings and other captions contained in this Plan
are for convenience and reference only and shall not be used in interpreting,
construing or enforcing any of the provisions of this Plan.
16
<PAGE> 6
FORMS OF
FIRST INDEPENDENCE BANK OF FLORIDA
STOCK OPTION AGREEMENT
17
<PAGE> 7
AMENDMENT TO STOCK OPTION AGREEMENT DATED JULY 16, 1996
BY AND BETWEEN FIRST INDEPENDENCE BANK OF FLORIDA
AND EDWARD H. BLACK
That certain Stock Option Agreement, dated July 16, 1996, by and between First
Independence Bank of Florida ("Bank") and Edward H. Black ("Participant"), is
amended as of May 7, 1997, as follows:
Section 2.3, which originally read:
"The one-hundred eightieth (180
th) day following the date of the
termination of employment of the Participant for any reason other than
"termination of employment for cause", as defined in Section 3.7;"
is amended to read as follows:
"2.3 THREE YEARS following the date of the termination of employment
of the Participant for any reason other than "termination of
employment for cause", as defined in Section 3.7;"
IN WITNESS WHEREOF, the Bank and Participant have executed this Stock Option
Amendment.
WITNESS AS TO
BANK: BANK:
_____________________________ ____________________________
Signature: James E. Courtney
Chairman of the Board
_____________________________
_____________________________
Signature:
_____________________________
Print Name:
18
<PAGE> 8
The undersigned Participant hereby acknowledges receipt of an executed original
of this Stock Option Amendment, dated May 7, 1997, and accepts any options
granted hereunder on the terms and conditions contained herein.
WITNESS AS TO
PARTICIPANT: PARTICIPANT:
_____________________________ ____________________________
Signature: Edward H. Black
_____________________________
Print Name:
_____________________________
Signature:
_____________________________
Print Name:
19
<PAGE> 9
FIRST INDEPENDENCE BANK OF FLORIDA
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made as of July 16, 1996, by
and between First Independence Bank of Florida (hereinafter referred to as the
"Bank"), a Florida bank corporation whose principal office is at 16740 San
Carlos Boulevard, S.W., Fort Myers, Florida, 33908, and EDWARD H. BLACK
(hereinafter referred to as the "Participant"), an employee of the Bank.
RECITALS
The Board of Directors of the Bank (hereinafter referred to as the "Board of
Directors") has determined that Participant is eligible to receive an Option to
purchase shares of "Option Stock", as such term is defined in the Stock Option
Plan of the Bank currently in effect, including all amendments thereto if any
(the "Plan").
OPERATIVE PROVISIONS
In consideration of the foregoing, of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Grant of Option
1.1 Shares, Exercise Price. Subject to the terms and conditions
hereinafter set forth, the Bank hereby grants to Participant the right to
purchase, during the period specified in Section 2 hereof, Twenty-Five Thousand
(25,000) Shares of Option Stock (such shares of Option Stock being hereinafter
referred to as the "Shares") at a price of ten dollars ($10.00) per Share (the
"Exercise Price"), in accordance with the terms of this Agreement and the Plan
(such right being hereinafter referred to as the "Option"). The Board of
Directors, exercising good faith, has determined that the Exercise Price is
equal to at least one hundred percent (100%) of the fair market value of each
Share on the date hereof.
2. Duration of Option. The Option shall be effective during the period
commencing with the date of this Agreement and ending on the earliest of:
2.1 The date all of the Shares are purchased pursuant to the terms of this
Agreement or the unexercised portion of the Option is surrendered to the Bank
pursuant to Section 3.6;
2.2 The date of the termination of employment for cause of the
Participant, as such term is defined in Section 3.7;
2.3 Three years following the date of the termination of employment of the
Participant for any reason other than "termination of employment for cause", as
defined in Section 3.7;
2.4 The expiration of the six (6) month period prescribed under Section
3.3 following the death of the Participant;
2.5 Ten (10) years from the date of this Agreement.
Notwithstanding any provision in this Agreement to the contrary, an option
granted under this Agreement (until terminated as hereinafter provided) shall
become exercisable to the full extent of the shares specified in such grant if
there is a Change in Control of the Bank as hereinafter defined. For purposes
of this
20
<PAGE> 10
Agreement, a "Change in Control" shall have occurred if any of the following
events shall have occurred:
a/ The Bank enters into an agreement to merge, consolidate or reorganize into
or with another corporation or other legal person, and, as a result of such
merger, consolidation, or reorganization, less than 75% of the combined voting
power of the then outstanding securities of such corporation or person,
immediately after such transaction, will be held in the aggregate by the
holders of voting shares of the Bank immediately prior to such transaction;
b/ The Bank enters into an agreement to sell or otherwise transfer all or
substantially all of its assets to any other corporation or other legal person,
and, as a result of such sale or transfer, less than 75% of the combined voting
power of the then outstanding securities of such corporation or person,
immediately after such sale of transfer, will be held in the aggregate by the
holders of voting shares of the Bank immediately prior to such sale or
transfer;
c/ During any period of two consecutive years, individuals who constituted the
Directors of the Bank at the beginning of any such period cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election, by the Bank's stockholders of each new Director was
approved by a vote of at least two-thirds of the Directors of the Bank then
still in office who were directors of the Bank at the beginning of such period;
or,
d./ Three or more directors, separately or together, are elected to the
Board of Directors in spite of publicly stated opposition to such election by
at least a majority of the Board of Directors of the Bank.
3. Exercise of Option.
3.1 The Option may be exercised only if compliance with all applicable
Federal and State securities laws can be effected as follows:
3.1.1 Except as provided in Section 2 hereof, an option granted under this
Agreement (until terminated as hereinafter provided) shall be exercisable only
to the extent of one-fourth of the shares specified in the grant after the
Participant shall have been in the continuous employ of the Bank for one full
year from February 20, 1996, and to the extent of an additional one-fourth of
such shares on the first day of January in each of the next three successive
calendar years thereafter during which the Participant shall have been in the
continuous employ of the Bank. The number of shares of Option Stock as to
which the Option may be exercised shall be determined on the last date on which
the Participant shall have been in the continuous employ of the Bank, except
that the Option may be exercised as to all the shares subject to the Option
under the circumstances set forth in Section 2 hereof. For the purposes of
this Section, leaves of absences approved by the Board of Directors of the Bank
for illness, military, or governmental service, or other cause, shall be
considered as employment.
3.2 The Option may be exercised only by:
3.2.1 Participant's completion, execution, and delivery to the Bank of a
notice of exercise and "investment letter" (if required by the Bank) as
supplied by the Bank; and,
3.2.2 The payment to the Bank, as provided in Section 3.4 of an amount
equal to the amount obtained by multiplying the Exercise Price by the number of
Shares being purchased pursuant to such exercise, as shall be specified by
Participant in such notice of exercise. Except in the event of the death of
Participant, in which event Participant's estate, executors or administrators,
or personal or legal representatives may exercise the Option in accordance with
the terms of Section 3.3, the Option or any of the rights thereunder may be
exercised by Participant only (regardless of any community property or similar
interest therein of the spouse, if any, of Participant or any successors in
interest of such spouse), and may not be transferred or assigned, in whole or
in part, whether voluntarily, involuntarily, or by operation of law (including,
without limitation, the
21
<PAGE> 11
laws of bankruptcy, intestacy, descent and distribution and succession) or on
an absolute or contingent basis.
3.3 In the event of the death of Participant at such time that Participant
shall possess an Option pursuant to the terms of this Agreement, Participant's
estate, executors or administrators, or personal or legal representatives shall
be entitled, for a period of six (6) months following the date of Participant's
death, to exercise the Option, but only to the extent that Participant was
entitled to exercise the Option on the date of such death. Any person so
desiring to exercise Participant's Option shall be required, as a condition to
the exercise of the Option, to furnish to the Bank such documentation as the
Bank shall deem satisfactory to evidence the authority of such person to
exercise the Option on behalf of Participant. In the event of the exercise of
such Option by Participant's estate, executors or administrators, or personal
or legal representatives, all references herein to Participant shall, to the
extent applicable, be deemed to refer to and include such estate, executors or
administrators, or personal or legal representatives, as the case may be.
