<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 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
THE COLONIAL BANCGROUP, INC.
POST OFFICE BOX 1108
MONTGOMERY, ALABAMA 36101-1108
(Name and address of agent for service)
---------------------
COPIES TO:
<TABLE>
<C> <C>
WILLIAM A. MCCRARY MARTIN D. WERNER
VICE PRESIDENT AND LEGAL COUNSEL WERNER & BLANK
THE COLONIAL BANCGROUP, INC. 7205 WEST CENTRAL AVENUE
P.O. BOX 1108 TOLEDO, OHIO 43617
MONTGOMERY, ALABAMA 36101-1108 TELEPHONE: 419-841-8051
TELEPHONE: 334-240-5315 FACSIMILE: 419-841-8380
FACSIMILE: 334-240-5069
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective time of the proposed merger of First Central
Bank ("First Central") with and into Colonial Bank, a subsidiary of the
Registrant (the "Merger") as described in the Agreement and Plan of Merger,
dated as of September 9, 1997, attached as Exhibit A to the Proxy Statement and
Prospectus forming a part 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
<TABLE>
<CAPTION>
=========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM
OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $2.50 per
share................................ 1,147,026 N/A $10,602,900 $3,213
=========================================================================================================================
</TABLE>
(1) This Registration Statement covers the maximum number of shares of the
common stock of the Registrant which is expected to be issued in connection
with the Merger.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) under the Securities Act of 1933, as amended, and based
upon the book value as of June 30, 1997 of $29.70 per share of 357,000
shares of First Central, including 29,500 shares subject to stock purchase
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 SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
FIRST CENTRAL BANK
5858 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33707
813-347-0197
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , , 1997, AT A.M.
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of First Central Bank ("First Central") will be held at the office of
First Central, located at 5858 Central Avenue, St. Petersburg, Florida 33707, on
, 1997, at a.m., local time, for the following purposes:
1. Merger. To consider and vote upon an Agreement and Plan of Merger,
dated as of September 9, 1997, between First Central, The Colonial
BancGroup, Inc. ("BancGroup") and Colonial Bank, a wholly owned subsidiary
of BancGroup (the "Agreement"), and the proposed merger (the "Merger") of
First Central 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 Central outstanding at the time of the Merger will
be converted into such number of shares of BancGroup Common stock equal to
$62.46 divided by the Market Value (as defined in the Agreement) of
BancGroup's common stock, par value $2.50, subject to a maximum and minimum
number of shares to be issued, 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. A copy of 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 Central has fixed the close of business on
Friday, , 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 Central 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 Central at
or prior to the Special Meeting that the shareholder dissents from the
Agreement. A copy of the dissenters' rights provisions under applicable Florida
law is attached to the enclosed Proxy Statement and Prospectus as Appendix C.
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 Central, by executing a
later dated proxy and delivering it to the Secretary of First Central, or by
attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
--------------------------------------
E. Ralph Crawford
Chairman
, 1997
<PAGE> 3
PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
FIRST CENTRAL BANK
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of First Central Bank, a Florida state bank
("First Central"), with and into Colonial Bank, an Alabama banking corporation
("Colonial Bank"). Colonial Bank is a wholly owned subsidiary of The Colonial
BancGroup, Inc. ("BancGroup"), a Delaware corporation. This Prospectus is being
furnished to the shareholders of First Central in connection with the
solicitation of proxies by the Board of Directors of First Central for use at a
special meeting of the shareholders of First Central (the "Special Meeting") to
be held on , , 1997, at 10:00 a.m., local time, at
the office of First Central, located at 5858 Central Avenue, St. Petersburg,
Florida 33707, including any adjournments or postponements thereof. At the
Special Meeting, shareholders of First Central will consider and vote upon the
matters set forth in the preceding Notice of Special Meeting of 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 September 9, 1997, by and between BancGroup,
Colonial Bank and First Central (the "Agreement"). The Agreement provides that,
subject to the approval of the Agreement by the shareholders of First Central 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 Central 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 Central (the "First Central 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 $62.46
divided by the Market Value of the BancGroup Common Stock. The Market Value will
be the average of the closing prices of BancGroup Common Stock for the ten
trading days ending on the trading day that is five calendar days immediately
preceding the Effective Date of the Merger, subject to a maximum and minimum
number of shares to be issued. Cash will be paid in lieu of fractional shares at
the Market Value of such fractional shares. See "The Merger -- Conversion of
First Central 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 October 21, 1997 was $30.75.
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
Central 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
employee stock options respecting First Central Common Stock assumed by
BancGroup as part of the Merger. This document constitutes a Proxy Statement of
First Central in connection with the solicitation of proxies by First Central
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 employee stock options
assumed in the Merger. This Prospectus and accompanying form of proxy are first
being mailed to shareholders of First Central on or about the date set forth
below.
THE BOARD OF DIRECTORS OF FIRST CENTRAL 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 Central are 5858 Central
Avenue, St. Petersburg, Florida 33707 (telephone 813-347-0197), 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, proxy and information statements, 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. 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 issued 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 Central has been furnished by First Central.
This Prospectus contains certain forward-looking statements with respect to
the financial condition, results of operations, and business of BancGroup
following the consummation of the Merger and the proposed acquisition of other
banking institutions (the "Other Pending Acquisitions"), including statements
relating to the expected impact of the Merger and the Other Pending Acquisitions
on BancGroup's financial performance. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among other things, the following possibilities: (i) expected cost savings from
the Merger and the Other Pending Acquisitions, if any or all of such
transactions are consummated, cannot be fully realized; (ii) deposit attrition,
customer loss, or revenue loss following the Merger and the Other Pending
Acquisitions is greater than expected; (iii) competitive pressure in the banking
industry increases significantly; (iv) costs or difficulties related to the
integration of the businesses of BancGroup and the institutions to be acquired
are greater than expected; (v) changes in the interest rate environment reduce
margins; (vi) general economic conditions, either nationally or regionally, are
less favorable than expected, resulting in, among other things, a deterioration
in credit quality; (vii) changes occur in the regulatory environment; (viii)
changes occur in business conditions and the rate of inflation; and (ix) changes
occur in the securities markets. Forward-looking earnings estimates, if any,
included in this Prospectus have not been examined or compiled by the
independent public accountants of BancGroup and First Central, nor have such
accountants applied any procedures thereto. Accordingly, such accountants do not
express an opinion or any other form of assurance on them. Further information
on other factors that could affect the financial results of BancGroup after the
Merger and the Other Pending Acquisitions is included in the filings with the
Commission incorporated by reference herein. When used in this Prospectus, the
words "believes," "estimates," "plans," "expects," "should," "may," "might,"
"outlook," and "anticipates," and similar expressions as they relate to
BancGroup (including its subsidiaries), or its management are intended to
identify forward-looking statements.
i
<PAGE> 5
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 CENTRAL.
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 CENTRAL 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.
ii
<PAGE> 6
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 Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(3) BancGroup's Reports on Form 8-K dated January 20, 1997, March 10,
1997, April 15, 1997, June 11, 1997; June 24, 1997; and October 30, 1997;
(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.
(5) BancGroup's Report on Form 8-K/A dated August 13, 1997 (correcting
and amending Form 8-K filed August 12, 1997); and
(6) The description of the current management and Board of Directors
contained in the Proxy Statement pursuant to Section 14(a) of the Exchange
Act for BancGroup's Annual Meeting of Shareholders held on April 16, 1997.
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 employee stock options that
are being assumed by BancGroup, prior to the exercise of such 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 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 Central 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).
iii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
THE SPECIAL MEETING......................................... 11
General................................................... 11
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 11
Solicitation, Voting and Revocation of Proxies............ 12
Effect of Merger on Outstanding BancGroup Common Stock.... 13
THE MERGER.................................................. 14
General................................................... 14
Background of the Merger.................................. 14
First Central's Board of Directors' Reasons for Approving
the Merger............................................. 15
Opinion of Financial Advisor.............................. 15
Recommendation of the Board of Directors of First
Central................................................ 17
BancGroup's Reasons for the Merger........................ 17
Related Transactions -- Stock Option...................... 17
Interests of Certain Persons in the Merger................ 18
Conversion of First Central Common Stock.................. 19
Surrender of First Central Common Stock Certificates...... 20
Certain Federal Income Tax Consequences................... 20
Other Possible Consequences............................... 22
Conditions to Consummation of the Merger.................. 22
Amendment or Termination.................................. 23
Regulatory Approvals...................................... 23
Conduct of Business Pending the Merger.................... 24
Commitments with Respect to Other Offers.................. 25
Rights of Dissenting Shareholders......................... 26
Resale of BancGroup Common Stock Issued in the Merger..... 27
Accounting Treatment...................................... 28
NYSE Reporting of BancGroup Common Stock Issued in the
Merger................................................. 28
Treatment of First Central Options........................ 28
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 31
BancGroup................................................. 31
First Central............................................. 32
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 32
BancGroup Common Stock.................................... 33
Preference Stock.......................................... 33
1986 Debentures........................................... 33
Other Indebtedness........................................ 34
Changes in Control........................................ 34
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 36
Director Elections........................................ 36
Removal of Directors...................................... 36
Voting.................................................... 36
Preemptive Rights......................................... 37
Directors' Liability...................................... 37
Indemnification........................................... 37
Special Meetings of Shareholders; Action Without a
Meeting................................................ 38
Mergers, Share Exchanges and Sales of Assets.............. 38
Amendment of Certificate of Incorporation and Bylaws...... 39
Rights of Dissenting Shareholders......................... 39
</TABLE>
iv
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Preferred Stock........................................... 40
Effect of the Merger on First Central Shareholders........ 40
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES............... 41
Condensed Pro Forma Statements of Condition (Unaudited)... 41
COMPLETED BUSINESS COMBINATIONS............................. 43
PENDING BUSINESS COMBINATIONS............................... 45
Condensed Pro Forma Statements of Income (Unaudited)...... 47
Recent Developments -- BancGroup.......................... 54
Selected Financial and Operating Information.............. 55
FIRST CENTRAL BANK.......................................... 58
Selected Financial Data................................... 58
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 59
General................................................... 59
Regulation and Legislation................................ 59
Credit Risk............................................... 59
Results of Operations..................................... 60
Rate/Volume Analysis...................................... 61
Liquidity and Capital Resources........................... 62
Regulatory Capital Requirements........................... 63
Assets and Liability Management........................... 63
Comparison of Six Months Ended June 30, 1997 and June 30,
1996................................................... 66
Comparison of Years Ended December 31, 1996 and December
31, 1995............................................... 67
Comparison of Years Ended December 31, 1995 and December
31, 1994............................................... 67
Impact of Inflation and Changing Prices................... 67
Future Accounting Requirements............................ 68
BUSINESS OF BANCGROUP....................................... 69
General................................................... 69
Recently Completed and Other Proposed Business
Combinations........................................... 69
Year 2000 Compliance...................................... 70
Voting Securities and Principal Shareholders.............. 70
Security Ownership of Management.......................... 71
Management Information.................................... 71
BUSINESS OF FIRST CENTRAL................................... 72
General................................................... 72
Market Area............................................... 72
Properties................................................ 72
Competition............................................... 72
Principal Holders of Common Stock......................... 73
ADJOURNMENT OF SPECIAL MEETING.............................. 74
OTHER MATTERS............................................... 75
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER PROPOSALS...... 75
LEGAL MATTERS............................................... 75
EXPERTS..................................................... 75
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Fairness Opinion of Austin Associates, Inc.... B-1
APPENDIX C -- Section 658.44 of the Florida Banking Code
Regarding Dissenters' Rights.............................. C-1
APPENDIX D -- Stock Option Agreement........................ D-1
</TABLE>
v
<PAGE> 9
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 Central are urged to
read this Prospectus, including the Appendices, in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of First Central 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 Central,
located at 5858 Central Avenue, St. Petersburg, Florida 33707 on ,
, 1997, at a.m., local time, for the purpose of considering and
voting upon the Agreement and the Merger. Only holders of record of First
Central 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 Central 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 118 branches in
Alabama, five branches in Tennessee, 14 branches in Georgia and 51 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 $12.3 billion in
residential loans and which originates residential mortgages in 37 states
through four divisional offices. The above number and amounts were calculated as
of June 30, 1997. At June 30, 1997, BancGroup had consolidated total assets of
$6.1 billion and consolidated stockholders' equity of $431.4 million. Since June
30, 1997, BancGroup has acquired four banking institutions with aggregate assets
of $419.9 million and aggregate stockholders' equity of $40.2 million. These
acquisitions are included in the pro forma statements included herein. See
"Business of BancGroup."
First Central. First Central is a Florida state bank which is
headquartered in St. Petersburg, Florida. Currently, the Bank operates one
office located in Pinellas County, Florida. At June 30, 1997, First Central had
total assets of approximately $54.9 million, total deposits of approximately
$44.6 million and total shareholders' equity of approximately $9.7 million. See
"Business of First Central."
THE MERGER
The Agreement provides for the Merger of First Central 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 Central 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 Central Common
Stock on the Effective Date will be converted will be equal to $62.46 divided by
the Market Value (the "Merger Consideration"), subject to a maximum and minimum
number of shares to be issued, with cash paid in lieu of fractional shares at
the Market Value of such fractional shares. The "Market Value" will be the
average of the closing prices of the BancGroup Common Stock as reported by the
NYSE on each of the ten trading days ending on the trading day five calendar
days immediately preceding the Effective Date. However, the Market Value shall
not be less than $24.30 per share nor more than $29.70 per share. Regardless of
the Market Value, however, the maximum number of shares of BancGroup Common
1
<PAGE> 10
Stock to be issued in the Merger shall be 841,796 (based upon a minimum Market
Value of $24.30 per share and subject to the exercise of certain options to
acquire First Central Common Stock described below) and the minimum number of
shares of BancGroup Common Stock to be issued in the Merger shall be 688,742
(based upon a maximum Market Value of $29.70 per share). The number of shares of
BancGroup Common Stock to be issued in the Merger shall be increased
proportionally with each share of First Central Common Stock issued before the
Effective Date upon the exercise of certain options to acquire First Central
Common Stock as described below (the "First Central Options").