3.4 Payment of the amount determined pursuant to Section 3.2 hereof shall
be made by cash or cashier's check.
3.5 Upon the exercise of the Option by Participant, or as soon thereafter
as is practicable, the Bank shall issue and deliver to Participant a
certificate or certificates evidencing such number of Shares as Participant has
so elected to purchase. Such certificate or certificates shall be registered
in the name of Participant and, if applicable, shall bear an appropriate
investment warranty legend, any legend required by any Federal or State
securities law, rule, or regulation, and, if applicable, a legend referring to
the restrictions provided hereunder and under the Plan and any other legend
required by the law of the State of Florida. Upon the exercise of the Option
and the issuance and delivery of such certificate or certificates, Participant
shall have all the rights of a shareholder with respect to such Shares,
including the right to receive all dividends or other distributions paid or
made with respect thereto, provided, however, that such Shares shall be subject
to the restrictions hereunder and in the Plan. In the event of a merger or
consolidation to which the Bank is a party (other than as the surviving
entity), or of any other acquisition of a majority of the outstanding shares of
Common Stock of the Bank, or of any transfer of all or substantially all of the
assets of the Bank, a determination as to whether the stock of the acquiring
corporation so received (if any) shall be subject to the restrictions set forth
in this Agreement shall be made solely by the acquiring corporation.
3.6 The Board of Directors may, upon such terms and conditions as it deems
appropriate, accept the surrender by Participant of Participant's right to
exercise the Option, in whole or in part, and authorize a payment in
consideration therefore of an amount equal to the difference obtained by
subtracting the Exercise Price of the Shares which are the subject of such
surrendered Option from the fair market value of the Shares which are the
subject of such surrendered Option on the date of such surrender (such amount
not to be less than zero), such payment to be in cash.
3.7 For all purposes of this Agreement, "termination of employment for
cause" shall mean termination of employment with the Bank because of
Participant's fraud, embezzlement, dishonesty, willful misconduct injurious to
the Bank, willful neglect of his employment duties, or willful violation of any
rule or regulation of the Bank. The determination that a termination was "for
cause" shall be made by the Board of Directors, in its sole discretion, without
any necessity for civil or criminal charges, proceedings, or judicial or
administrative determination.
4. Restrictions on Transfer of Option. Except as otherwise provided in
Section 3.2, neither the Option nor any future interest in the Shares to be
acquired pursuant to the Option shall or may be sold, exchanged, delivered,
assigned, bequeathed or gifted, pledged, mortgaged, hypothecated or otherwise
encumbered, transferred or permitted to be transferred, or otherwise disposed
of, whether voluntarily, involuntarily, or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution
and succession), or on an absolute or contingent basis.
5. Delivery of Stock and Documents. Upon the closing of any purchase by
Participant of any Shares pursuant to Section 3 of this Agreement, the Bank
shall deliver to Participant the certificate or certificates representing the
Shares being sold, free and clear of all options, calls, contracts,
commitments, demands, liens
22
<PAGE> 12
encumbrances, pledges, charges, and security interests, duly endorsed for
transfer and such assignments, certificates of authority, consents to transfer,
instruments and evidences of title of the Bank and of the Bank's compliance
with this Agreement as may be reasonably required by Participant (or by counsel
for Participant). In addition, the Bank shall agree to indemnify (and, if so
requested by Participant shall so agree in writing) Participant for any and all
losses or damages resulting from, relating or incident to, or arising out of,
any misrepresentation or breach or warranty with respect thereto and any and
all actions, suits, proceedings, claims, demands, judgements, costs, and
expenses (including legal fees) incident to the foregoing.
6. Binding Upon Transferees. In the event that, at any time or from time to
time, any Options or other rights under this Agreement are transferred to any
party (other than the Bank) pursuant to the provisions of Section 3.3 or
otherwise, the transferee shall take such Shares pursuant to all of the
provisions, conditions and obligations of the Plan and this Agreement, and, as
a condition precedent to such transfer, the transferee shall agree (for and on
behalf of such transferee, such transferee's legal representatives, and such
transferee's transferees and assigns) in writing to be bound by all provisions
of the Plan and this Agreement.
7. Changes in Capital Structure of the Bank. Subject to any required action
by the shareholders of the Bank and the provision of the laws of the State of
Florida, the number of shares of Option Stock subject to this Agreement, as
well as the Exercise Price of any Shares not yet purchased by Participant shall
be proportionately adjusted for (i) a division, combination, or
reclassification of the shares of Common Stock of the Bank, or (ii) a dividend
payable in shares of Common Stock of the Bank.
8. Rights Prior to Exercise. Participant shall have no equity interest in the
Bank or any voting, dividend, liquidation, or dissolution rights with respect
to any capital stock of the Bank solely by reason of having an Option or having
executed this Agreement. Furthermore, prior to the exercise of all or a
portion of the Option, as set forth in Section 3, and the issuance and delivery
of a certificate or certificates evidencing the Shares purchased pursuant to
the exercise of all or a portion of such Option, Participant shall have no
interest in, or any voting, dividend, liquidation, or dissolution rights with
respect to the Shares, except to the extent that Participant has exercised all
or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.
9. Employment of Participant. Nothing in this Agreement shall be construed as
constituting a commitment, guarantee, agreement, or understanding of any kind
or nature, that the Bank shall continue to employ Participant, nor shall this
Agreement affect in any way the right of the Bank to terminate the employment
of Participant at any time and for any reason. By Participant's execution of
this Agreement, Participant acknowledges and agrees that Participant's
employment is "at will". No change of Participant's duties as an employee of
the Bank shall result in, or be deemed to be, a modification of any of the
terms of this Agreement.
10. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of, the Bank and the Participant, and their respective
heirs, personal and legal representatives, successors and assigns. As used in
this Agreement, the term the "Bank" shall also include any corporation which is
the parent or a subsidiary of the Bank or any corporation or entity which is an
affiliate of the Bank by virtue of common (although not identical) ownership,
and for which Participant is providing services in any form during
Participant's employment with the Bank or any such other corporation or entity.
Participant hereby consents to the enforcement of any and all of the provisions
of this Agreement by or for the benefit of the Bank and any such other
corporation or entity. Each provision of this Agreement which is at any time
required to be contained herein by the Internal Revenue Code of 1986, as
amended (the "Code"), or any regulation or rule promulgated thereunder, is
included herein as a material inducement to the Bank to grant the Option and
execute this Agreement.
11. Genders. The use of any gender herein shall be deemed to be or
include the other genders, and the use of the singular herein shall be deemed
to be or include the plural (and vice versa), wherever appropriate.
12. Headings. The headings and other captions contained in this Agreement
are for convenience of reference only and shall not be used in interpreting,
construing, or enforcing any of the provisions of this
23
<PAGE> 13
Agreement.
13. Entire Agreement. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the parties hereto with respect to the Option and the Shares, and there are no
promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, between them with respect
to the Option or the Shares other than as set forth herein. Any and all prior
agreements between the parties hereto with respect to any stock purchase rights
or stock option rights regarding the Shares or the Option are hereby revoked.
This Agreement is, and is intended by the parties to be, an integration of any
kind and all prior agreements or understandings, oral or written, with respect
to the Option and the Shares. Participant further covenants and agrees not to
enter into any agreement or understanding, either written or oral, in conflict
with the provisions of this Agreement.
14. Notices. Any and all notices provided for herein shall be sufficient
if in writing and sent by hand delivery or by certified or registered mail
(return receipt requested and first class postage prepaid), in the case of the
Bank to its principal office, and, in the case of Participant to Participant's
address as shown on the Bank's records.
15. Specific Performance. Strict compliance by Participant shall be
required with each and every provision of this Agreement. The parties hereto
agree that the Shares are unique, that Participant's failure to perform the
obligations provided by this Agreement will result in irreparable damage to the
Bank and that specific performance of Participant's obligations may be obtained
by suit in equity.
16. Invalid or Unenforceable Provisions. The provisions of this Agreement
shall be deemed severable, and the invalidity or unenforceability of any one or
more of the provisions hereof shall not affect the validity and enforceability
of the other provisions hereof. Participant agrees that the breach or alleged
breach by the Bank of any covenant contained in another agreement (if any)
between the Bank and Participant, or any obligation owed to Participant by the
Bank, shall not affect the validity or enforceability of the covenants and
agreements of Participant set forth herein.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. Participant agrees that any
action to enforce any provision of this Agreement or to recover damages
relating to a breach of any provision hereof may be brought in any court having
appropriate subject matter jurisdiction in Lee County, Florida, and, by
execution of this Agreement, Participant consents, accepts, and submits to the
personal jurisdiction of any such court and irrevocably waives any objection or
claim or immunity on the ground of venue, convenience of the forum, or the
personal jurisdiction of such court or the execution on, and enforcement of,
judgments and orders thereof.
18. Modifications. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by the parties hereto, provided,
however, that Participant hereby covenants and agrees to execute any amendment
to this Agreement which shall be required or desirable (in the opinion of the
Bank or its counsel) in order to comply with any rule or regulation promulgated
or proposed under the Code by the Internal Revenue Service and which has been
approved by the Florida Department of Banking and Finance.
19. Terms and Conditions of Plan. The terms and conditions included in
the Plan, the receipt of a copy of which Participant hereby acknowledges by
execution of this Agreement, are incorporated by reference herein, and to the
extent that any conflict may exist between any term or provision of this
Agreement and any terms or provision of the Plan, such term or provision of the
Plan shall control.
IN WITNESS WHEREOF, the Bank and Participant have executed this Agreement
as of the day and year first above written.
24
<PAGE> 14
WITNESS AS TO BANK:BANK:
__________________________FIRST INDEPENDENCE BANK OF FLORIDA
A Florida Bank Corporation
____________________________________________________________
James E. Courtney,
Chairman of the Board
The undersigned Participant hereby acknowledges receipt of an executed
original of this Stock Option Agreement dated July 16, 1996, and accepts any
options granted hereunder on the terms and conditions contained herein.
WITNESS AS TO
PARTICIPANT:PARTICIPANT:
____________________________________________________________
EDWARD H. BLACK
__________________________
25
<PAGE> 15
FIRST INDEPENDENCE BANK OF FLORIDA
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made as of April 15, 1997, by
and between First Independence Bank of Florida (hereinafter referred to as the
"Bank"), a Florida bank corporation whose principal office is at 16740 San
Carlos Boulevard, S.W., Fort Myers, Florida, 33908, and KENNETH J. IGLESIAS
(hereinafter referred to as the "Participant"), an employee of the Bank.
RECITALS
The Board of Directors of the Bank (hereinafter referred to as the "Board of
Directors") has determined that Participant is eligible to receive an Option to
purchase shares of "Option Stock", as such term is defined in the Stock Option
Plan of the Bank currently in effect, including all amendments thereto if any
(the "Plan").
OPERATIVE PROVISIONS
In consideration of the foregoing, of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Grant of Option
1.1 Shares, Exercise Price. Subject to the terms and conditions
hereinafter set forth, the Bank hereby grants to Participant the right to
purchase, during the period specified in Section 2 hereof, Seven Thousand
(7,000) Shares of Option Stock (such shares of Option Stock being hereinafter
referred to as the "Shares") at a price of ten dollars ($10.00) per Share (the
"Exercise Price"), in accordance with the terms of this Agreement and the Plan
(such right being hereinafter referred to as the "Option"). The Board of
Directors, exercising good faith, has determined that the Exercise Price is
equal to at least one hundred percent (100%) of the fair market value of each
Share on the date hereof.
2. Duration of Option. The Option shall be effective during the period
commencing with the date of this Agreement and ending on the earliest of:
2.1 The date all of the Shares are purchased pursuant to the terms of this
Agreement or the unexercised portion of the Option is surrendered to the Bank
pursuant to Section 3.6;
2.2 The date of the termination of employment for cause of the
Participant, as such term is defined in Section 3.7;
2.3 Three years following the date of the termination of employment of the
Participant for any reason other than "termination of employment for cause", as
defined in Section 3.7;
2.4 The expiration of the six (6) month period prescribed under Section
3.3 following the death of the Participant;
2.5 Ten (10) years from the date of this Agreement.
Notwithstanding any provision in this Agreement to the contrary, an option
granted under this Agreement (until terminated as hereinafter provided) shall
become exercisable to the full extent of the shares specified in such grant if
there is a Change in Control of the Bank as hereinafter defined. For purposes
of this
26
<PAGE> 16
Agreement, a "Change in Control" shall have occurred if any of the following
events shall have occurred:
a/ The Bank enters into an agreement to merge, consolidate or reorganize into
or with another corporation or other legal person, and, as a result of such
merger, consolidation, or reorganization, less than 75% of the combined voting
power of the then outstanding securities of such corporation or person,
immediately after such transaction, will be held in the aggregate by the
holders of voting shares of the Bank immediately prior to such transaction;
b/ The Bank enters into an agreement to sell or otherwise transfer all or
substantially all of its assets to any other corporation or other legal person,
and, as a result of such sale or transfer, less than 75% of the combined voting
power of the then outstanding securities of such corporation or person,
immediately after such sale of transfer, will be held in the aggregate by the
holders of voting shares of the Bank immediately prior to such sale or
transfer;
c/ During any period of two consecutive years, individuals who constituted the
Directors of the Bank at the beginning of any such period cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election, by the Bank's stockholders of each new Director was
approved by a vote of at least two-thirds of the Directors of the Bank then
still in office who were directors of the Bank at the beginning of such period;
or,
d./ Three or more directors, separately or together, are elected to the
Board of Directors in spite of publicly stated opposition to such election by
at least a majority of the Board of Directors of the Bank.
3. Exercise of Option.
3.1 The Option may be exercised only if compliance with all applicable
Federal and State securities laws can be effected as follows:
3.1.1 Except as provided in Section 2 hereof, an option granted under this
Agreement (until terminated as hereinafter provided) shall be exercisable only
to the extent of one-fourth of the shares specified in the grant after the
Participant shall have been in the continuous employ of the Bank for one full
year from April 15, 1997, and to the extent of an additional one-fourth of such
shares on the fifteenth day of April in each of the next three successive
calendar years thereafter during which the Participant shall have been in the
continuous employ of the Bank. The number of shares of Option Stock as to
which the Option may be exercised shall be determined on the last date on which
the Participant shall have been in the continuous employ of the Bank, except
that the Option may be exercised as to all the shares subject to the Option
under the circumstances set forth in Section 2 hereof. For the purposes of
this Section, leaves of absences approved by the Board of Directors of the Bank
for illness, military, or governmental service, or other cause, shall be
considered as employment.
3.2 The Option may be exercised only by:
3.2.1 Participant's completion, execution, and delivery to the Bank of a
notice of exercise and "investment letter" (if required by the Bank) as
supplied by the Bank; and,
3.2.2 The payment to the Bank, as provided in Section 3.4 of an amount
equal to the amount obtained by multiplying the Exercise Price by the number of
Shares being purchased pursuant to such exercise, as shall be specified by
Participant in such notice of exercise. Except in the event of the death of
Participant, in which event Participant's estate, executors or administrators,
or personal or legal representatives may exercise the Option in accordance with
the terms of Section 3.3, the Option or any of the rights thereunder may be
exercised by Participant only (regardless of any community property or similar
interest therein of the spouse, if any, of Participant or any successors in
interest of such spouse), and may not be transferred or assigned, in whole or
in part, whether voluntarily, involuntarily, or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution
and succession) or on an absolute or contingent basis.