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of First Central otherwise entitled to receive a
fractional share of BancGroup Common Stock will receive instead a cash payment
(without interest) equal to such fractional share multiplied by the Market
Value.
As of the date of this Prospectus, First Central had granted First Central
Options which entitle the holders thereof to acquire up to 29,500 shares of
First Central Common Stock. On the Effective Date, BancGroup will assume all
First Central Options outstanding, and each such option will represent the right
to acquire BancGroup Common Stock on substantially the same terms applicable to
the First Central Options. The number of shares of BancGroup Common Stock to be
issued pursuant to such options will equal the number of shares of First Central
Common Stock subject to such First Central Options multiplied by the Exchange
Ratio, as defined below, provided that no fractional shares of BancGroup Common
Stock will be issued. The number of shares of BancGroup Common Stock to be
issued upon the exercise of First Central 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 fractional share
in cash in the manner set forth in the preceding paragraph. The exercise price
for the acquisition of BancGroup Common Stock will be the exercise price for
each share of First Central 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
$62.46 by the Market Value.
Promptly after the Effective Date, First Central shareholders will be given
notice of the consummation of the Merger and instructions for the exchange of
such shareholders' certificates representing shares of First Central Common
Stock for certificates representing shares of BancGroup Common Stock.
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 Central Common Stock in
accordance with those instructions. FIRST CENTRAL SHAREHOLDERS SHOULD NOT SEND
IN THEIR CERTIFICATES UNTIL THEY RECEIVE THE INSTRUCTIONS.
See "The Merger -- Conversion of First Central Common Stock," "Surrender of
First Central Common Stock Certificates," "Treatment of First Central Options."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and First Central, see "The
Merger -- Rights of Dissenting Shareholders," "-- Conversion of First Central
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 Central -- Principal Holders of
Common Stock."
OPINION OF FINANCIAL ADVISORS
First Central has received an opinion from Austin Associates, Inc. that the
terms of the Agreement are fair, from a financial point of view, to the
shareholders of First Central. The full text of Austin Associates, Inc.'s
opinion is set forth in Appendix B to this Prospectus and should be read in its
entirety by First Central Shareholders. For additional information regarding
Austin Associates, Inc.'s opinion, see "The Merger -- Opinion of Financial
Advisors."
2
<PAGE> 11
RECOMMENDATION OF FIRST CENTRAL'S BOARD OF DIRECTORS
The Board of Directors of First Central has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF FIRST CENTRAL BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FIRST CENTRAL 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 Central's
Board of Directors' Reasons for Approving the Merger."
RELATED TRANSACTIONS -- STOCK OPTION
In connection with the Agreement, First Central has granted to BancGroup an
option to purchase up to 19.9% of the First Central Common Stock at a purchase
price of $62.46 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of First Central by another party. The option is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for any third party to acquire control of First Central
while BancGroup is seeking to consummate the Merger. See "The Merger -- Related
Transactions -- Stock Option."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, certain executive officers of First Central hold,
pursuant to option agreements with First Central, First Central Options which
entitle them to purchase, in the aggregate, up to 29,500 shares of First Central
Common Stock. Under the terms of the Agreement, any First Central Options which
are not exercised prior to the Effective Date will be assumed by BancGroup, and
the holders of such First Central Options will thereafter have the right to
acquire shares of BancGroup Common Stock. See "The Merger -- Conversion of First
Central Common Stock," and "Treatment of First Central Options."
On the Effective Date and subject to the existing agreements referenced
above, all employees of First Central 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. All employees of First Central 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.
Effective July 9, 1997, First Central entered into an agreement with Mr. E.
Ralph Crawford, President and Chief Executive Officer of First Central. Under
that agreement's terms, Mr. Crawford shall, subject to other conditions set out
in such agreement, be entitled to continue his employment and continue to
receive his current salary of $200,000 per year, plus his current fringe
benefits for a period of three years after a "Change in Control" as defined in
the Agreement. The approval by the shareholders of First Central of the proposed
merger with Colonial Bank will constitute a "Change in Control" under the
agreement. In the event that Mr. Crawford elects to terminate his employment
within three years after the Merger, he will receive one-half of his annual
salary for the remainder of the three-year term. During the term of his
employment and for three years thereafter, Mr. Crawford is restricted from
competing with First Central (and, after the Effective Date, with Colonial Bank)
for a period of three years in Pinellas County Florida or contiguous counties.
See "The Merger -- Background of the Merger."
On November 1, 1994, First Central entered into salary continuation
agreements with Mr. Crawford and two other of its executive employees, Lawrence
D. Floyd and Scott C. Boyle. The agreements provide that, subject to certain
conditions, each of them will receive, upon reaching age 65, salaries in the
amounts of $45,000; $15,000 and $36,000, respectively, for a period of fifteen
years. Mr. Crawford is currently 100% vested in that portion of this benefit
which has accrued to date and upon the Effective Date shall be 100% vested in
his final retirement benefit. Mr. Floyd and Mr. Boyle are both currently 30%
vested in that portion of their benefit which has accrued to date. Upon a
"Change of Control," they will become 100% vested in accrued benefits. Certain
events in the agreements could cause an acceleration of benefits. The Merger
will constitute a "Change of Control" under those agreements.
3
<PAGE> 12
Except as indicated above, none of the directors or executive officers of
First Central, 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 Central 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 Central
Common Stock. Each share of First Central 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 Central 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, shares of First Central Common Stock were
issued and outstanding. As of the Record Date, the directors and executive
officers of First Central beneficially owned approximately % of the
outstanding shares of First Central Common Stock. As of the same date, the
directors, executive officers and affiliates of BancGroup held no shares of
First Central Common Stock. See "The Special Meeting."
As of the Record Date, the directors of First Central beneficially owned
shares of First Central Common Stock representing approximately % of
the outstanding shares and have agreed with BancGroup to vote their shares in
favor of the Agreement. See "The Special Meeting." As of , 1997,
Directors and executive officers of BancGroup beneficially owned in the
aggregate shares of BancGroup Common Stock representing approximately
% of BancGroup's outstanding shares.
Proxies should be returned to First Central in the envelope enclosed
herewith. Shareholders of First Central submitting proxies may revoke their
proxies by (i) giving notice of such revocation in writing to the Secretary of
First Central at or prior to the Special Meeting, (ii) by executing and
delivering a proxy bearing a later date to the Secretary of First Central 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 Central 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."
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Central Common Stock as of the Record Date are entitled to
exercise dissenters' rights of appraisal pursuant to Section 658.44 of the
Florida Banking Code (the "FBC"). A holder of First Central 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 Central at or prior to the Special
Meeting that the shareholder dissents from the Agreement. To the extent that a
First Central 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 exactly 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 C 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 from the treatment for
shareholders who do not exercise dissenters' rights. See "The Merger -- Rights
of Dissenting Shareholders," "-- Certain Federal Income Tax Consequences."
4
<PAGE> 13
CONDITIONS TO THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The obligations of First Central 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 Central Common
Stock; (ii) the approval of the Merger by the Board of Governors of the Federal
Reserve Board (the "Federal Reserve") and by the Alabama Banking Department (the
"Alabama Department"); (iii) each party's having obtained consents of third
parties required for the consummation of the Merger or for the prevention of
default under material contracts or permits of such party; (iv) the Registration
Statement of which this Prospectus forms a part shall have become effective, and
no stop order or proceedings for such purpose suspending the effectiveness of
the Registration Statement shall be pending or in effect; (v) 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; (vi) the absence of any
investigation by any governmental agency which might result in any such
proceeding; (vii) consummation of the Merger no later than May 31, 1998; (vii)
receipt of an opinion of Coopers & Lybrand L.L.P. regarding certain matters;
and, (ix) receipt of opinions of counsel.
The obligation of First Central to consummate the Merger is further subject
to several other conditions, including, among others: (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, among others: (i) the absence of any material
adverse change in the financial condition or affairs of First Central; (ii) the
number of shares as to which holders of First Central Common Stock exercise
dissenters' rights not exceeding 10% of the outstanding shares of First Central
Common Stock; (iii) the receipt of a letter from Coopers & Lybrand L.L.P.
concurring with the conclusions of BancGroup's and First Central'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 Central
contained in the Agreement, and the performance by First Central of all of its
covenants and agreements under the Agreement; and, (v) the receipt by BancGroup
of certain undertakings from holders of First Central Common Stock who may be
deemed to be "affiliates" of First Central pursuant to the rules of the
Commission.
Applications for appropriate regulatory approvals by the Federal Reserve
and the Alabama Department were filed with such agencies on October 16, 1997.
The Federal Reserve's approval is anticipated on or about November 15, 1997, and
approval of the Alabama Department is anticipated on or about December 31, 1997.
It is currently anticipated that the Merger will be consummated during the first
quarter of 1998. No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that the other conditions precedent to
the Merger can or will be satisfied.
See "The Merger -- Conditions to Consummation of the Merger" and
"Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and the merger by the holders of First Central Common Stock, no amendment
decreasing the consideration to be received by First Central stockholders may be
made without the further approval of such stockholders. Such amendments may
require the filing with the Commission of an amendment of the Registration
Statement, of which this Prospectus forms a part. The Agreement may be
terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the stockholders of
5
<PAGE> 14
First Central, by the mutual consent of the respective Boards of Directors of
First Central and BancGroup, or by the Board of Directors of either BancGroup or
First Central under certain circumstances including, but not limited to, the
failure of the transactions contemplated by the Agreement to be consummated on
or prior to March 1, 1998, if such failure to consummate is not caused by any
breach of the Agreement by the party electing to terminate. See "The
Merger -- Amendment or Termination of Agreement."
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of the holders of the First Central 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
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"). No ruling with respect to the federal income tax
consequences of the Merger to First Central's shareholders will be requested
from the Internal Revenue Service (the "IRS"). First Central has received an
opinion from Coopers & Lybrand L.L.P., that, among other things, a shareholder
of First Central who exchanges shares of First Central Common Stock for
BancGroup Common Stock will not recognize gain, except that shareholders of
First Central will recognize gain to the extent such shareholders receive cash
in lieu of fractional shares of BancGroup Common Stock. Shareholders who receive
cash for their shares of First Central 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." TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL
TAX PAYERS CAN VARY, HOWEVER, AND FIRST CENTRAL SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
TO THEM.
ACCOUNTING TREATMENT
The merger of First Central into BancGroup will be treated as a
"pooling-of-interests" transaction by BancGroup for accounting purposes. See
"The Merger -- Accounting Treatment."
6
<PAGE> 15
RECENT PER SHARE MARKET PRICES
First Central. There is no established public trading market for the First
Central Common Stock. The shares of First Central Common Stock are not actively
traded, and such trading activity, as it occurs, takes place in privately
negotiated transactions. Management of First Central is aware of certain
transactions in shares of First Central 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 Central Common
Stock that have occurred since January 1, 1995 for transactions in which the
trading prices are known to management of First Central:
<TABLE>
<CAPTION>
PRICE PER SHARE
OF COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter............................................... -- --
Second Quarter.............................................. -- --
Third Quarter............................................... -- --
Fourth Quarter.............................................. -- --
1996
First Quarter............................................... $30.00 $15.00
Second Quarter.............................................. -- --
Third Quarter............................................... -- --
Fourth Quarter.............................................. -- --
1997
First Quarter............................................... -- --
Second Quarter.............................................. -- --
Third Quarter............................................... -- --
Fourth Quarter (through October 20, 1997)................... -- --
</TABLE>
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 National Market System (the "Nasdaq NMS") 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 Common Stock was not publicly traded. Class A Common Stock was traded on
the Nasdaq NMS 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> <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 3/18
1997
First Quarter............................................... 24 18 2/3
Second Quarter.............................................. 24 7/8 22
Third Quarter............................................... 29 3/16 24 1/4
Fourth Quarter (through October 20, 1997)................... 29 15/16 28 15/16
</TABLE>
7
<PAGE> 16
- ---------------
(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 September 9, 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 $27.9375 per share. The following table presents the market value
of BancGroup Common Stock per share on that date, and the per share market value
and equivalent per share value of First Central Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP FIRST CENTRAL BANCGROUP
COMMON STOCK(1) COMMON STOCK(2) COMMON STOCK(3)
--------------- --------------- ---------------
<S> <C> <C> <C>
Comparative Market Value..... $27.9375 $30.00 $62.46
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on September 9, 1997.
(2) There is no established public trading market for the shares of First
Central Common Stock. The value shown is the price at which shares of First
Central Common Stock were sold in March 1996, which was the last sale price
prior to the public announcement of the Merger on September 10, 1997, of
which management of First Central is aware.
(3) If the Merger had closed on September 9, 1997 and assuming the Market Value
had also been $27.9375, then 2.236 ($62.46 divided by $27.9375) shares of
BancGroup Common Stock would have been exchanged for each share of First
Central 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 have been
satisfied.
BancGroup's Restated Certificate of Incorporation (the "BancGroup
Certificate") 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 of
Directors to consider non-economic and other factors in evaluating a "business
combination," (4) inability of shareholders to call special meetings and act by
written consent, and (5) certain advance notice provisions for the conduct of
business at shareholder meetings.
See "BancGroup Capital Stock and Debentures" and "Comparative Rights of
Shareholders."
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 Central
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.