27
<PAGE> 17
3.3 In the event of the death of Participant at such time that Participant
shall possess an Option pursuant to the terms of this Agreement, Participant's
estate, executors or administrators, or personal or legal representatives shall
be entitled, for a period of six (6) months following the date of Participant's
death, to exercise the Option, but only to the extent that Participant was
entitled to exercise the Option on the date of such death. Any person so
desiring to exercise Participant's Option shall be required, as a condition to
the exercise of the Option, to furnish to the Bank such documentation as the
Bank shall deem satisfactory to evidence the authority of such person to
exercise the Option on behalf of Participant. In the event of the exercise of
such Option by Participant's estate, executors or administrators, or personal
or legal representatives, all references herein to Participant shall, to the
extent applicable, be deemed to refer to and include such estate, executors or
administrators, or personal or legal representatives, as the case may be.
3.4 Payment of the amount determined pursuant to Section 3.2 hereof shall
be made by cash or cashier's check.
3.5 Upon the exercise of the Option by Participant, or as soon thereafter
as is practicable, the Bank shall issue and deliver to Participant a
certificate or certificates evidencing such number of Shares as Participant has
so elected to purchase. Such certificate or certificates shall be registered
in the name of Participant and, if applicable, shall bear an appropriate
investment warranty legend, any legend required by any Federal or State
securities law, rule, or regulation, and, if applicable, a legend referring to
the restrictions provided hereunder and under the Plan and any other legend
required by the law of the State of Florida. Upon the exercise of the Option
and the issuance and delivery of such certificate or certificates, Participant
shall have all the rights of a shareholder with respect to such Shares,
including the right to receive all dividends or other distributions paid or
made with respect thereto, provided, however, that such Shares shall be subject
to the restrictions hereunder and in the Plan. In the event of a merger or
consolidation to which the Bank is a party (other than as the surviving
entity), or of any other acquisition of a majority of the outstanding shares of
Common Stock of the Bank, or of any transfer of all or substantially all of the
assets of the Bank, a determination as to whether the stock of the acquiring
corporation so received (if any) shall be subject to the restrictions set forth
in this Agreement shall be made solely by the acquiring corporation.
3.6 The Board of Directors may, upon such terms and conditions as it deems
appropriate, accept the surrender by Participant of Participant's right to
exercise the Option, in whole or in part, and authorize a payment in
consideration therefore of an amount equal to the difference obtained by
subtracting the Exercise Price of the Shares which are the subject of such
surrendered Option from the fair market value of the Shares which are the
subject of such surrendered Option on the date of such surrender (such amount
not to be less than zero), such payment to be in cash.
3.7 For all purposes of this Agreement, "termination of employment for
cause" shall mean termination of employment with the Bank because of
Participant's fraud, embezzlement, dishonesty, willful misconduct injurious to
the Bank, willful neglect of his employment duties, or willful violation of any
rule or regulation of the Bank. The determination that a termination was "for
cause" shall be made by the Board of Directors, in its sole discretion, without
any necessity for civil or criminal charges, proceedings, or judicial or
administrative determination.
4. Restrictions on Transfer of Option. Except as otherwise provided in
Section 3.2, neither the Option nor any future interest in the Shares to be
acquired pursuant to the Option shall or may be sold, exchanged, delivered,
assigned, bequeathed or gifted, pledged, mortgaged, hypothecated or otherwise
encumbered, transferred or permitted to be transferred, or otherwise disposed
of, whether voluntarily, involuntarily, or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution
and succession), or on an absolute or contingent basis.
5. Delivery of Stock and Documents. Upon the closing of any purchase by
Participant of any Shares pursuant to Section 3 of this Agreement, the Bank
shall deliver to Participant the certificate or certificates representing the
Shares being sold, free and clear of all options, calls, contracts,
commitments, demands, liens encumbrances, pledges, charges, and security
interests, duly endorsed for transfer and such assignments, certificates of
authority, consents to transfer, instruments and evidences of title of the Bank
and of the Bank's
28
<PAGE> 18
compliance with this Agreement as may be reasonably required by Participant (or
by counsel for Participant). In addition, the Bank shall agree to indemnify
(and, if so requested by Participant shall so agree in writing) Participant for
any and all losses or damages resulting from, relating or incident to, or
arising out of, any misrepresentation or breach or warranty with respect
thereto and any and all actions, suits, proceedings, claims, demands,
judgements, costs, and expenses (including legal fees) incident to the
foregoing.
6. Binding Upon Transferees. In the event that, at any time or from time to
time, any Options or other rights under this Agreement are transferred to any
party (other than the Bank) pursuant to the provisions of Section 3.3 or
otherwise, the transferee shall take such Shares pursuant to all of the
provisions, conditions and obligations of the Plan and this Agreement, and, as
a condition precedent to such transfer, the transferee shall agree (for and on
behalf of such transferee, such transferee's legal representatives, and such
transferee's transferees and assigns) in writing to be bound by all provisions
of the Plan and this Agreement.
7. Changes in Capital Structure of the Bank. Subject to any required action
by the shareholders of the Bank and the provision of the laws of the State of
Florida, the number of shares of Option Stock subject to this Agreement, as
well as the Exercise Price of any Shares not yet purchased by Participant shall
be proportionately adjusted for (i) a division, combination, or
reclassification of the shares of Common Stock of the Bank, or (ii) a dividend
payable in shares of Common Stock of the Bank.
8. Rights Prior to Exercise. Participant shall have no equity interest in the
Bank or any voting, dividend, liquidation, or dissolution rights with respect
to any capital stock of the Bank solely by reason of having an Option or having
executed this Agreement. Furthermore, prior to the exercise of all or a
portion of the Option, as set forth in Section 3, and the issuance and delivery
of a certificate or certificates evidencing the Shares purchased pursuant to
the exercise of all or a portion of such Option, Participant shall have no
interest in, or any voting, dividend, liquidation, or dissolution rights with
respect to the Shares, except to the extent that Participant has exercised all
or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.
9. Employment of Participant. Nothing in this Agreement shall be construed as
constituting a commitment, guarantee, agreement, or understanding of any kind
or nature, that the Bank shall continue to employ Participant, nor shall this
Agreement affect in any way the right of the Bank to terminate the employment
of Participant at any time and for any reason. By Participant's execution of
this Agreement, Participant acknowledges and agrees that Participant's
employment is "at will". No change of Participant's duties as an employee of
the Bank shall result in, or be deemed to be, a modification of any of the
terms of this Agreement.
10. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of, the Bank and the Participant, and their respective
heirs, personal and legal representatives, successors and assigns. As used in
this Agreement, the term the "Bank" shall also include any corporation which is
the parent or a subsidiary of the Bank or any corporation or entity which is an
affiliate of the Bank by virtue of common (although not identical) ownership,
and for which Participant is providing services in any form during
Participant's employment with the Bank or any such other corporation or entity.
Participant hereby consents to the enforcement of any and all of the provisions
of this Agreement by or for the benefit of the Bank and any such other
corporation or entity. Each provision of this Agreement which is at any time
required to be contained herein by the Internal Revenue Code of 1986, as
amended (the "Code"), or any regulation or rule promulgated thereunder, is
included herein as a material inducement to the Bank to grant the Option and
execute this Agreement.
11. Genders. The use of any gender herein shall be deemed to be or
include the other genders, and the use of the singular herein shall be deemed
to be or include the plural (and vice versa), wherever appropriate.
12. Headings. The headings and other captions contained in this Agreement
are for convenience of reference only and shall not be used in interpreting,
construing, or enforcing any of the provisions of this Agreement.