8
<PAGE> 17
PER SHARE DATA
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED YEAR ENDED YEAR ENDED
1997 1996 1996 1995 1994
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- HISTORICAL (AS RESTATED):
Net income
Primary*............................ $ 0.88 $ 0.78 $ 1.26 $ 1.23 $ 0.96
Fully diluted*...................... 0.87 0.77 1.25 1.19 0.95
Book value at end of period*.......... 10.54 10.11 10.29 9.43 7.93
Dividends per share:
Common stock........................ 0.30 0.27 0.54 0.3375
Common A............................ 0.1125 0.40
Common B............................ 0.0625 0.20
FIRST CENTRAL
Net income
Historical:
Primary**........................ 2.21 2.05 4.28 3.67 3.16
Fully diluted.................... 2.21 2.05 4.28 3.67 3.16
Pro forma equivalent assuming
combination with First Central
and completed business
combinations(a):
Primary.......................... 1.68 1.64 2.61 2.54 2.02
Fully diluted.................... 1.68 1.62 2.59 2.48 2.00
Pro forma equivalent assuming
combination with First Central,
completed business combinations
and other probable business
combinations(a):
Primary.......................... 1.64 1.60 2.54 2.46 2.02
Fully diluted.................... 1.62 1.58 2.54 2.42 2.00
Book value at end of period
Historical.......................... 29.70 28.55 28.55 25.47 21.43
Pro forma equivalent assuming
combination with First
Central(a)....................... 22.18 N/A N/A N/A N/A
Pro forma equivalent assuming
combination with First Central,
completed business combinations
and other probable business
combinations(a):................. 22.79 N/A N/A N/A N/A
Dividends per share
Historical.......................... 0.50 0.50 1.00 0.25 0.00
Pro forma equivalent assuming
combination with First Central
and completed business
combinations(b).................. 0.63 0.57 1.14 0.95 0.84
Pro Forma equivalent assuming
Combination with First Central,
completed business combinations and
other probable business
combinations(b):.................... 0.63 0.57 1.14 0.95 0.84
</TABLE>
9
<PAGE> 18
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED YEAR ENDED YEAR ENDED
1997 1996 1996 1995 1994
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- PRO FORMA COMBINED (FIRST
CENTRAL AND COMPLETED BUSINESS
COMBINATIONS):
Net income
Primary............................. 0.80 0.78 1.24 1.21 0.96
Fully diluted....................... 0.80 0.77 1.23 1.18 0.95
Book value at end of period........... 10.55 N/A N/A N/A N/A
BANCGROUP -- PRO FORMA COMBINED
(COMPLETED BUSINESS COMBINATIONS,
FIRST CENTRAL AND OTHER PROBABLE
BUSINESS COMBINATIONS):
Net income
Primary............................. 0.78 0.76 1.23 1.17 0.96
Fully diluted....................... 0.77 0.75 1.21 1.15 0.95
Book value at end of period........... 10.84 N/A N/A N/A N/A
</TABLE>
- ---------------
* Restated to reflect the impact of a two-for-one stock split in the form of
a 100% dividend paid February 11, 1997.
** Referred to as earnings per common and common equivalent share in First
Central Bank's selected financial data and financial statements, included
elsewhere herein.
N/A Not applicable due to pro forma balance sheet being presented only at June
30, 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
Central Common Stock. For the purposes of these pro forma equivalent per
share amounts, an 2.1030 BancGroup Common Stock share conversion ratio is
utilized. The ratio is based on the maximum Market Value of $29.70,
($62.46/$29.70). As of October 20, 1997, the Market Value exceeded the
maximum Market Value allowed.
(b) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the 2.1030 conversion ratio per
share of First Central 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> 19
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of First Central in
connection with the solicitation of proxies by the Board of Directors of First
Central for use at the Special Meeting and any adjournments or postponements
thereof. The purpose of the Special Meeting is to consider and vote upon the
Agreement which provides for the proposed Merger of First Central with and into
Colonial Bank. Colonial Bank will be the surviving corporation in the Merger.
THE BOARD OF DIRECTORS OF FIRST CENTRAL BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF FIRST CENTRAL AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE AGREEMENT (ITEM 1 ON THE PROXY CARD).
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 shareholders is required to approve the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of First Central has fixed the close of business on
, 1997, as the Record Date for determination of shareholders
entitled to vote at the Special Meeting. As of the Record Date, there were
record holders of First Central Common Stock and shares of First Central
Common Stock outstanding, each entitled to one vote per share. First Central is
obligated to issue an additional
shares of First Central Common Stock upon the exercise of outstanding First
Central Options.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of First Central 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 Central shareholders holding the
requisite number of shares of First Central 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 Central 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 Central 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
Central 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 with respect
to which the holder thereof has given written notice to First Central 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 from the treatment for shareholders who receive
BancGroup Common Stock in the Merger. See "The Merger -- Certain Federal Income
Tax Consequences." 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 Central owned shares of
First Central Common Stock representing approximately % of the outstanding
shares. These individuals have agreed with BancGroup to vote their shares in
favor of the Merger. As of the Record Date, the directors, executive officers
and affiliates of BancGroup held no shares of first Central Common Stock.
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If the Agreement is approved at the Special Meeting, First Central is
expected to merge with and into Colonial Bank promptly after the other
conditions to the Agreement are satisfied. See "The Merger -- Conditions to
Consummation of the Merger."
THE BOARD OF DIRECTORS OF FIRST CENTRAL URGES THE SHAREHOLDERS OF FIRST
CENTRAL 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 Central, without receiving special compensation therefor, may
solicit proxies from First Central'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 Central Common Stock.
First Central will bear the cost of assembling and mailing this Prospectus
and other materials furnished to shareholders of First Central. 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
Central, 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 Central 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 Central 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 Central 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 Central, prior to or at the Special
Meeting, a written notice revoking the proxy; (ii) delivering to the Secretary
of First Central, 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. Attendance at the Special Meeting will not, in and of
itself, constitute a revocation of a proxy. All written notices of revocation
and other communications with respect to the revocation of First Central's
proxies should be addressed to:
FIRST CENTRAL BANK
5858 Central Avenue
St. Petersburg, Florida 33707
Attention: E. Ralph Crawford
President and CEO
Proxies marked as abstentions and shares held in a 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 Central is not aware of any business to be
acted upon at the Special Meeting other than consideration of the Agreement and
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 approval of
the Agreement, 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 approval of the Agreement. Proxies voted against
approval of the Agreement 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, a Market Value of BancGroup Common Stock of $29.70 (the maximum Market
Value) on the Effective Date (as of October 20, 1997, the Market Value exceeded
the maximum Market Value allowed), BancGroup would issue approximately 688,742
shares of BancGroup Common Stock to the shareholders of First Central pursuant
to the Merger. Based on those assumptions, the 688,742 shares of BancGroup
Common Stock would represent approximately 1.61% 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.
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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, a copy of which is attached hereto as Appendix A and certain
provisions of Florida law relating to the rights of dissenting shareholders, a
copy of which is attached hereto as Appendix C. All First Central shareholders
are urged to read the Agreement and the Appendices in their entirety.
GENERAL
The Agreement provides that, subject to approval by the shareholders of
First Central, receipt of necessary regulatory approval and satisfaction of
certain other conditions described below at "Conditions to Consummation of the
Merger," First Central will merge with and into Colonial Bank. Upon completion
of the Merger, the corporate existence of First Central will cease, and Colonial
Bank will succeed to the business formerly conducted by First Central.
BACKGROUND OF THE MERGER
On March 20, 1997, the Board of Directors of First Central retained Austin
Associates, Inc. to complete an appraisal of First Central. The appraisal was
intended to provide the Board of Directors with information regarding First
Central's potential value if it were to entertain discussions with prospective
purchasers. Austin Associates, Inc. issued its appraisal report on April 11,
1997, and presented the report to the Board of Directors on April 16, 1997. The
report indicated a range of values for sale of control of First Central between
$19 to $21 million as of December 31, 1996.
Over approximately the next two months, members of the Board of Directors
considered the results of the Austin Associates, Inc.'s report and determined to
pursue a limited process of contacting a selective group of potential
purchasers. On June 11, 1997, the Board of Directors retained Austin Associates,
Inc. to serve as financial advisor with respect to a possible sale or merger of
First Central. At this time, the Board of Directors authorized an employment
agreement between the First Central and E. Ralph Crawford which was subsequently
executed as of July 9, 1997. The purpose of the contract is to induce Mr.
Crawford to remain in the employ of First Central and to encourage a prospective
purchaser to maintain Mr. Crawford's status and principal responsibilities
following a change in control.
During late June, the Board of Directors and Austin Associates, Inc.
further evaluated prospective purchasers and identified three banking
organizations, including BancGroup, as potential acquirers. The three
organizations were selected based on strength of financial performance, stock
trading volumes, geographic scope of operation and history of acquisitions in
Florida. Austin Associates, Inc. began contacting the potential acquirers in
early July. All three potential acquirers executed confidentiality agreements,
and were provided confidential information packages regarding the business and
operations of First Central on or about July 15, 1997. The deadline for
submission of indications of interest was August 8, 1997.
On August 12, 1997, representatives of Austin Associates, Inc. met with the
Board of Directors of First Central to review and evaluate the status of the
process. After extensive deliberation, the Board of Directors authorized Austin
Associates, Inc. to contact BancGroup and to offer to negotiate exclusively with
BancGroup, provided certain conditions were met. Representatives of Austin
Associates, Inc. contacted representatives of BancGroup late in the day on
August 12 to communicate this information. On August 13, BancGroup notified
Austin Associates, Inc. of its willingness to agree to the specified conditions.
During the remainder of August and through September 9, BancGroup and First
Central and their respective representatives negotiated the financial and other
terms of the Agreement on an "arm's length" basis. During the week of September
2, BancGroup performed a due diligence review of First Central. On September 9,
1997, the First Central Board of Directors held a meeting, attended by legal
counsel, to review the terms and conditions of the Agreement. During this
meeting, legal counsel reviewed generally the fiduciary obligations of directors
in mergers of financial institutions. In addition, a representative of Austin
Associates, Inc. orally advised the Board of Directors that the terms of the
Agreement were fair to the shareholders of
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First Central, from a financial point of view. Following discussion and review,
the First Central Board of Directors unanimously approved the Agreement. The
Agreement between First Central and BancGroup was entered into as of September
9, 1997.
FIRST CENTRAL'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
In connection with its decision to approve the Merger and recommend the
transaction to the shareholders of First Central, the Board of Directors of
First Central, with the assistance of its financial advisor, Austin Associates,
Inc., reviewed the adequacy and fairness of the consideration to be received by
shareholders of First Central in the Merger, taking into account the historical
trading prices of First Central's stock, the price to be achieved in a
negotiated sale of First Central as a whole, premiums over trading prices which
have been proposed or offered with respect to the securities of other companies
in the past in connection with similar offers, and the future prospects for
First Central and its business. In addition, the Board of Directors of First
Central considered the potential social and economic impact of the Merger on its
employees, depositors and other customers and vendors as well as and the
potential social and economic impact of the Merger on the communities in which
the Bank operates. The Board of Directors also considered the business and
financial condition and earnings prospects of BancGroup and the competence,
experience and integrity of its management.
OPINION OF FINANCIAL ADVISOR
Austin Associates, Inc. is a recognized investment banking firm regularly
engaged in the valuation of financial institutions and other businesses and
their securities in connection with mergers and acquisitions and in valuation
for estate, corporate and other purposes. First Central selected Austin
Associates, Inc. to serve as financial adviser in connection with the Merger on
the basis of its reputation and qualifications in representing financial
institutions in mergers and acquisitions.
Austin Associates, Inc. has rendered a written opinion to the Board of
Directors of First Central to the effect that the terms of the Agreement are
fair from a financial point of view to the shareholders of First Central as of
the date of the opinion. A copy of Austin Associates, Inc.'s fairness opinion is
attached as Appendix B to this Prospectus and should be read in its entirety.
Austin Associates, Inc. based its opinion upon, among other things: (i) a
comparison of the financial statements and other financial information
concerning First Central and BancGroup set forth or incorporated by reference in
this Prospectus; (ii) certain other financial information concerning First
Central, including, but not limited to, operating budgets and loan loss reserve
adequacy reports; (iii) financial and share price data of First Central,
BancGroup and comparable banking organizations; (iv) the financial terms, to the
extent publicly available, of certain comparable transactions; and (v)
discussions with the management of First Central and BancGroup.
The terms of the Agreement were determined by BancGroup and First Central,
and their respective representatives, after arm's-length negotiations between
the parties. Austin Associates, Inc. participated in the negotiations on behalf
of First Central.
In connection with rendering its opinion, Austin Associates, Inc. performed
a variety of financial analyses, which are summarized below. Austin Associates,
Inc. believes its analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and the process underlying the Austin Associates, Inc.'s opinion. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analyses or summary
description. In its analyses, Austin Associates, Inc. made numerous assumptions
with respect to industry performance, business and economic conditions, and
other matters, many of which are beyond the control of First Central or
BancGroup. Any estimates contained in Austin Associates, Inc.'s analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than the estimates.
Preliminary Appraisal of First Central. Austin Associates, Inc. completed
a preliminary appraisal of First Central as of December 31, 1996, which was
presented to the Board of Directors of First Central in
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April of 1997. Austin Associates, Inc. estimated a range of values for sale of
control of First Central from $19 million to $21 million, which would include
the value of First Central's outstanding options.
The Process for Soliciting Indications of Interest from Other Bank Holding
Companies. After analysis and discussions between Austin Associates, Inc. and
First Central, three potential purchasers, including BancGroup, were contacted
to determine their potential interest in acquiring First Central. All three
organizations requested confidential information packages which provided
detailed information regarding the business and operations of First Central.
Each organization was asked to submit a specific proposal to acquire First
Central. The First Central Board of Directors agreed to negotiate exclusively
with BancGroup after extensive deliberation, and after the financial terms of
BancGroup's proposal were deemed acceptable.
Comparative Price Analysis. Austin Associates, Inc. reviewed a comparison
of prices paid in selected sale of control transactions announced in Florida
between January 1, 1996 and September 30, 1997, for banks having assets of up to
$500 million. The 45 transactions reviewed had a median price to book value
ratio of 226 percent, a price to earnings multiple of 20.2 times, and a median
premium over book value as a percent of assets of 9.6 percent. For sale of
control transactions involving higher performing banks in Florida, Austin
Associates, Inc. selected only those banks with return on average equity ratios
above 15 percent. Of the 45 transactions noted above, 11 banks met this
criteria. The median multiples were 247 percent of book value, 15.2 times
earnings, and a 12.0 percent premium to assets. The Market Value of the
consideration to be received by First Central shareholders and option holders in
the Merger is estimated at 226 percent of First Central's book value at June 30,
1997, based on an aggregate transaction value of $22 million. The Market Value
of the consideration is further estimated to equal 14.2 times First Central's
consolidated earnings for the twelve months ended June 30, 1997, and the premium
over book value is 22.4 percent of First Central's assets.
Contribution Analysis. Austin Associates, Inc. compared the pro forma
ownership interest in BancGroup that First Central shareholders would receive,
in the aggregate, to the contribution by First Central to the total assets,
equity and net income in the combined organization. Assuming a June 30, 1997,
Effective Date for the Merger and based on the minimum exchange ratio, First
Central shareholders would own approximately 1.61 percent of BancGroup on a pro
forma basis. First Central's contribution of total assets would equal 0.84
percent, the contribution of total equity would equal 2.06 percent, the
contribution of net income for the twelve months ending June 30, 1997 would have
equaled 2.76 percent and the contribution of net income for the six months
ending June 30, 1997 would have equaled 2.19%.
Dilution Analysis. Austin Associates, Inc. also reviewed the pro forma
effect of the Merger on First Central's fully diluted earnings per share as of
December 31, 1996 and June 30, 1997 and book value per share as of June 30,
1997. First Central recorded earnings per share in 1996 of $4.28. Giving effect
to the Merger, the equivalent First Central earnings per share would have
equaled $2.59 per share, a decrease of 39.5 percent from actual results.
First Central recorded year to date earnings per share of $2.21 and a book
value of $29.70 per share as of June 30, 1997. Giving effect to the Merger, the
equivalent First Central earnings per share would have equaled $1.68, a decrease
of 24.0 percent from actual results. Book value per share would have decreased
to $22.18 per share, a decrease of 25.3 percent from actual book value.
Dividends. Austin Associates, Inc. reviewed the current cash dividends
paid by First Central and BancGroup. Based on the range of possible exchange
ratios, from 2.1030 (assuming a Market Value of $29.70) to 2.5704 (assuming a
Market Value of $24.30), equivalent dividends to First Central shareholders
would have ranged from $1.14 to $1.39 for the year ended December 31, 1996, a 14
to 39 percent increase over actual dividends received by First Central
shareholders of $1.00 per share. Equivalent dividends to First Central
shareholders would have ranged from $.63 to $.77 for the six months ended June
30, 1997, a 26 to 54 percent increase over actual dividends received by First
Central shareholders of $0.50 per share.
The summary set forth above does not purport to be a complete description
of the analyses performed by Austin Associates, Inc. Furthermore, Austin
Associates, Inc. did not conduct a physical inspection of any of the properties
or assets of First Central or BancGroup. Austin Associates, Inc. has assumed and
relied upon the accuracy and completeness of the financial and other information
provided to it or publicly available, has
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relied upon the representations and warranties of First Central and BancGroup in
the Agreement, and has not independently attempted to verify any of such
information. Austin Associates, Inc. has also assumed that the conditions
precedent to the consummation of the Merger as set forth in the Agreement will
be satisfied and that the Merger will be consummated on a timely basis in the
manner contemplated by the Agreement. No limitations were imposed by First
Central or BancGroup on the scope of Austin Associates, Inc.'s investigation,
nor were any specific instructions given to Austin Associates, Inc. in
connection with its fairness opinion.
For Austin Associates, Inc.'s services as financial advisor, including the
fee paid for the appraisal, First Central will pay the firm $15,000, plus a
contingent amount equal to one percent of the transaction value when the Merger
is consummated. In addition, First Central has agreed to reimburse Austin
Associates, Inc. for reasonable out-of-pocket expenses and indemnify Austin
Associates, Inc. against certain liabilities, including liabilities under
applicable securities laws.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF FIRST CENTRAL
The Board of Directors of First Central has determined that the Merger is
in the best interests of First Central and its shareholders. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FIRST CENTRAL 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, Miami,
Winter Haven and West Palm Beach areas. The Board of Directors of BancGroup
believes that the combination of First Central 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 Central, including the quality of its capital and assets;
(ii) similarities in the philosophies of BancGroup and First Central, including
First Central's commitment to delivering high quality personalized financial
services to its customers; and (iii) First Central's management's knowledge of
and experience in the St. Petersburg, Florida market.
RELATED TRANSACTIONS -- STOCK OPTION
First Central and BancGroup have entered into a stock option agreement
dated as of September 9, 1997 (the "Option Agreement") whereby First Central has
granted to BancGroup an option to purchase up to 65,172 shares, or 19.9% of
First Central Common Stock at a purchase price of $62.46 per share. The Option
Agreement is attached hereto as Appendix D. Both the number of shares subject to
the option and the purchase price per option share are subject to adjustment in
certain circumstances. The Option Agreement was entered into as an inducement
for, and as a condition to, BancGroup's execution of the Agreement. The Option
Agreement is intended to increase the likelihood that the Merger will be
consummated by making it more difficult and expensive for a third party to
acquire control of First Central while BancGroup is seeking to consummate the
Merger.
The option granted under the Option Agreement may be exercised by
BancGroup, in whole or in part, in the event a "Purchase Event" precedes the
termination of the Agreement. If the option becomes exercisable, First Central
may be required to repurchase the option or any shares issued thereunder at a
price calculated in accordance with the Option Agreement. In addition, under
certain circumstances, the option may be converted into a similar option to
acquire shares of an entity engaging in certain transactions with First Central.
The term "Purchase Event" is defined in the Option Agreement to include:
(i) First Central's agreement, without BancGroup's prior written consent, to
effect an "Acquisition Transaction" with any person other than
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BancGroup, or First Central's authorization, recommendation, or public proposal
of (or public announcement of its intention to authorize, recommend, or propose)
such an agreement; or (ii) the acquisition by any person of beneficial ownership
of 25% or more of the outstanding shares of First Central Common Stock. The term
"Acquisition Transaction" is defined to include: (i) a merger, consolidation, or
other business combination involving First Central; (ii) the disposition, by
sale, exchange, lease, or otherwise, of substantially all of the consolidated
assets of First Central; or (iii) the issuance of securities representing 25% or
more of the voting power of First Central.
The Option Agreement and the option granted thereunder terminate upon the
earliest to occur of: (i) the Effective Date; (ii) termination of the Agreement
in accordance with its terms prior to the occurrence of a Purchase Event or a
"Preliminary Purchase Event" (generally, a tender offer or exchange offer by a
third party to acquire more than 25% of the outstanding shares of First Central
Common Stock or the failure of First Central's shareholders to approve the
Agreement following the public announcement of a proposed Acquisition
Transaction or tender offer); (iii) termination of the Agreement by BancGroup
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event for
reasons other than a breach of the Agreement by First Central or the failure to
occur of certain conditions precedent to the Merger; or (iv) the passage of
eighteen months after termination of the Agreement by BancGroup because of a
material breach of the Agreement by First Central or the failure to occur of
certain conditions precedent to the consummation of the Merger.
To the knowledge of First Central, no event that would permit the exercise
of the option has occurred as of the date hereof. The rights and obligations of
First Central and BancGroup under the Option Agreement are subject to receipt of
any required regulatory approval, including approval by the Federal Reserve
under the BHCA.
The Option Agreement, together with First Central's agreement not to
negotiate or entertain any proposals for the sale of First Central or its
subsidiaries to another party (see "The Merger -- Commitments with Respect to
Other Offers"), have the effect of discouraging persons who might now, or prior
to the Effective Date, be interested in acquiring all or a significant interest
in First Central from considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for the First Central
Common Stock than the price per share to be paid by BancGroup in the Merger. The
option granted to BancGroup under the Option Agreement will become exercisable
in the event of the occurrence of certain proposals to acquire First Central.
The possibility that BancGroup might exercise the option, and thus acquire a
substantial block of First Central Common Stock, might deter offers of other
bidders interested in such an acquisition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, certain executive officers of First Central hold
First Central Options which entitle them to purchase, in the aggregate, up to
29,500 shares of First Central Common Stock. Under the terms of the Agreement,
any First Central Options which are not exercised prior to the Effective Date
will be assumed by BancGroup, and thereafter the holders of such options will
have the right to acquire shares of BancGroup Common Stock. See "The
Merger -- Conversion of First Central Common Stock," "-- Treatment of First
Central Options."
On the Effective Date, all employees of First Central (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 in effect as of the date of the
Agreement, except that such severance policy will be modified and will apply to
employees of First Central who become employees of BancGroup. All employees of
First Central 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.
Effective July 9, 1997, First Central entered into an agreement with Mr.
Crawford, the President and Chief Executive Officer of First Central. Under the
terms of that agreement and subject to other conditions set out in such
agreement, Mr. Crawford shall be entitled to continue his employment and
continue to receive his
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current salary of $200,000 per year, plus his current fringe benefits, for a
period of three years after a "Change in Control" as defined in the Agreement.
The approval by the shareholders of First Central of the proposed merger with
Colonial Bank will constitute a "Change in Control" under the agreement. In the
event that Mr. Crawford elects to terminate his employment within three years
after the Merger, he will receive one-half of his annual salary for the
remainder of the three-year term. During the term of his employment and for
three years thereafter, Mr. Crawford is restricted from competing with First
Central (and, after the Effective Date, with Colonial Bank) for a period of
three years in Pinellas County, Florida or contiguous counties. See "The
Merger -- Background of the Merger."
On November 1, 1994, First Central entered into salary continuation
agreements with Mr. Crawford and two other of its executive employees, Lawrence
D. Floyd and Scott C. Boyle. The agreements provide that, subject to certain
conditions, each of them will receive, upon reaching age 65, salaries in the
amounts of $45,000, $15,000 and $36,000, respectively, for a period of fifteen
years. Mr. Crawford is currently 100% vested in that portion of the benefit
which has accrued to date, and upon the Effective Date he will be 100% vested in
his final retirement benefit. Mr. Floyd and Mr. Boyle are both currently 30%
vested in that portion of the benefit which has accrued as to each of them to
date. Upon a "Change of Control," they would become 100% vested in accrued
benefits. Certain events in the agreements could cause an acceleration of
benefits. The Merger between First Central and Colonial Bank will constitute a
"Change of Control" under those agreements.
Except as described above, none of the directors or executive officers of
First Central, 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 Central Common Stock.
CONVERSION OF FIRST CENTRAL COMMON STOCK
On the Effective Date, each share of First Central Common Stock outstanding
and held by First Central'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 Central Common Stock on the Effective Date
will be converted, will be equal to $62.46 divided by the Market Value. The
Market Value will be the average of the closing prices of the Common Stock of
BancGroup as reported by the NYSE on each of the ten consecutive trading days
ending on the trading day five calendar days immediately preceding the Effective
Date. However, the Market Value shall be not less than $24.30 per share nor more
than $29.70 per share. Regardless of the Market Value, however, the maximum
number of shares of BancGroup Common Stock to be issued in the Merger shall be
841,796 (based upon a minimum Market Value of $24.30 per share) and the minimum
number of shares of BancGroup Common Stock to be issued in the Merger shall be
688,742 (based upon a maximum Market Value of $29.70 per share). The number of
shares of BancGroup Common Stock to be issued in the Merger shall increase
proportionally with each share of First Central Common Stock issued before the
Effective Date upon the exercise of First Central Options.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of First Central otherwise entitled to receive a
fractional share of BancGroup Common Stock will receive instead a cash payment
(without interest) equal to such fractional share multiplied by the Market
Value.
As of October 20, 1997, the Market Value exceeded the maximum Market Value
of $29.70 permitted under the Agreement. If on the Effective Date, the Market
Value exceeds the maximum, then each share of First Central Common Stock will be
converted into 2.1030 shares of BancGroup Common Stock (i.e. $62.46 divided by
$29.70, the maximum Market Value). As a result, a stockholder of First Central
who owns 500 shares of First Central Common Stock would be entitled to receive
1,051.5 shares of BancGroup Common Stock ($62.46 divided by $29.70 and
multiplied by 500) and would receive 1,051 shares of BancGroup Common Stock with
the .5 of a share paid in cash equal to $14.85 (.5 multiplied by $29.70).
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
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representing such shares are received by First Central 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.
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 Central Common Stock will be
converted in the Merger.
For a description of the assumption of First Central Options, see "The
Merger -- Treatment of First Central Options."
SURRENDER OF FIRST CENTRAL COMMON STOCK CERTIFICATES
Upon the Effective Date and subject to the conditions described at "The
Merger -- Conditions to Consummation of the Merger," First Central'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 holders of BancGroup Common Stock as
described herein. Outstanding certificates representing shares of the First
Central Common Stock will represent shares of BancGroup Common Stock.
Thereafter, upon surrender of the certificates formerly representing shares of
First Central 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 Central unless and until such shareholder surrenders for
cancellation his certificate for First Central 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 Central Common Stock
surrendered in connection with the Merger.
A detailed explanation of these arrangements will be mailed to First
Central 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 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 Central 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 Central. 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
Central 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 Central has no knowledge
of any plan or intention on the part of the First Central 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 Central Common Stock outstanding
immediately upon consummation of the Merger.
Neither First Central nor BancGroup intends to seek a ruling from the
Internal Revenue Service (the "IRS") as to the federal income tax consequences
of the Merger. First Central's shareholders should be aware that the opinion of
Coopers & Lybrand, L.L.P will not be binding on the IRS or the courts. First
Central'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.