29
<PAGE> 19
13. Entire Agreement. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the parties hereto with respect to the Option and the Shares, and there are no
promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, between them with respect
to the Option or the Shares other than as set forth herein. Any and all prior
agreements between the parties hereto with respect to any stock purchase rights
or stock option rights regarding the Shares or the Option are hereby revoked.
This Agreement is, and is intended by the parties to be, an integration of any
kind and all prior agreements or understandings, oral or written, with respect
to the Option and the Shares. Participant further covenants and agrees not to
enter into any agreement or understanding, either written or oral, in conflict
with the provisions of this Agreement.
14. Notices. Any and all notices provided for herein shall be sufficient
if in writing and sent by hand delivery or by certified or registered mail
(return receipt requested and first class postage prepaid), in the case of the
Bank to its principal office, and, in the case of Participant to Participant's
address as shown on the Bank's records.
15. Specific Performance. Strict compliance by Participant shall be
required with each and every provision of this Agreement. The parties hereto
agree that the Shares are unique, that Participant's failure to perform the
obligations provided by this Agreement will result in irreparable damage to the
Bank and that specific performance of Participant's obligations may be obtained
by suit in equity.
16. Invalid or Unenforceable Provisions. The provisions of this Agreement
shall be deemed severable, and the invalidity or unenforceability of any one or
more of the provisions hereof shall not affect the validity and enforceability
of the other provisions hereof. Participant agrees that the breach or alleged
breach by the Bank of any covenant contained in another agreement (if any)
between the Bank and Participant, or any obligation owed to Participant by the
Bank, shall not affect the validity or enforceability of the covenants and
agreements of Participant set forth herein.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. Participant agrees that any
action to enforce any provision of this Agreement or to recover damages
relating to a breach of any provision hereof may be brought in any court having
appropriate subject matter jurisdiction in Lee County, Florida, and, by
execution of this Agreement, Participant consents, accepts, and submits to the
personal jurisdiction of any such court and irrevocably waives any objection or
claim or immunity on the ground of venue, convenience of the forum, or the
personal jurisdiction of such court or the execution on, and enforcement of,
judgments and orders thereof.
18. Modifications. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by the parties hereto, provided,
however, that Participant hereby covenants and agrees to execute any amendment
to this Agreement which shall be required or desirable (in the opinion of the
Bank or its counsel) in order to comply with any rule or regulation promulgated
or proposed under the Code by the Internal Revenue Service and which has been
approved by the Florida Department of Banking and Finance.
19. Terms and Conditions of Plan. The terms and conditions included in
the Plan, the receipt of a copy of which Participant hereby acknowledges by
execution of this Agreement, are incorporated by reference herein, and to the
extent that any conflict may exist between any term or provision of this
Agreement and any terms or provision of the Plan, such term or provision of the
Plan shall control.
IN WITNESS WHEREOF, the Bank and Participant have executed this Agreement
as of the day and year first above written.
30
<PAGE> 20
WITNESS AS TO BANK:BANK:
__________________________FIRST INDEPENDENCE BANK OF FLORIDA
A Florida Bank Corporation
____________________________________________________________
James E. Courtney,
Chairman of the Board
31
<PAGE> 21
The undersigned Participant hereby acknowledges receipt of an executed
original of this Stock Option Agreement dated April 15, 1997, and accepts any
options granted hereunder on the terms and conditions contained herein.
WITNESS AS TO
PARTICIPANT: PARTICIPANT:
__________________________ __________________________________
KENNETH J. IGLESIAS
__________________________
32
<PAGE> 1
EXHIBIT 2(C)
FIRST INDEPENDENCE BANK NONTRANSFERABLE STOCK PURCHASE WARRANT
33
<PAGE> 2
NAME OF HOLDER: ______________________________________________________
NUMBER OF WARRANTS: ____________________________________________________
FIRST INDEPENDENCE BANK
NONTRANSFERABLE STOCK PURCHASE WARRANT
THIS NONTRANSFERABLE STOCK PURCHASE WARRANT (the "Warrant") is dated as of
February 15, 1995, and is issued by First Independence Bank, a Florida banking
corporation (the "Bank"), to the individual whose name is set forth above.
This certifies that, for value received, the above-named individual (the
"Holder"), is entitled to purchase from the Bank at any time during the period
ending at 5:00 p.m., Fort Myers, Florida time, on November 1, 1998, the number
of shares of Common Stock, par value $5.00 per share ("Common Stock"), of the
Bank which is equal to the number of Warrants set forth above. The purchase
price per share ("Warrant Price") per each share of Common Stock shall be the
greater of $10.00 per share or the book value per share as shown on the
quarterly financial statements issued by the Bank next preceding the date this
Warrant is exercised. The number of shares purchasable upon exercise of this
Warrant and the Warrant Price per share shall be subject to adjustment from
time to time as set forth in this Warrant.
This Warrant shall be exercised, in whole or in part by: (i) written notice of
intent to exercise the Warrant with respect to a specific number of shares of
Common Stock, which notice is delivered by hand delivery or registered or
certified mail, return receipt requested, to the Bank at its principal office;
and (ii) payment in full (by a check or money order payable to "First
Independence Bank") to the Bank at such office, of the amount of the Warrant
Price for the number of shares of Common Stock with respect to which the
Warrant is then being exercised.
Upon surrender of the Warrant and payment of the Warrant Price, the Bank shall
issue and cause to deliver with all reasonable dispatch to or upon the written
order of the Holder and in the name of the Holder, a certificate or
certificates for the number of full shares of Common Stock so purchased upon
the exercise of the Warrant, together with cash in respect to any fractional
share otherwise issuable upon such surrender. Such certificate or certificates
shall be deemed to have been issued and the Holder shall be deemed to have
become a holder of record of such shares as of the date of the surrender of the
Warrant and payment of the Warrant Price. The rights of purchase represented
by the Warrant shall be exercisable at the election of the Holder either in
full or from time to time in part and, in the event the Warrant is exercised in
respect of less than all of the shares of Common Stock for which the Warrant
may be exercised at any time prior to the date of expiration of the Warrant, a
new Warrant in respect to the shares to which this Warrant shall not have been
exercised shall be so issued by the Bank.
This Warrant may be exchanged at the office of the Bank by surrender of this
Warrant properly endorsed either separately or in combination with one or more
other Warrants for one or more new Warrants of the same aggregate number of
shares of Common Stock evidenced by the Warrant or Warrants exchanged.
In the event that the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Bank or of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares,
stock split-up, or stock dividend, the Board of Directors of the Bank shall
make such corresponding adjustments, if any, as may be appropriate in the
Warrant Price, and the number, and the kind of shares or property subject to
the Warrant herein; provided, however, that no dilution of the Holder's
Warrant, or the shares of Common Stock covered thereby, shall result from any
such adjustments.
The Bank shall not be required to issue fractional shares on the exercise of
the Warrant. If any fraction of a
34
<PAGE> 3
share would be issuable on the exercise of the Warrant (or specified portion
thereof) the Bank shall pay an amount in cash equal to the Warrant Price
multiplied by such fraction.
The Holder hereof may be treated by the Bank and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented hereby.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or receive dividends or to consent or to receive
notice as shareholder in respect to any meeting of shareholders, or any rights
whatsoever as shareholder of the Bank, with respect to the shares of Common
Stock subject to the Warrant prior to the purchase of such shares by exercise
of the Warrant as provided herein.
The Warrant shall be nontransferable and shall be exercisable only by the
Holder in whose name this Warrant is issued.
IN WITNESS WHEREOF, the Bank caused this Stock Purchase Warrant to be duly
executed, all as of the day and year first above written.
FIRST INDEPENDENCE BANK
By: __________________________________________
Alfred W. Roepstorff
Chairman of the Board, President,
and Chief Executive Officer
35
<PAGE> 1
EXHIBIT 5
OPINION AS TO CERTAIN DELAWARE LAW ISSUES OF THE SECURITIES
BEING REGISTERED
36
<PAGE> 2
July 16, 1997
Montgomery Office
The Colonial BancGroup, Inc.
P. O. Box 1108
Montgomery, AL 36101
Re: Registration Statement on Form S-4 relating to the issuance of
shares of Common Stock of The Colonial BancGroup, Inc., in
connection with the acquisition by merger of First
Independence Bank of Florida ("Merger")
Gentlemen:
We are familiar with the proceedings taken and proposed to be taken by
The Colonial BancGroup, Inc., a Delaware corporation (the "Company"), in
connection with the proposed issuance by the Company of shares of its Common
Stock, par value of $2.50 per share, in connection with the Merger and in
accordance with an Agreement and Plan of Merger, dated as of May 8, 1997 and
amended as of July 7, 1997 (the "Agreement"), by and among the Company, Colonial
Bank and First Independence Bank of Florida and the issuance by the Company of
its Common Stock pursuant to stock options and stock purchase warrants being
assumed by the Company in accordance with the Agreement. We have also acted as
counsel for the Company in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, of the
Registration Statement on Form S-4 referred to in the caption above. In this
connection we have reviewed such documents and matters of law as we have deemed
relevant and necessary as a basis for the opinions expressed herein.
Upon the basis of the foregoing, we are of the opinion that:
(i) The Company is a corporation duly organized and existing under
the laws of the State of Delaware;
(ii) The shares of Common Stock of the Company referred to above,
to the extent actually issued pursuant to the Agreement will, when so issued, be
duly and validly authorized and issued and will be fully paid and nonassessable
shares of Common Stock of the Company;
(iii) Under the laws of the State of Delaware, no personal liability
attaches to the ownership of the shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced registration statement. In consenting to the inclusion of our
opinion in the Registration Statement, we do not thereby admit that we are a
person whose consent is required pursuant to Section 7 of the Securities Act of
1933, as
<PAGE> 3
The Colonial BancGroup
April 17, 1997
Page 2
amended.
Sincerely yours,
MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
By: /s/ Michael D. Waters
------------------------------------
Michael D. Waters
MDW/mfm
38
<PAGE> 1
EXHIBIT 8
TAX OPINION
39
<PAGE> 2
Mr. Flake Oakley
Chief Financial Officer
Colonial Bancgroup, Inc.
P.O. Box 1109
Montgomery, AL 36101
Dear Mr. Oakley:
For valid business reasons, First Independence Bank Of Florida (Acquired Bank)
and The Colonial Bancgroup, Inc. (Bancgroup) have entered into an Agreement and
Plan of Merger (Agreement) on May 8, 1997. Pursuant to your request, our letter
addresses the income tax consequences of the proposed transaction as outlined
below. We will address whether the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986
(I.R.C.). We will also address additional income tax consequences to Acquired
Bank, Bancgroup, and shareholders.
BACKGROUND
Acquired Bank operates as a Florida state bank with its principal office in Fort
Myers, Florida. Bancgroup, a Delaware corporation, is a bank holding company
with Subsidiary banks in Florida (Colonial Bank), Alabama, Georgia and
Tennessee.
CERTAIN TERMS OF THE MERGER
At the effective date of the merger, Acquired Bank will merge with and into
Colonial Bank, with Colonial Bank as the surviving corporation. Pursuant to the
terms of the transaction, each share of common stock of Acquired Bank
outstanding and held by Acquired Bank's shareholders other than shares held by
shareholders who perfect their dissenter's rights, will be converted by
operation of law and without any action on the part of the parties or the
holders thereof into shares of Bancgroup Common Stock at a rate $20.71 divided
by the Market Value of Bancgroup Common Stock as determined by the Agreement. On
the effective date and as a result of the merger, Bancgroup will assume all the
outstanding options of Acquired Bank, whether or not vested or exercisable. Each
such option will cease to represent a right to acquire Acquired Bank Common
Stock and will, instead, represent a right to acquire Bancgroup common stock on
substantially the same terms applicable to the Acquired Bank Options except as
specified in the Agreement.
No fractional shares of Bancgroup Common Stock will be issued. Instead, each
holder of shares of Acquired Bank Stock having a fractional interest arising
upon the conversion of such shares into shares of Bancgroup Common Stock shall,
at the time of surrender of the certificates previously representing Acquired
Bank Stock, be paid by Bancgroup an amount in cash.
Any shareholder of Acquired Bank who does not vote in favor of the Agreement and
who complies with certain procedures relating to the rights of dissenting
shareholders will be
<PAGE> 3
entitled to receive payment for the fair value of his or her Acquired Bank
Stock.
REPRESENTATIONS OF PARTIES
- Bancgroup and Acquired Bank intend that the merger will qualify for
federal income tax purposes as a "reorganization" within the meaning of
I.R.C. Section 368(a) of the Code.
- The fair market value of the Bancgroup stock received by each shareholder
of Acquired Bank pursuant to the terms of the Agreement will be
approximately equal to the fair market value of Acquired Bank stock
surrendered in the exchange. The terms of the Agreement are the result of
arm's-length negotiations between unrelated parties.
- No stock of Colonial Bank will be issued in the transaction.
- There is no plan or intention by the shareholders of Acquired Bank to
sell, exchange, or otherwise dispose of a number of shares of Bancgroup
stock received in the transaction that will reduce the Acquired Bank
shareholders' ownership of Bancgroup stock to a number of shares having a
value, as of the date of the transaction, of less than fifty percent of the
value of all of the formerly outstanding stock of Acquired Bank as of the
same date. For purposes of this representation, shares of Acquired Bank
stock exchanged for cash, and surrendered by dissenters, or exchanged for
cash in lieu of fractional shares of Bancgroup stock will be treated as
outstanding Acquired Bank stock on the date of the transaction. Shares of
Acquired Bank stock and shares of Bancgroup stock held by Acquired Bank
shareholders and otherwise sold, redeemed or disposed of prior or subsequent
to the transaction will be considered in making this representation.
- Following the merger, Bancgroup will continue the historic business of
Acquired Bank or use a significant portion of Acquired Bank's historic
business assets in a business.
- Acquired Bank, Bancgroup and Acquired Bank Shareholders will pay their
respective expenses, if any, incurred in connection with the transaction.
- No part of the consideration received by the Acquired Corporation
shareholders will be received by them in their capacity as debtor, creditor,
employee, or any way other than as shareholder.
- The fair market value of the assets of Acquired Bank transferred to
Bancgroup will equal or exceed the sum of the liabilities assumed by
Bancgroup plus the amount of liabilities, if any, to which the assets
transferred are subject.
- The total adjusted basis of the assets of Acquired Bank transferred to
Bancgroup will equal or exceed the sum of the liabilities assumed by
Bancgroup plus the amount of liabilities, if any, to which the assets
transferred are subject.
<PAGE> 4
- Any incentive stock options acquired from Acquired Bank as a part of the
merger and reissued by Bancgroup will be issued at substantially the same
terms, so as not to create material modification as defined in I.R.C.
Section 424.
TAX CONSEQUENCES TO ACQUIRED BANK, COLONIAL BANK, AND BANCGROUP
The merger of Acquired Bank with and into Colonial Bank will constitute a merger
within the meaning of I.R.C. Sections 368(a)(1)(A) and 368(a)(2)(D), provided
that the merger qualifies as a statutory merger pursuant to state law. Acquired
Bank, Colonial Bank, and Bancgroup will each be "a party to the reorganization"
within the meaning of I.R.C. Section 368(b) of the Code. Based upon I.R.C.
Sections 357(a) and 361(a), Acquired Bank will recognize no gain or loss when it
transfers its assets to Colonial Bank in a constructive exchange solely for
Bancgroup's stock and the assumption of Acquired Bank's liabilities by
Bancgroup. Acquired Bank will also not recognize any gain or loss upon the
receipt of cash in the exchange if it distributes such property as part of the
plan of reorganization under I.R.C. Section 361(b).