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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 consequences will
result to First Central's shareholders who exchange their shares of First
Central Common Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by First Central's shareholders
on the exchange of shares of First Central Common Stock for shares of
BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
First Central 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 Central Common Stock
surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each First Central shareholder will include the period during
which the shares of First Central Common Stock exchanged therefor were
held, provided that the shares of First Central Common Stock were a capital
asset in the holder's hands as of the Effective Date;
(iv) Cash payments received by each First Central 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 Central Common Stock is a capital asset in the hands
of the holder;
(v) No gain or loss will be recognized by First Central 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 Central;
(vi) The basis of the assets of First Central acquired by Colonial
Bank will be the same as the basis of the assets in the hands of First
Central immediately prior to the Merger;
(vii) The holding period of the assets of First Central in the hands
of Colonial Bank will include the period during which such assets were held
by First Central;
(viii) No gain or loss will be recognized by First Central's
shareholders on the assumption and conversion of First Central Options into
options to acquire BancGroup Common Stock; and
(ix) A First Central 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 Central Common Stock converted, if the shares of First
Central Common Stock were held as capital assets. However, a First Central
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.
Each First Central 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 MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF FIRST CENTRAL, TO
FIRST CENTRAL 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 FIRST CENTRAL
COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE,
AND SHARE-
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HOLDERS WHO ACQUIRED THEIR SHARES OF FIRST CENTRAL 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 CENTRAL 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 CENTRAL 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 Central, 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 Central Common Stock as compared with
BancGroup Common Stock, see "Comparative Rights of Shareholders."
CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The obligations of First Central 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 Central Common
Stock; (ii) the approval of the Merger by the Federal Reserve and by the Alabama
Department; (iii) each party's having obtained consents of third parties
required for the consummation of the Merger or for the prevention of default
under material contracts or permits of such party; (iv) the Registration
Statement of which this Prospectus forms a part shall have become effective, and
no stop order or proceedings for such purpose suspending the effectiveness of
the Registration Statement shall be pending or in effect; (v) 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; (vi) the absence of any
investigation by any governmental agency which might result in any such
proceeding; (vii) consummation of the Merger no later than May 31, 1998; (vii)
receipt of an opinion of Coopers & Lybrand L.L.P. regarding certain matters;
and, (ix) receipt of opinions of counsel.
The obligation of First Central to consummate the Merger is further subject
to several other conditions, including, among others: (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, among others: (i) the absence of any material
adverse change in the financial condition or affairs of First Central; (ii) the
number of shares as to which holders of First Central Common Stock exercise
dissenters' rights not exceeding 10% of the outstanding shares of First Central
Common Stock; (iii) the receipt of a letter from Coopers & Lybrand L.L.P.
concurring with the conclusions of BancGroup's and First Central'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 Central
contained in the Agreement, and the performance by First Central of all of its
covenants and agreements under the Agreement; and, (v) the receipt by BancGroup
of certain undertakings
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from holders of First Central Common Stock who may be deemed to be "affiliates"
of First Central pursuant to the rules of the Commission.
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 Central and BancGroup may waive all conditions
to their respective obligations to consummate the Merger, other than the receipt
of the requisite approvals of regulatory authorities and First Central
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 Central 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
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and the merger by the holders of First Central Common Stock, no amendment
decreasing the consideration to be received by First Central stockholders may be
made without the further approval of such stockholders. Such amendments may
require the filing with the Commission of an amendment of the Registration
Statement, of which this Prospectus forms a part. The Agreement may be
terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the stockholders of First Central, by the
mutual consent of the respective Boards of Directors of First Central and
BancGroup, or by the Board of Directors of either BancGroup or First Central
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
March 1, 1998, if such failure to consummate is not caused by any breach of the
Agreement by the party electing to terminate. See "The Merger -- Amendment or
Termination of Agreement."
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
October 7, 1997. The regulatory approval process is expected to take
approximately two months from that date.
Alabama 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. 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 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.
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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 fifteen to
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 Federal Reserve's approval of the Merger is anticipated on or about
November 15, 1997. In its approval, it is anticipated that the Federal Reserve
will stipulate that the Merger cannot be consummated before fifteen calendar
days from the date of its approval.
The Agreement provides that the obligation of each of BancGroup, Colonial
Bank and First Central 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
Central 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 bank regulatory 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 BANK REGULATORY 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 Central pending consummation of the Merger. The Agreement prohibits
First Central from taking, without the prior written consent of BancGroup, any
of the following actions, prior to the Effective Date, subject to certain
limited exceptions previously agreed to by BancGroup and First Central:
(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 Central Common Stock issued
upon the exercise of First Central Options;
(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 normal and usual 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 normal and usual 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 Central 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 Central or its subsidiaries.
The Agreement also provides that (i) First Central will consult with
BancGroup respecting loan requests outside the ordinary course of business or in
excess of $100,000, except for single-family residential loan requests and
renewals of existing loans which do not increase the outstanding principal
amount of the loan, and (ii) First Central will consult with BancGroup
respecting business issues on a basis mutually satisfactory to BancGroup and
First Central.
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, and except for the Merger, neither
First Central 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 Central or any business combination involving First Central (collectively,
an "Acquisition Proposal") other than as contemplated by the Agreement. First
Central will notify BancGroup immediately if any such inquiries or proposals are
received by First Central, if any such information is requested from First
Central, or if any such negotiations or discussions are sought to be initiated
with First Central. First Central is required to instruct its officers,
directors, agents or affiliates or their subsidiaries to refrain from doing any
of the above. First Central may communicate information about an Acquisition
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Proposal to its shareholders if and to the extent that legal counsel provides a
written opinion to First Central that it is required to do so in order to comply
with its legal obligations.
In connection with the Agreement, First Central has granted to BancGroup
the option to purchase up to 19.9% of the First Central Common Stock at a
purchase price of $62.46 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of First Central by another party. The option is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for any third party to acquire control of First Central
while BancGroup is seeking to consummate the Merger. See "The Merger -- Related
Transactions -- Stock Option."
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Central Common Stock as of the Record Date are entitled to
dissenters' rights of appraisal under Florida law. Consummation of the Merger is
subject to, among other things, the holders of no more than 10% of the
outstanding First Central Common Stock electing to exercise their dissenters'
rights. PURSUANT TO SECTION 658.44 OF THE FBC, A FIRST CENTRAL SHAREHOLDER WHO
VOTES HIS SHARES AGAINST THE MERGER, OR WHO OTHERWISE GIVES WRITTEN NOTICE TO
FIRST CENTRAL 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
Central (a "Dissenting Shareholder") must strictly comply with the statutory
procedures of Section 658.44 of the FBC, which are summarized below. A copy of
the text Section 658.44 of the FBC is attached hereto as Appendix C.
Shareholders of First Central are urged to read Section 658.44 in its entirety
and to consult with their legal advisors. Each shareholder of First Central 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 C.
Any shareholder of First Central 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 Central and which it will pay to the Dissenting Shareholders
and, if it fixes such amount, will offer to pay such amount to the holders of
all dissenting shares of First Central. The owners of dissenting shares
Dissenting Shareholders 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 Central, 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 which will be final and
binding on all parties. The expenses of appraisal will be paid by Colonial Bank.
The Dissenting Shareholders, 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 Central 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
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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, 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 C.
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 follow strictly 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 Code. See "-- Certain Federal
Income Tax Consequences."
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 Central Options) has been
registered under the Securities Act of 1933 (the "Securities Act"). As a result,
shareholders of First Central who are not "affiliates" of First Central (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 Central 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 Central 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 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 Central affiliate has held the BancGroup
Common Stock for at least one year. BancGroup Common Stock held by affiliates of
First Central who become affiliates of BancGroup, if any, will be subject to
additional restrictions on the ability of such persons to resell such shares.
First Central 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 Central. First Central 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. The undertaking will
also require each affiliate of First Central to 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 within the meaning of
Section 201.01 of the Commission's Codification of Financial Reporting Policies.
If such undertakings are not received and BancGroup waives receipt of such
condition, the certificates for the shares
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<PAGE> 36
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 Central 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 Central Common Stock.
Under this accounting treatment, assets and liabilities of First Central 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 Central 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 Central Common Stock will be reported on the NYSE.
TREATMENT OF FIRST CENTRAL OPTIONS
Assumption of Options. As of the date of this Prospectus, First Central
had granted options (the "First Central Options"), which entitle the holders
thereof to acquire up to 29,500 shares of First Central Common Stock. On the
Effective Date, BancGroup will assume all First Central Options outstanding, and
each such option will represent the right to acquire BancGroup Common Stock on
substantially the same terms applicable to the acquisition of First Central
Common Stock pursuant to the First Central Options. The shares of BancGroup
Common Stock to be delivered upon the exercise of First Central Options granted
under the Option Plan will be made available, after the Merger, from the
authorized but unissued shares of BancGroup Common Stock. 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. The Registration Statement constituting a part of this
Prospectus 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 Central 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 Central Common Stock subject to such First
Central Options multiplied by the Exchange Ratio, provided that no fractions 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 Central 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 Central 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
$62.46 by the Market Value.
The First Central Bank Stock Option Plan. The First Central Options are
issuable pursuant to the First Central Bank 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 Central Options are not transferable except
under the laws of descent and distribution.
Purpose of the Option Plan. The purpose of the Option Plan is to promote
the best interests of First Central and its shareholders by enabling First
Central to attract and retain persons of ability as employees, furnishing an
incentive to employees of First Central by providing them with an equity
participation in First Central and rewarding those employees who contribute to
the operating progress and earning power of First
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<PAGE> 37
Central. BancGroup believes that its assumption of the First Central Options
will be consistent with this purpose. No further options will be granted under
the Option Plan after the Merger. A total of three persons currently hold First
Central 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 described above 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 described 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 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 W. Flake Oakley, IV, BancGroup's
Corporate Secretary, at the offices of BancGroup, Post Office Box 1108, One
Commerce Street, Montgomery, Alabama 36101, telephone: (334) 240-5000.
Exercise of Options. After a First Central 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 ten years from the date
the option is granted. The optionee must be in the continuous employ of First
Central or BancGroup from the date of grant through the date of exercise, except
as stated below.
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<PAGE> 38
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
Central 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 Central 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.
CERTAIN OPTION AGREEMENTS, BY THEIR TERMS, TERMINATE AS OF THE EFFECTIVE
DATE. HOLDERS OF FIRST CENTRAL OPTIONS ARE URGED TO EXAMINE THEIR INDIVIDUAL
OPTION AGREEMENT AND OBTAIN APPROPRIATE LEGAL ADVICE REGARDING WHETHER SUCH
FIRST CENTRAL OPTION WILL SO TERMINATE.
Amendment and Other Matters. BancGroup's Board of Directors may amend the
Option Plan at any time, except that no amendment may make any change in any
First Central Option already granted which would adversely affect the rights of
any participant in the Option Plan.
It is not anticipated that BancGroup will make any reports to option
holders regarding the amount or status of First Central Options held. Option
holders may obtain such information from BancGroup at the address given above.
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<PAGE> 39
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 Common Stock was not publicly traded. The Class A Common Stock was
traded in the over-the-counter market and quoted on the Nasdaq NMS. The
BancGroup Class A Common Stock had more limited voting rights than the BancGroup
Class B Common Stock. The Class A Common Stock 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 the Nasdaq NMS 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 NMS 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)
-------------------
HIGH LOW DIVIDENDS(1)
-------- ------- ------------
<S> <C> <C> <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 7/8 18 2/3 0.15
2nd Quarter................................................. 24 7/8 22 0.15
3rd Quarter................................................. 29 3/16 24 1/4 0.15
4th Quarter (through October 20, 1997)...................... 29 15/16 28 15/16 0.15
</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.
On September 9, 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 $27 15/16 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.
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<PAGE> 40
FIRST CENTRAL
There is no established public trading market for the First Central Common
Stock. The shares of First Central Common Stock are not actively traded, and
such trading activity, as it occurs, takes place in privately negotiated
transactions.
Management of First Central is aware of certain transactions in shares of
First Central 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 Central Common Stock that have occurred
since January 1, 1995 for transactions in which the trading prices are known to
management of First Central:
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK DIVIDENDS
------------------- PER
HIGH LOW SHARE
-------- -------- ---------
<S> <C> <C> <C>
1995
First Quarter............................................... -- -- NA
Second Quarter.............................................. -- -- NA
Third Quarter............................................... -- -- NA
Fourth Quarter.............................................. -- -- .25
1996
First Quarter............................................... $30.00 $15.00 .25
Second Quarter.............................................. -- -- .25
Third Quarter............................................... -- -- .25
Fourth Quarter.............................................. -- -- .25
1997
First Quarter............................................... -- -- .25
Second Quarter.............................................. -- -- .25
Third Quarter............................................... -- -- .25
Fourth Quarter (through October 20, 1997)................... -- -- .25
</TABLE>
The Agreement restricts First Central'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 September 30, 1997, there
were issued and outstanding a total of 41,964,197 shares of BancGroup Common
Stock. No shares of Preference Stock are issued and outstanding. In 1986,
BancGroup issued $28,750,000 in principal amount of its 7 1/2% Convertible
Subordinated Debentures due 2011 (the "1986 Debentures") of which $5,012,686
were outstanding as of September 30, 1997 and convertible at any time into
358,049 shares of BancGroup Common Stock, subject to adjustment. There are
1,774,988 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, and will issue $7,725,000 aggregate
principal amount of subordinated debentures with a ten year maturity, that will
rank pari pasu with the 1986 Debentures. See "Business of BancGroup -- Proposed
Affiliate Banks." On January 29, 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.
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<PAGE> 41
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 shareholders.
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 shareholder
approval. However, BancGroup's Common Stock is listed on the NYSE, which
requires shareholder 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 shareholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after preferences
of any outstanding Preference Stock.
PREFERENCE STOCK
The Preference Stock may be issued from time to time as a class without
series, or if so determined by the Board of Directors of BancGroup, 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 Preference Stock (or of the entire class of 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 Board of Directors of 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 Board
of Directors of BancGroup.
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, Georgia, as trustee.
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 358,049 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
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<PAGE> 42
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.
OTHER INDEBTEDNESS
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 subject to redemption in whole or in part at any time after January 29, 2007
through January 2027. Circumstances are remote that redemption will occur prior
to maturity. 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.
BancGroup has contracted to enter into a merger with ASB Bancshares, Inc.
("ASB"), a Delaware corporation wherein BancGroup would be the surviving
corporation. As part of the consideration for the Common Stock of ASB, BancGroup
intends to issue debentures to three ASB shareholders. It is anticipated that
the aggregate principal amount of these debentures will be $7,724,813.
The debentures would pay a rate of interest equal to the New York Prime
Rate minus 1% (but in no event less than 7% per annum) and would be due and
payable ten years from the date of issuance. They are senior to the BancGroup
Common Stock upon liquidation, but would be subordinate to BancGroup's Senior
Indebtedness. See "BancGroup Capital Stock and Debentures." The Debentures are
redeemable by BancGroup with the consent of the holders thereof. A holder of a
Debenture may, subject to BancGroup's right to decline, request redemption of
any or all of the Debentures held by him or her.
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 Preference
Stock with such rights and privileges, including voting rights, as it may deem
appropriate may enable the BancGroup Board of Directors to prevent a change in
control despite a shift in ownership of the BancGroup Common Stock. See and
"-- Preference Stock." In addition, the power of BancGroup's Board of Directors
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 shareholders 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 the BancGroup 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
Directors, and (iv) the provisions relating to the classified Board of Directors
can only be amended by the
34
<PAGE> 43
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 Chief Executive Officer 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 and Executive Officers that could be desired by a majority of
BancGroup's stockholders. As of April 30, 1997, the Board of Directors of
BancGroup as a group beneficially owned approximately 10.46% of the outstanding
shares of BancGroup Common Stock.
Board Evaluation of Mergers. The BancGroup 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. The BancGroup Certificate prohibits shareholders from
calling special shareholders' 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 shareholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of shareholder meetings but could make it more
difficult for shareholders to nominate directors or introduce business at
shareholder 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 Shareholder"), 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 Shareholder 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 Shareholder or (ii) upon
consummation of the transaction which resulted in the shareholder becoming an
Interested Shareholder, such shareholder owned at least 85% of the outstanding
stock of BancGroup (excluding BancGroup stock held by officers and directors of
BancGroup or by certain BancGroup stock plans). These provisions of Delaware law
apply simultaneously
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<PAGE> 44
with the provisions of the BancGroup Certificate relating to business
combinations with a related person, described above at "Business Combinations,"
but they are generally less restrictive than the BancGroup 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 SHAREHOLDERS
If the Merger is consummated, shareholders of First Central (except those
perfecting dissenters' rights of appraisal) will become holders of BancGroup
Common Stock. The rights of the holders of the First Central Common Stock who
become holders of the BancGroup Common Stock following the Merger will be
governed by the BancGroup 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
Central 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, particularly provisions in BancGroup's Certificate that may limit
or discourage changes in control of BancGroup, see "BancGroup Capital Stock and
Debentures."
The following information is qualified in its entirety by the BancGroup
Certificate and Bylaws, and First Central's Articles of Incorporation and
bylaws, the Delaware General Corporation Law (the "DGCL") and the FBC.
DIRECTOR ELECTIONS
First Central. First Central's 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 of Directors 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 Central. First Central directors may be removed, with or without
cause, by the First Central 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 Central. Each holder of First Central 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.
36
<PAGE> 45
BancGroup. Each shareholder 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 Central. Shareholders of First Central do not have preemptive
rights.
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 Central. 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 willfully
permit to be violated, any of the provisions of the financial institutions
codes, or other pertinent rules of the Florida Department of Banking and
Finance. Section 648.30 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 shareholders 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 shareholders, (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 shareholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
First Central. First Central may indemnify every person who was or is a
party or is or was threatened to be made a party to any action, suit or
proceeding whether civil, criminal, administrative or investigative by reason of
the fact he is or was a director, officer, employee, or agent, or is or was
serving at the request of First Central as a director, officer, employee, agent
or trustee of another corporation, partnership, joint venture trust, employee
benefit plan or other enterprise, against expenses (including attorney's fees),
judgments fines and amounts paid in settlement, actually and reasonably incurred
by him in connection with such action, suit or
37
<PAGE> 46
proceeding, (except in such cases involving gross negligence or willful
misconduct) in the performance of his duties, to the full extent permitted by
applicable law. Such indemnification may, in the discretion of the Board of
Directors, include advances of his expenses in advance of final disposition
subject to the provisions of applicable law. Such indemnification is not
exclusive of any right to which any director, officer, employee, agent or
controlling stockholder of First Central may be entitled as a matter of law.
First Central maintains a directors' and officers' insurance policy
pursuant to which officers and directors of First Central would be entitled to
indemnification against certain liabilities.
BancGroup. The BancGroup Certificate provides that BancGroup shall
indemnify its officers, directors, agents and employees to the full extent
permitted under the DGCL. Section 145 of the DGCL 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 DGCL, 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 directors and certain
officers 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 DGCL.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
First Central. First Central's bylaws authorize a special shareholders
meeting to be called by a majority of the members of the Board of Directors, the
President, Chairman of the Board, or by holders of not less than one-tenth of
the total voting power of all outstanding shares of First Central Common Stock.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's shareholders 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 Central. 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 Finance and by a
majority of the outstanding shares of the bank entitled to vote thereon.
BancGroup. The DGCL 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 DGCL also
provides, however, that the shareholders 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
38
<PAGE> 47
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.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
First Central. 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 638.23 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 DGCL, 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 DGCL, the BancGroup Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The shareholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
First Central. Holders of First Central 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
Shareholders."
BancGroup. Under the DGCL, a shareholder 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 Chancery if a petition for appraisal is
timely filed. Appraisal rights are not available, however, to shareholders of a
corporation (i) if the shares are listed on a national securities exchange (as
is BancGroup Common Stock) or quoted on the Nasdaq NMS, or held of record by
more than 2,000 shareholders (as is BancGroup Common Stock), and (ii)
shareholders 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 shareholders, (c) cash
in lieu of fractional shares of such stock, or (d) any combination thereof.
Shareholders are not permitted appraisal rights in a merger if such corporation
is the surviving corporation and no vote of its shareholders is required.
39
<PAGE> 48
PREFERRED STOCK
First Central. First Central'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 CENTRAL SHAREHOLDERS
As of September 30, 1997, First Central had 130 shareholders of record and
327,500 outstanding shares of common stock. As of September 30, 1997, BancGroup
had 41,964,197 shares of BancGroup Common Stock outstanding with 8,007
shareholders of record.
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, a Market Value of BancGroup Common Stock of $29.70 (the maximum Market
Value) on the Effective Date (as of October 20, 1997, the Market Value exceeded
the maximum Market Value allowed), an aggregate amount of 688,742 shares of
BancGroup Common Stock would be issued to the shareholders of First Central
pursuant to the Merger. Based on those assumptions, the 688,742 shares of
BancGroup Common Stock would represent approximately 1.61% 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 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 shareholder and each director and officer of BancGroup. Based
upon the foregoing assumptions and the additional shares issued pursuant to
completed business combinations since April 30, 1997, as a group, the directors
and executive officers of BancGroup who own approximately 10.33% of BancGroup's
outstanding shares would own approximately 10.18% after the Merger.
BancGroup has entered into agreements pursuant to which additional shares of
BancGroup Common Stock will be issued. See "Business of BancGroup -- Proposed
Affiliate Banks."
40
<PAGE> 49
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, Inc. and subsidiaries as of June 30, 1997, (ii) the
combined presentation of the condensed consolidated statements of condition of
completed business combinations: Great Southern Bancorp, Inc., First Commerce
Banks of Florida, Inc., Dadeland Bancshares, Inc. and First Independence Bank of
Florida ("Completed Business Combinations") as of June 30, 1997, (iii)
adjustments to give effect to the completed pooling-of-interest method business
combinations with Great Southern and First Independence and the completed
purchase method business combinations with First Commerce and Dadeland, (iv) the
condensed consolidated statements of condition of First Central Bank (v)
adjustments to give effect to the proposed pooling-of-interest method business
combination with First Central Bank, (vi) combined presentation of condensed
consolidated statements of condition of the other probable business combinations
with BancGroup; ASB Bancshares, Inc., United American Holding Corp. and South
Florida Banking Corp. ("Other probable business combinations") as of June 30,
1997, (vii) adjustments to give effect to the proposed pooling-of-interests
method business combinations with United American and South Florida and the
proposed purchase method business combination with ASB, (viii) the pro forma
combined condensed statement of condition of BancGroup and subsidiaries as if
such combinations had occurred on June 30, 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. The pro forma
information provided below may not be indicative of future results.
41
<PAGE> 50
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of The
Colonial BancGroup and subsidiaries, incorporated by reference herein. The pro
forma information provided below may not be indicative of future results.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED FIRST OTHER PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ -------- ------------ ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.... $ 188,777 $ 21,637 $(38,000)(3) $ 3,447 $ 175,861 $ 27,557
Interest-bearing deposits
in banks.................. 8,134 8,134 307
Federal funds sold......... 16,567 8,543 1,500 26,610 5,950
Securities available for
sale...................... 502,772 56,254 (637)(2) 3,073 561,462 103,970
Investment securities...... 307,483 3,810 6,657 317,950 19,726
Mortgage loans held for
sale...................... 165,476 165,476
Loans, net of unearned
income.................... 4,582,254 312,613 192(2) 39,043 4,934,128 451,703
26(3)
Less: Allowance for
possible loan losses...... (58,525) (3,986) (558) (63,069) (5,331)
---------- -------- -------- -------- -------- ---------- --------
Loans, net................. 4,523,729 308,627 218 38,485 4,871,059 446,372
Premises and equipment,
net....................... 114,501 12,026 (148)(2) 81 125,776 16,515
(684)(3)
Excess of cost over
tangible and identified
intangible assets
acquired, net............. 38,991 7,728(2) 70,078 2,106
23,359(3)
Mortgage servicing
rights.................... 125,342 $ 125,342
Other real estate owned.... 10,120 712 293 11,125 1,799
Accrued interest and other
assets.................... 98,724 8,268 508(2) 1,342 109,436 8,500
594(3)
---------- -------- -------- -------- -------- ---------- --------
Total Assets............... $6,100,616 $419,877 $ (7,062) $ 54,878 $6,568,309 $632,802
========== ======== ======== ======== ======== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits................... $4,747,342 $365,774 $ 44,580 $5,157,696 549,632
FHLB short-term
borrowings................ 610,000 610,000
Other short-term
borrowings................ 125,479 11,827 137,306 27,876
Subordinated debt.......... 6,676 6,676
Trust preferred
securities................ 70,000 70,000
Other long-term debt....... 15,279 15,279 4,200
Other liabilities.......... 94,472 2,073 1,116(2) 571 99,224 3,821
992(3)
---------- -------- -------- -------- -------- ---------- --------
Total Liabilities.......... 5,669,248 379,674 2,108 45,151 $6,096,181 585,529
Common Stock............... 102,316 2,680 (17)(1) 1,638 1,722(5) $ 107,654 1,231
2,320(1) (1,638)(5)
(16)(2)
36(2)
(2,646)(4)
1,260(4)
(1)(3)
Additional paid in
capital................... 180,736 21,721 (8,206)(1) 1,138 1,054(5) $ 191,488 27,511
5,903(1) (1,138)(5)
(6,754)(2)
15,742(2)
(15,887)(2)
3,938(4)
(2,552)(4)
(4,207)(3)
Retained earnings.......... 164,984 17,197 (2,442)(2) 6,954 $ 173,809 19,136
(12,884)(3)
Treasury Stock............. (15,887) (1,378) 1,378(3) (534)
15,887(2)
Unearned compensation...... (1,887) $ (1,887) (69)
Unrealized gain (loss) on
securities available for
sale, net of taxes........ 1,106 (17) (39)(2) (3) $ 1,064 (2)
17(3)
---------- -------- -------- -------- -------- ---------- --------
Total equity............... 431,368 40,203 (9,170) 9,727 472,128 47,273
---------- -------- -------- -------- -------- ---------- --------
Total liabilities and
equity.................... $6,100,616 $419,877 $ (7,062) $ 54,878 $6,568,309 $632,802
========== ======== ======== ======== ======== ========== ========
Capital Ratios:
Capital Ratio............. 8.06%
Tangible Leverage Ratio... 7.70%
Tier One Capital Ratio*... 10.52%
Total Capital Ratio*...... 11.92%
<CAPTION>
JUNE 30, 1997
---------------------------
PRO FORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks.... $ 203,418
Interest-bearing deposits
in banks.................. 8,441
Federal funds sold......... 32,560
Securities available for
sale...................... 665,432
Investment securities...... 337,676
Mortgage loans held for
sale...................... 165,476
Loans, net of unearned
income.................... 5,385,831
Less: Allowance for
possible loan losses...... (68,400)
-------- ----------
Loans, net................. 5,317,431
Premises and equipment,
net....................... (115)(7) 142,176
Excess of cost over
tangible and identified
intangible assets
acquired, net............. 9,352(7) 81,536
Mortgage servicing
rights.................... 125,342
Other real estate owned.... 12,924
Accrued interest and other
assets.................... 194(6) 118,130
-------- ----------
Total Assets............... $ 9,431 $7,210,542
======== ==========
LIABILITIES AND SHAREHOLDER
Deposits................... 5,707,328
FHLB short-term
borrowings................ 610,000
Other short-term
borrowings................ 165,182
Subordinated debt.......... 7,725(5) 14,401
Trust preferred
securities................ 70,000
Other long-term debt....... 19,479
Other liabilities.......... 423(6) 103,468
-------- ----------
Total Liabilities.......... 8,148 6,689,858
Common Stock............... 1,168(7) 118,869
(2)(7)
(17)(8)
5,276(8)
4,771(6)
(1,212)(6)
Additional paid in
capital................... 11,740(7) 220,873
(1,048)(7)
(17,775)(8)
12,516(8)
5,129(6)
(8,688)(6)
Retained earnings.......... (11,078)(7) 181,867
Treasury Stock............. 534(7)
Unearned compensation...... (1,956)
Unrealized gain (loss) on
securities available for
sale, net of taxes........ (31)(7) 1,031
-------- ----------
Total equity............... 1,283 520,684
-------- ----------
Total liabilities and
equity.................... $ 9,431 $7,210,542
======== ==========
Capital Ratios:
Capital Ratio............. 8.29%
Tangible Leverage Ratio... 7.20%
Tier One Capital Ratio*... 9.82%
Total Capital Ratio*...... 11.35%
</TABLE>
42
<PAGE> 51
COMPLETED BUSINESS COMBINATIONS
GREAT SOUTHERN BANCORP, INC.