Pursuant to I.R.C. Section 1032 of the Code, no gain or loss will be recognized
by Bancgroup or Colonial Bank upon the acquisition by Colonial Bank of the
assets of Acquired Bank in exchange for Bancgroup common stock and the
assumption of Acquired Bank's liabilities. Colonial Bank's basis in the assets
acquired in the transaction will be equal to the basis of the assets in the
hands of Acquired Bank immediately before the transaction per I.R.C. Section
362(b). I.R.C. Section 1223(2) provides that Colonial Bank's holding period for
each Acquired Bank's asset received in the merger will include the period during
which the asset was held by Acquired Bank immediately before the transaction.
The basis of Colonial Bank stock in the hands of Bancgroup will be increased by
an amount equal to the basis of the Acquired Bank assets acquired by Colonial
Bank and decreased by the sum of the amount of liabilities of Acquired Bank
assumed by Colonial Bank and the amount of liabilities to which the assets of
Acquired Bank are subject.
Pursuant to I.R.C. Section 381(a), Colonial Bank will succeed to and take into
account the items of Acquired Bank described in I.R.C. Section 381(c), subject
to the conditions and limitations of I.R.C. Sections 381, 382, 383, 384, and
1502 and the regulations thereunder. Colonial Bank will succeed to and take into
account the earnings and profits, or deficit in earnings and profits, of
Acquired Bank as provided by I.R.C. Section 382(c)(2) of the Code and Section
1.381(c)(2)-1 of the Regulations.
TAX CONSEQUENCES TO ACQUIRED BANK SHAREHOLDERS
I.R.C. Section 354 states that a shareholder who receives solely Bancgroup
common stock in exchange for Acquired Bank common stock will recognize no gain
or loss on the exchange, except with respect to cash received in lieu of a
fractional interest in Bancgroup common stock. I.R.C. Section 358 of the Code
provides that the shareholder's tax basis in the Bancgroup common stock received
in the exchange will be the same as the basis of the Acquired Bank common stock
surrendered, decreased by the amount of cash (if any)
<PAGE> 5
received by the shareholder and increased by the amount of gain (if any)
recognized in the exchange. I.R.C. Section 1223 of the Code provides that such
shareholder will include the period during which Acquired Bank stock was held in
his holding period for the Bancgroup common stock received in the exchange.
The payment of cash in lieu of fractional shares of Bancgroup common stock will
be treated as if the fractional shares were issued as part of the exchange and
then redeemed by Bancgroup. These cash payments will be treated as having been
received as distributions in full payment in exchange for the stock redeemed as
provided in I.R.C. Section 302(a) of the Code. Generally, any gain or loss
recognized upon such exchange will be capital gain or loss, provided the
fractional share constitutes a capital asset in the hands of the exchanging
shareholder. The shareholders will recognize capital gain or loss equal to the
difference between the cash received and the basis of the fractional share
interest that would have been issued.
Holders of shares of Acquired Bank Common Stock who receive cash upon the
exercise of any appraisal rights will be subject to a taxable transaction for
federal income tax purposes. Such a shareholder will recognize gain or loss
measured by the difference between the tax basis for his or her shares and the
amount of cash received pursuant to I.R.C. Section 1012 of the Code (unless the
receipt of cash is treated as a dividend, as described below).
In certain circumstances, the receipt of solely cash by an Acquired Bank
shareholder could be treated as a dividend (to the extent of the shareholder's
ratable share of applicable earnings and profits) if the shareholder
constructively owns shares of Acquired Bank Common Stock that are exchanged for
Bancgroup Common Stock in the Merger. Generally, a shareholder constructively
owns stock that is owned by members of the shareholder's family, and by certain
controlled or related partnerships, estates, trusts and corporations, pursuant
to the constructive ownership rules of I.R.C. Section 318 of the Code, as well
as any shares that the shareholder has an option to acquire.
The receipt of solely cash by an Acquired Bank shareholder in exchange for his
stock will not be treated as a dividend if such exchange or receipt results in a
meaningful reduction or a substantially disproportionate reduction in the
shareholder's ownership interest or results in a complete termination of the
shareholder's interest, taking into account, in each case, the constructive
ownership rules described above. A complete termination of a shareholder's
interest will occur if, after the receipt of cash in exchange for stock, the
shareholder owns no shares of stock in Bancgroup. Thus, a shareholder who
receives solely cash for all of the stock actually owned by him will generally
qualify for capital gain treatment under the complete termination test if none
of the shares constructively owned by him are exchanged in the merger for
Bancgroup Common Stock and the shareholder does not otherwise own, actually or
constructively, any shares of Bancgroup Common Stock after the merger.
Where the complete termination of interest test is not satisfied with respect to
a particular shareholder (because, for example, Acquired Bank shares owned by a
related party are exchanged for Bancgroup Common Stock in the merger), that
shareholder will nonetheless
<PAGE> 6
generally be entitled to capital gain treatment if the receipt of cash in
exchange for his shares results in a "substantially disproportionate" reduction
or a "meaningful" reduction in his ownership interest. I.R.C. Section 302 of the
Code provides that a shareholder's reduction in ownership interest should
normally be "substantially disproportionate," and capital gain treatment should
normally result, if (1) the shareholder owns less than 50% of the total combined
voting power of all classes of stock immediately after the merger, and (2) the
shareholder's proportionate stock interest in Bancgroup immediately after the
merger is 20% or more below what his proportionate interest in Bancgroup would
have been if he had received solely Bancgroup Common Stock in the merger.
Acquired Bank shareholders who constructively own stock in Acquired Bank should
consult a tax advisor regarding the characterization of cash payments received
in the reorganization in exchange for Acquired Bank stock as either capital gain
income or dividend income.
CONVERSION OF ACQUIRED BANK OPTIONS INTO BANCGROUP OPTIONS
INCENTIVE STOCK OPTIONS
The assumption and conversion of Acquired Bank incentive stock options, whether
vested or exercisable, into rights to acquire Bancgroup common stock pursuant to
the terms of the Agreement shall not be considered the granting of a new option
as long as the following requirements of I.R.C. Section 424 are met. I.R.C.
Section 424 provides that the excess of the aggregate fair market value of the
shares subject to the options immediately after the substitution or assumption
over the aggregate option price of such shares is not more than the excess of
the aggregate fair market value of all shares subject to the option immediately
before such substitution or assumption over the aggregate option price of such
shares. Section 424 also provides that the new option or the assumption of the
old option must not give the employee additional benefits which he did not have
under the old option. If the terms of the old option are modified, extended, or
renewed, such modification, extension, or renewal shall be considered the
granting of a new option which will disqualify the option as a statutory stock
option.
NONQUALIFIED STOCK OPTIONS
The assumption and conversion of Acquired Bank nonqualified stock options into
Bancgroup nonqualified stock options pursuant to the merger will not result in
current federal income tax consequences if neither the nonqualified options to
purchase shares of Acquired Bank stock nor the substituted options to purchase
Bancgroup stock have a readily ascertainable value. I.R.C. Section 83(e)
provides that I.R.C. Section 83 does not apply to the transfer of an option
without a readily ascertainable fair market value. The regulations under Section
1.83-7 state that if an option is not actively traded on an established market,
the option does not have a readily ascertainable fair market value when granted
unless a taxpayer can show that the option is transferable by the optionees; the
option is exercisable immediately in full by the optionee; the option or
property subject to the option is not subject to any restriction or condition
that has a significant effect upon the
<PAGE> 7
fair market value of the option; and, the fair market value of the option
privilege is readily ascertainable under the provision for determining fair
market value in the case of options not actively traded on an established
market.
ACQUIRED BANK WARRANTS
Certain shareholders of Acquired Bank have stock warrants to acquire additional
shares of Acquired Bank stock at a strike price below the fair market value of
Acquired Bank stock. These warrants were not issued to Acquired Bank
shareholders in return for services and none of the warrant holders are
employees of Acquired Bank. A Florida state banking law prohibits the exercise
of stock warrants on a "cashless" basis (i.e. the exercise price must be paid in
cash).
Generally, the exercise of a stock warrant is a non-taxable event. The warrant
holder is treated as making a capital contribution (i.e. the exercise price) to
the issuing corporation in exchange for stock. The warrant holder's basis in the
warrant is added to the exercise price to determine the warrant holder's basis
in the stock received upon exercise (Revenue Ruling 78-182, 1978-1 C.B. 265).
The issuing corporation recognizes no gain or loss on the exercise of a warrant.
Because of the Florida state banking law prohibiting the "cashless" exercise of
stock warrants, Acquired Bank warrant holders will have to contribute cash to
Acquired Bank in order to exercise their warrants. The Acquired Bank stock
received upon the exercise of the warrants could then be exchanged tax-free for
Bancgroup stock in the reorganization.
As an alternative to the exercise of the warrants, Bancgroup has offered to
exchange Bancgroup warrants for Acquired Bank warrants or issue Bancgroup stock
to the Acquired Bank warrant holders equal to the "in the money" (i.e. the
difference between the exercise price of the warrant and the Market Value)
element of the warrants. Both the assumption of Acquired Bank warrants and the
issuance of Bancgroup stock to the Acquired Bank warrant holders equal to the
"in the money" element of the warrants will trigger capital gain income to the
Acquired Bank warrant holders equal to the "in the money" element of the
warrants, less any basis the shareholders have in their warrants. The character
of the capital gain income (either long-term or short-term) is determined by
each individual warrant holder.
Bancgroup will not recognize gain or loss upon the exchange of Acquired Bank
warrants for Bancgroup warrants. Any subsequent exercise of the exchanged
warrants will not trigger gain or loss to Bancgroup. Bancgroup will not be
entitled to a compensation deduction for the exercise or extinguishment of these
warrants. In addition, the issuance of Bancgroup stock to Acquired Bank
shareholders for the "in the money" element of Acquired Bank warrants is a
non-taxable event to Bancgroup.
SUMMARY
The merger of Colonial Bank and Acquired Bank will qualify as a tax-free
reorganization
<PAGE> 8
within the meaning of I.R.C. Sections 368(a)(1)(A) and 368(a)(2)(D), provided
that the merger qualifies as a statutory merger pursuant to state law. Colonial
Bank's basis in Acquired Bank's assets will be the same as Acquired Bank's basis
in its assets before the merger. Acquired Bank shareholders will retain a
substituted basis in the shares of Bancgroup stock received in the merger
decreased by the amount of cash received and increased by the amount of gain
recognized in the deal. The only taxable consequences will be to those
shareholders who receive cash in lieu of fractional shares, those shareholders
who receive solely cash in the exchange upon perfecting their dissenter's
rights, and those warrant holders who receive Bancgroup stock equal to the "in
the money" element of the warrants. Shareholders receiving cash must examine
their actual and constructive ownership of Acquired Bank and Bancgroup stock for
purposes of determining the tax consequences of the cash payments.
The assumption and conversion of Acquired Bank's qualified and nonqualified
options by Bancgroup is a tax-free event to the shareholders of Acquired Bank,
assuming certain requirements of Section 424 are met and the nonqualified
options do not have a readily ascertainable fair market value. Both the
assumption of Acquired Bank warrants and the issuance of Bancgroup stock to the
Acquired Bank warrant holders equal to the "in the money" element of the
warrants will trigger capital gain income to the Acquired Bank warrant holders
equal to the "in the money" element of the warrants, less any basis the
shareholders have in their warrants.
If you have any questions or comments, please call Thomas Lee or Mark Borden at
(205) 252-8400.
Very Truly Yours,
Coopers & Lybrand L.L.P.
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 of our report dated February 20, 1997, on our audits of the
consolidated financial statements of The Colonial bancGroup, Inc., as of
December 31, 1996 and 1995 and for each of the three in the period ended
December 31, 1996 and our report dated February 20, 1997, except Notes 1 and 2
as to which the date is June 20, 1997, on our audits of the supplemental
consolidated financial statements of The Colonial BancGroup, Inc., as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996. We also consent to the reference to our firm under the
caption "experts".
/s/ Coopers & Lybrand L.L.P.
Montgomery, Alabama
July 25, 1997
42
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
CONSENT OF COUNSEL
THE COLONIAL BANCGROUP, INC.
WE HEREBY CONSENT TO USE IN THIS FORM S-4 REGISTRATION STATEMENT OF THE
COLONIAL BANCGROUP, INC., OF OUR NAME IN THE PROSPECTUS, WHICH IS A PART OF SUCH
REGISTRATION STATEMENT, UNDER THE HEADING "LEGAL MATTERS," TO THE SUMMARIZATION
OF OUR OPINION REFERENCED THEREIN, AND TO THE INCLUSION OF OUR OPINION AT
EXHIBIT 5 OF THE REGISTRATION STATEMENT.
/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
JULY 16, 1997
43
<PAGE> 1
EXHIBIT 23(C)
CONSENT OF BREWER, BEEMER, KUEHNHACKL & KOON, P.A.
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE USE IN THIS REGISTRATION STATEMENT ON FORM S-4 OF OUR
REPORT DATED FEBRUARY 13, 1997, ON OUR AUDIT OF THE FINANCIAL STATEMENTS OF
FIRST INDEPENDENCE BANK OF FLORIDA AND TO THE REFERENCE TO OUR FIRM UNDER THE
HEADING "EXPERTS."
/s/ BREWER, BEEMER, KUEHNHACKL & KOON
- -------------------------------------
BREWER, BEEMER, KUEHNHACKL & KOON
July 23, 1997
44
<PAGE> 1
EXHIBIT 99(A)
FORM OF PROXY OF FIRST INDEPENDENCE BANK OF FLORIDA
45
<PAGE> 2
PROXY CARD
REVOCABLE PROXY
FIRST INDEPENDENCE BANK OF FLORIDA
PROXY SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON ________, 1997.
The undersigned hereby appoints James E. Courtney and Edward H. Black,
or either of them with individual power of substitution, proxies to vote all
shares of the Common Stock of First Independence Bank of Florida ("First
Independence") which the undersigned may be entitled to vote at the Special
Meeting of Shareholders to be held at the main office of First Independence Bank
of Florida, 16740 San Carlos Boulevard, SW, Fort Myers, Florida, 33908, on
______, ________, 1997, at __:00 p.m., and at any adjournment or postponement
thereof.
1. To ratify and approve the Agreement and Plan of Merger dated as of May
8, 1997, pursuant to which First Independence will be merged with and
into Colonial Bank.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, to vote on such other matters as may properly come
before the meeting and to vote upon matters incident to the conduct of
the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST
INDEPENDENCE AND WILL BE VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXY HOLDERS RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING AND TO VOTE UPON MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL
MEETING.
PLEASE MARK, SIGN BELOW, DATE AND RETURN
THIS PROXY PROMPTLY IN THE ENVELOPE
FURNISHED.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF
A CORPORATION, PLEASE SIGN IN FULL CORPORATE
NAME BY
46
<PAGE> 3
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
SHARES _______________
DATED _______ ___, 1997
-----------------------------------
SIGNATURE
-----------------------------------
SIGNATURE IF HELD JOINTLY
-----------------------------------
PLEASE PRINT OR TYPE YOUR NAME
[ ] Please mark here if you intend to attend the Special Meeting of
Shareholders.
PLEASE RETURN YOUR SIGNED PROXY TO:
FIRST INDEPENDENCE BANK OF FLORIDA, INC.
16740 SAN CARLOS BOULEVARD, SW
FORT MYERS, FLORIDA 33908
ATTENTION: EDWARD H. BLACK, PRESIDENT
47