(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............................................ 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....................... 8,223
Excess recorded as an increase in contributed capital....... 5,903
--------
8,223
To eliminate Great Southern
Common stock, at par value................................ (17)
Contributed capital....................................... (8,206)
--------
(8,223)
Net change in equity.............................. $ 0
========
</TABLE>
FIRST COMMERCE BANKS OF FLORIDA
(purchase)
(2) To assign the amount by which the estimated value of BancGroup's
investment in First Commerce is in excess of the historical carrying value
amount of the net assets acquired, based on their estimated fair value of such
assets and to record the investment in First Commerce by the issuance of 685,695
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.... $ 9,251
Adjustments to state assets at fair value:
Write-down of fixed assets................................ (148)
Write-down securities..................................... (637)
Write-off organization expenses and accrued expenses...... (6)
Write-off deferred fees................................... 192
Write-off other assets and prepaid expenses............... (133)
Acquisition accruals:
Broker fee................................................ (156)
Buy out option holders.................................... (238)
Buy out data processing contract.......................... (540)
Other legal, accounting and professional.................. (182)
Tax effect of purchase adjustments.......................... 647
Goodwill.................................................... 7,728
-------
6,527
Adjusted equity in carrying value of net assets............. $15,778
=======
Allocated as follows:
Cost of 671,165 shares of BancGroup Common Stock purchased
and re-issued for First Commerce outstanding shares.... 15,887
Issuance of an additional 14,530 shares of BancGroup
Common Stock........................................... 36
Adjustment to contributed capital for difference in cost
of treasury stock and fair value at date of re-issue... (145)
-------
Total purchase price.............................. $15,778
=======
</TABLE>
43
<PAGE> 52
DADELAND BANCSHARES, INC.
(purchase)
(3) To assign the amount by which the estimated value of BancGroup's
investment in Dadeland is in excess of the historical carrying value amount of
the net assets acquired, based on their estimated fair value of such assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of Dadeland.......... $15,697
Adjustments to state assets at fair value:
Write-up loans............................................ 26
Write-down of fixed assets................................ (684)
Acquisition accruals:
Accrue income taxes....................................... (84)
Accounts payable and other miscellaneous.................. (112)
Buy out data processing contract.......................... (20)
Accrue executive severance................................ (766)
Legal, accounting, professional........................... (10)
Tax effect of purchase adjustments.......................... 594
Goodwill.................................................... 23,359
-------
22,277
Adjusted equity in carrying value of net assets............. $38,000
=======
Total purchase price to be paid in cash........... $38,000
=======
</TABLE>
FIRST INDEPENDENCE BANK OF FLORIDA
(pooling of interests)
(4) To record the issuance of 504,075 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....................... 640,674
First Independence warrants (converted according to merger
agreement)................................................ 104,285
Conversion ratio -- shares.................................. 0.7257
Conversion ratio -- warrants................................ 0.3753
BancGroup shares to be issued............................... 504,075
Par value of 504,075 shares issued at $2.50 per share....... $ 1,260
Shares issued at par value.................................. $ 1,260
Total capital stock of First Independence................... 5,198
Excess recorded as an increase to contributed capital....... 3,938
--------
5,198
To eliminate First Independence Common stock, at par
value..................................................... (2,646)
Contributed capital....................................... (2,552)
--------
(5,198)
Net change in equity.............................. $ 0
========
</TABLE>
44
<PAGE> 53
PENDING BUSINESS COMBINATIONS
FIRST CENTRAL BANK
(pooling of interests)
(5) To record the issuance of 688,742 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of First Central:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Central outstanding shares............................ 327,500
Conversion ratio............................................ 2.1030
BancGroup shares to be issued............................... 688,742
Par value of 688,742 shares issued at $2.50 per share....... $ 1,722
Shares issued at par value.................................. $ 1,722
Total capital stock of First Central........................ 2,776
Excess recorded as an increase to contributed capital....... 1,054
--------
2,776
To eliminate First Central Common stock, at par value....... (1,638)
Contributed capital....................................... (1,138)
--------
(2,776)
Net change in equity.............................. $ 0
========
</TABLE>
SOUTH FLORIDA BANKING CORP.
(pooling of interests)
(6) To record the issuance of 1,908,415 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of South Florida Banking Corp.
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
South Florida outstanding shares............................ 1,212,000
Conversion ratio............................................ 1.5746*
BancGroup shares to be issued............................... 1,908,415
Par value of 1,908,415 shares issued at $2.50 per share..... $ 4,771
Shares issued at par value 1,908,415 X 2.50................. $ 4,771
Total capital stock of South Florida........................ 9,900
Excess recorded as an increase to contributed capital....... 5,129
---------
9,900
To eliminate South Florida Common stock, at par value....... (1,212)
Contributed capital....................................... (8,688)
---------
(9,900)
Net change in equity.............................. $ 0
=========
</TABLE>
- ---------------
* The conversion ratio may be adjusted to 1.5908 upon the occurrence of certain
events as defined in the agreement.
45
<PAGE> 54
ASB BANCSHARES, INC.
(purchase)
(7) To assign the amount by which the estimated value of BancGroup's
investment in ASB is in excess of the historical carrying value amount of the
net assets acquired, based on their estimated fair value of such assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of ASB............... $11,625
Adjustments to state assets at fair value:
Write-off computer software and hardware.................. (115)
Acquisition accruals:
Present value of deferred compensation.................... (393)
Litigation accrual........................................ (15)
Legal, accounting and professional........................ (15)
Tax effect of purchase adjustments.......................... 194
Goodwill.................................................... 9,352
-------
9,008
Adjusted equity in carrying value of net assets............. $20,633
=======
Allocated as follows:
Subordinated Debentures for 31,506 shares of ASB
$7,724,799............................................. 7,725
Shares to be issued at par value 467,398 X 2.50........... 1,168
Additional paid in capital................................ 11,740
-------
Total purchase price to be paid in stock and
debt............................................. $20,633
=======
</TABLE>
UNITED AMERICAN HOLDING CORPORATION
(pooling of interests)
(8) To record the issuance of 2,110,563 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of United American:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
United American outstanding shares.......................... 1,720,100
Conversion ratio............................................ 1.2270
BancGroup shares to be issued............................... 2,110,563
Par value of 2,110,563 shares issued at $2.50 per share..... $ 5,276
Shares issued at par value.................................. $ 5,276
Total capital stock of United American...................... 17,792
Excess recorded as an increase to contributed capital....... 12,516
----------
17,792
To eliminate United American Common stock, at par value..... (17)
Contributed capital....................................... (17,775)
----------
(17,792)
Net change in equity.............................. $ 0
==========
</TABLE>
46
<PAGE> 55
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statements of
income of BancGroup on a historical basis for the six months ended June 30, 1997
and 1996 and the years ended December 31, 1996, 1995 and 1994, (ii) the combined
presentation of condensed consolidated statements of income of the completed
business combinations: Great Southern Bancorp, Inc., First Commerce Banks of
Florida, Inc., Dadeland Bancshares, Inc. and First Independence Bank of Florida
("Completed Business Combinations"), for the six months ended June 30, 1997 and
1996 and the years ended December 31, 1996, 1995 and 1994, (iii) adjustments to
give effect to the completed pooling-of-interests method business combinations
with Great Southern and First Independence and the completed purchase method
business combinations with First Commerce and Dadeland, (iv) the condensed
consolidated statements of income of First Central Bank, for the six months
ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and
1994, (v) adjustments to give effect to the proposed pooling-of-interests method
business combination with First Central, (vi) the combined presentation of
condensed consolidated statements of income of the other probable business
combinations with BancGroup: South Florida Banking Corp., ASB Bancshares, Inc.,
and United American Holding Corporation, ("Other Probable Business
Combinations"), for the six months ended June 30, 1997 and 1996 and the years
ended December 31, 1996, 1995 and 1994, (vii) adjustments to give effect to the
probable pooling-of-interests method business combinations with combinations
with South Florida and United American and the probable purchase method business
combination with ASB, (vii) the pro forma statements of income of BancGroup and
subsidiaries as if such business combinations had occurred on January 1, 1994.
Note that for the purchase method business combinations, Article 11 of
Regulation S-X requires the pro forma statements of income to be presented for
only the most recent fiscal year and interim period. Accordingly, only condensed
consolidated statements of income for the six months ended June 30, 1997 and the
year ended December 31, 1996 are included in (ii), (iv), (v) and (vi) above for
Dadeland, ASB and First Commerce.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries, incorporated by reference herein, and the statements
of income of First Central Bank, included elsewhere herein. The pro forma
information provided may not necessarily be indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
---------------------------------------------------------------------------------
CONSOLIDATED COMPLETED FIRST
COLONIAL BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $ 231,674 $ 16,914 $ (474)(1) $ 2,263 $ 250,373
(4)(1)
Interest expense........... 117,445 5,566 499 123,510
---------- --------- ---------- ------- -------- ----------
Net interest income........ 114,229 11,348 (478) 1,764 126,863
Provision for loan
losses.................... 6,190 2,937 25 9,152
---------- --------- ---------- ------- -------- ----------
Net interest income after
provision for loan
losses.................... 108,039 8,411 (478) 1,739 117,711
---------- --------- ---------- ------- -------- ----------
Noninterest income......... 39,627 2,331 230 42,188
Noninterest expense........ 90,051 11,278 (15)(1) 753 103,035
258(1)
(69)(2)
779(2)
---------- --------- ---------- ------- -------- ----------
Income before income
taxes..................... 57,615 (536) (1,431) 1,216 56,864
Applicable income taxes.... 21,286 (152) (162)(1) 440 21,436
24(2)
---------- --------- ---------- ------- -------- ----------
Net income................. $ 36,329 $ (384) $ (1,293) $ 776 $ 35,428
========== ========= ========== ======= ======== ==========
Average primary shares
outstanding............... 41,231,000 3,834,201 (3,834,201) 350,945 (350,945) 44,026,965
2,068,812 727,153
Average fully-diluted
shares outstanding........ 41,798,000 3,834,201 (3,834,201) 350,945 (350,945) 44,606,547
2,080,518 728,029
Earnings per share:
Net income:
Primary................. $ 0.88 $ 0.80
Fully diluted........... 0.87 0.80
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income............ $ 23,705 $ 274,078
Interest expense........... 10,417 290(3) 134,217
--------- ---------- ----------
Net interest income........ 13,288 (290) 139,861
Provision for loan
losses.................... 520 9,672
--------- ---------- ----------
Net interest income after
provision for loan
losses.................... 12,768 (290) 130,189
--------- ---------- ----------
Noninterest income......... 2,546 44,734
Noninterest expense........ 16,837 (12)(3) 114,172
312(3)
--------- ---------- ----------
Income before income
taxes..................... 4,477 (590) 60,751
Applicable income taxes.... 1,552 (108)(3) 22,880
--------- ---------- ----------
Net income................. $ 2,925 $ (482) $ 37,871
========= ========== ==========
Average primary shares
outstanding............... 2,902,245 (2,902,245) 48,833,933
4,806,968
Average fully-diluted
shares outstanding........ 2,902,245 (2,902,245) 49,420,879
4,814,332
Earnings per share:
Net income:
Primary................. $ 0.78
Fully diluted........... 0.77
</TABLE>
47
<PAGE> 56
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED FIRST
BANCGROUP BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................ $ 196,099 $ 6,292 $ 2,116 $ 204,507
Interest expense............... 98,782 2,133 499 101,414
---------- --------- ---------- ------- -------- ----------
Net interest income............ 97,317 4,159 1,617 103,093
Provision for loan losses...... 3,623 50 26 3,699
---------- --------- ---------- ------- -------- ----------
Net interest income after
provision for loan losses..... 93,694 4,109 1,591 99,394
---------- --------- ---------- ------- -------- ----------
Noninterest income............. 35,923 734 247 36,904
Noninterest expense............ 82,986 3,290 731 87,009
---------- --------- ---------- ------- -------- ----------
Income before income taxes..... 46,631 1,553 1,107 49,291
Applicable income taxes........ 16,434 452 401 17,287
---------- --------- ---------- ------- -------- ----------
Net income..................... $ 30,197 $ 1,101 $ 706 $ 32,005
========== ========= ========== ======= ======== ==========
Average primary shares
outstanding**................. 38,950,000 2,071,527 (2,071,527) 344,947 344,947 40,940,977
1,276,109 714,868
Average fully-diluted shares
outstanding**................. 39,624,000 2,071,527 (2,071,527) 344,947 (344,947) 41,615,886
1,276,677 715,009
Earnings per share:
Net income:
Primary**................... $ 0.78 $ 0.78
Fully diluted**............. 0.77 0.77
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income................ $ 14,804 $ 219,311
Interest expense............... 6,014 107,428
--------- ---------- ----------
Net interest income............ 8,790 111,883
Provision for loan losses...... 542 4,241
--------- ---------- ----------
Net interest income after
provision for loan losses..... 8,248 107,642
--------- ---------- ----------
Noninterest income............. 1,576 38,480
Noninterest expense............ 6,799 93,806
--------- ---------- ----------
Income before income taxes..... 3,025 52,316
Applicable income taxes........ 1,093 18,380
--------- ---------- ----------
Net income..................... $ 1,932 $ 33,936
========= ========== ==========
Average primary shares
outstanding**................. 2,698,063 (2,698,063) 44,765,946
3,824,969
Average fully-diluted shares
outstanding**................. 2,698,063 (2,698,063) 45,441,263
3,825,377
Earnings per share:
Net income:
Primary**................... $ 0.76
Fully diluted**............. 0.75
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** 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.
48
<PAGE> 57
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED FIRST
BANCGROUP BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $ 406,838 $ 31,212 $ (948)(1) $ 4,361 $ 441,453
(8)(1)
Interest expense........... 205,843 10,337 980 217,160
---------- --------- ---------- ------- -------- ----------
Net interest income........ 200,995 20,875 (956) 3,381 224,293
Provision for loan
losses.................... 12,545 1,238 54 13,837
---------- --------- ---------- ------- -------- ----------
Net interest income after
provision for loan
losses.................... 188,450 19,637 (956) 3,327 210,456
---------- --------- ---------- ------- -------- ----------
Noninterest income......... 72,382 4,447 500 77,329
Noninterest expense........ 183,316 18,693 (30)(1) 1,483 205,397
515(1)
(137)(2)
1,557(2)
---------- --------- ---------- ------- -------- ----------
Income before income
taxes..................... 77,516 5,391 (2,861) 2,344 82,390
Applicable income taxes.... 27,303 1,774 (324)(1) 862 29,664
49(2)
---------- --------- ---------- ------- -------- ----------
Net income................. $ 50,213 $ 3,617 $ (2,586) $ 1,482 $ 52,726
========== ========= ========== ======= ======== ==========
Average primary shares
outstanding**............. 39,764,000 3,798,244 (3,798,244) 346,211 (346,211) 42,483,155
2,020,486 698,669
Average fully-diluted
shares outstanding**...... 40,623,000 3,798,244 (3,798,244) 346,211 (346,211) 43,369,558
2,044,599 701,959
Earnings per share:
Net income:
Primary**............... $ 1.26 $ 1.24
Fully diluted**......... 1.25 1.23
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income............ $ 41,631 $ 483,086
Interest expense........... 17,812 579(3) 235,551
--------- ---------- ----------
Net interest income........ 23,819 (579) 247,535
Provision for loan
losses.................... 1,025 14,862
--------- ---------- ----------
Net interest income after
provision for loan
losses.................... 22,794 (579) 232,673
--------- ---------- ----------
Noninterest income......... 4,334 81,663
Noninterest expense........ 17,886 (23)(3) 223,883
623(3)
--------- ---------- ----------
Income before income
taxes..................... 9,242 (1,179) 90,453
Applicable income taxes.... 3,208 (217)(3) 32,655
--------- ---------- ----------
Net income................. $ 8,034 $ (962) $ 57,798
========= ========== ==========
Average primary shares
outstanding**............. 2,788,496 (2,788,496) 47,112,400
4,629,245
Average fully-diluted
shares outstanding**...... 2,788,496 (2,788,496) 48,013,991
4,644,433
Earnings per share:
Net income:
Primary**............... $ 1.23
Fully diluted**......... 1.21
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** 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.
49
<PAGE> 58
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED FIRST
BANCGROUP BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................ $ 341,826 $ 11,929 $ 4,176 $ 357,931
Interest expense............... 170,483 4,516 1,050 178,049
---------- --------- ---------- ------- -------- ----------
Net interest income............ 171,343 7,413 3,126 181,882
Provision for loan losses...... 8,986 68 75 9,129
---------- --------- ---------- ------- -------- ----------
Net interest income after
provision for loan losses..... 162,357 7,345 3,051 172,753
---------- --------- ---------- ------- -------- ----------
Noninterest income............. 60,527 1,268 432 62,227
Noninterest expense............ 150,654 7,408 1,467 159,529
---------- --------- ---------- ------- -------- ----------
Income before income taxes..... 72,230 1,205 2,016 75,451
Income taxes................... 25,765 740 758 27,263
---------- --------- ---------- ------- -------- ----------
Net income..................... $ 46,465 $ 465 $ 0 $ 1,258 $ 48,188
========== ========= ========== ======= ======== ==========
Average primary shares
outstanding**................. 37,912,000 2,022,212 (2,022,212) 343,027 (343,027) 39,844,874
1,225,276 707,598
Average fully-diluted shares
outstanding**................. 39,796,000 2,022,212 (2,022,212) 343,027 (343,027) 41,769,475
1,258,300 715,175
Earnings per share:
Net income:
Primary**................... $ 1.23 $ 1.21
Fully diluted**............. 1.19 1.18
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income................ $ 25,983 $ 383,914
Interest expense............... 10,908 186,957
--------- ---------- ----------
Net interest income............ 15,075 196,957
Provision for loan losses...... 1,119 10,248
--------- ---------- ----------
Net interest income after
provision for loan losses..... 13,956 186,709
--------- ---------- ----------
Noninterest income............. 2,521 64,748
Noninterest expense............ 12,618 172,147
--------- ---------- ----------
Income before income taxes..... 3,859 79,310
Income taxes................... 839 28,202
--------- ---------- ----------
Net income..................... $ 2,920 $ 51,108
========= ========== ==========
Average primary shares
outstanding**................. 2,586,759 (2,586,759) 43,506,616
3,661,742
Average fully-diluted shares
outstanding**................. 2,586,759 (2,586,759) 45,452,278
3,682,803
Earnings per share:
Net income:
Primary**................... $ 1.17
Fully diluted**............. 1.15
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** 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.
50
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED FIRST
BANCGROUP BUSINESS ADJUSTMENTS/ CENTRAL ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) BANK (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............. $ 255,758 $ 9,697 $ 3,727 $ 269,182
Interest expense............ 105,797 3,161 842 109,800
---------- --------- ---------- ------- -------- ----------
Net interest income......... 149,961 6,536 2,885 159,382
Provision for loan losses... 8,254 302 72 8,628
---------- --------- ---------- ------- -------- ----------
Net interest income after
provision for loan
losses..................... 141,707 6,234 2,813 150,754
---------- --------- ---------- ------- -------- ----------
Noninterest income.......... 54,149 1,104 334 55,587
Noninterest expense......... 144,119 6,150 1,435 151,704
---------- --------- ---------- ------- -------- ----------
Income before income
taxes...................... 51,737 1,188 1,712 54,637
Income taxes................ 17,243 481 643 18,367
---------- --------- ---------- ------- -------- ----------
Net income.................. $ 34,494 $ 707 $ 1,069 $ 36,270
========== ========= ========== ======= ======== ==========
Average primary shares
outstanding**.............. 35,907,000 1,835,283 (1,835,283) 338,663 (338,663) 37,671,888
1,067,761 697,127
Average fully-diluted shares
outstanding**.............. 37,383,000 1,835,283 (1,835,283) 338,663 (338,663) 39,147,888
1,067,761 697,127
Earnings per share:
Net income:
Primary**................ $ 0.96 $ 0.96
Fully diluted**.......... 0.95 0.95
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income............. $ 18,738 $ 287,920
Interest expense............ 7,075 116,875
--------- ---------- ----------
Net interest income......... 11,663 171,045
Provision for loan losses... 618 9,246
--------- ---------- ----------
Net interest income after
provision for loan
losses..................... 11,045 161,799
--------- ---------- ----------
Noninterest income.......... 2,084 57,671
Noninterest expense......... 9,877 161,581
--------- ---------- ----------
Income before income
taxes...................... 3,252 57,889
Income taxes................ 724 19,091
--------- ---------- ----------
Net income.................. $ 2,528 $ 38,798
========= ========== ==========
Average primary shares
outstanding**.............. 2,028,367 (2,028,367) 40,625,307
2,953,419
Average fully-diluted shares
outstanding**.............. 2,028,367 (2,028,367) 42,101,307
2,953,419
Earnings per share:
Net income:
Primary**................ $ 0.96
Fully diluted**.......... 0.95
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** 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.
51
<PAGE> 60
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>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Increases in income:
Amortization of write down on fixed assets (5
year period)................................. $ 15 $ 30
Decreases in income:
Amortization of write-up on securities portfolio
(5 year period).............................. (4) (8)
Earnings foregone on $15,887,000 cash at an
average interest rate of 5.95%............... (474) (948)
------------- -------
Total................................... (463) (926)
------------- -------
Increase in expense:
Amortization of goodwill (15 year period)....... (258) (515)
------------- -------
Total................................... (258) (515)
------------- -------
Net decrease in income before tax................. (721) (1,441)
------------- -------
Tax effect of the pro forma adjustments (other
than goodwill amortization)..................... 162 324
------------- -------
Net decrease in income............................ $ (559) $(1,117)
============= =======
</TABLE>
Adjustments applicable to the purchase method business combination with
Dadeland:
(2) 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>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Increases in income:
Amortization of write-down on fixed assets (5
year period)................................ $ 69 $ 137
------------- -------
Total.................................. 69 137
------------- -------
Increase in expense:
Amortization of goodwill (20 year period)...... (779) (1,557)
------------- -------
Total.................................. (779) (1,557)
------------- -------
Net decrease in income before tax................ (710) (1,420)
------------- -------
Tax effect of the pro forma adjustments (other
than goodwill amortization).................... (24) (49)
------------- -------
Net decrease in income........................... $ (734) $(1,469)
============= =======
</TABLE>
52
<PAGE> 61
PENDING BUSINESS COMBINATIONS
Adjustments applicable to the purchase method business combination with ASB
Bancshares:
(3) 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>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Increases in income:
Amortization of write-down on fixed assets (5
year period)............................... $ 12 $ 23
----- -------
Total................................. 12 23
----- -------
Increase in expense:
Interest on subordinated debentures (assumed
at 7.5%)................................... (290) (579)
Amortization of goodwill (15 year period)..... (312) (623)
----- -------
Total................................. (602) (1,202)
----- -------
Net decrease in income before tax............... (590) (1,179)
----- -------
Tax effect of the pro forma adjustments (other
than goodwill amortization)................... 108 217
----- -------
Net decrease in income................ $(482) $ (962)
===== =======
</TABLE>
53
<PAGE> 62
RECENT DEVELOPMENTS -- BANCGROUP
BANCGROUP -- RECENT UNAUDITED RESULTS
The following table presents certain unaudited data for BancGroup for the
period ended September 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.
<TABLE>
<CAPTION>
% CHANGE
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1996 TO 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets............................................ $6,605,927 $5,493,617 20%
Loans, net of unearned income........................... 4,970,765 4,089,404 22%
Total earnings assets................................... 6,006,662 5,046,539 19%
Deposits................................................ 5,136,556 4,237,610 21%
Shareholders' equity.................................... 472,707 392,822 20%
Book value per share.................................... $ 11.26 $ 10.09 12%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
% CHANGE
1997 1996 1996 TO 1997
------------- ------------- ------------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent)................. $182,126 $151,317 20%
Provision for loan losses................................ 8,833 6,292 40%
Noninterest income....................................... 61,623 53,900 11%
Noninterest expense...................................... 143,609 129,378 11%
Net income............................................... $ 56,054 $ 43,832 28%
Average primary shares outstanding....................... 42,370 39,525
Average fully diluted shares outstanding................. 42,963 40,204
Earnings per share:
Primary................................................ $ 1.32 $ 1.11 19%
Fully diluted.......................................... $ 1.31 $ 1.10 19%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
----- -----
<S> <C> <C>
SELECTED RATIOS:
Return on average assets.................................... 1.21% 1.12%
Return on average equity.................................... 16.84% 15.51%
Efficiency ratio............................................ 58.92% 63.04%
Equity to assets............................................ 7.16% 7.15%
Total capital............................................... 8.11% 8.17%
Tier one leverage........................................... 7.28% 6.82%
</TABLE>
Net income for the nine months ended September 30, 1997 was $56,054,000
compared to $43,832,000 for the same period in 1996, a 28% increase. Earnings
per share for the nine months ended September 30, 1997 was $1.31 on a fully
diluted basis, a 19% increase over the same period in 1996. The company's return
on average equity was 16.84% compared with 15.51% in 1996. Return on average
assets was 1.21% compared to 1.12% for 1996.
54
<PAGE> 63
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical basis for the six months ended June 30, 1997 and 1996, as of June
30, 1997 and, years ended December 31, 1996, 1995, 1994, 1993 and 1992 and as of
December 31, 1996, 1995, 1994, 1993 and 1992 and on a pro forma basis for the
six months ended June 30, 1997 and June 30, 1996, as of June 30, 1997 and, years
ended December 31, 1996, 1995 and 1994.
The pro forma information includes consolidated BancGroup and subsidiaries
and consolidated Great Southern, First Commerce, First Independence, Dadeland,
South Florida, United American, ASB, and First Central. 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 the Regulation S-X requires
pro forma statements be presented for only the most recent fiscal year and
interim period. Accordingly, Dadeland, ASB and First Commerce are only included
in the pro forma information as of and for the six months ended June 30, 1997
and the year ended December 31, 1996.
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 and incorporated by reference.
The pro forma information provided below may not be indicative of future
results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income.................................... $274,078 $231,674 $219,311 $196,099
Interest expense................................... 134,217 117,445 107,428 98,782
-------- -------- -------- --------
Net interest income................................ 139,861 114,229 111,883 97,317
Provision for loan losses.......................... 9,672 6,190 4,241 3,623
-------- -------- -------- --------
Net interest income after provision for loan
losses........................................... 130,189 108,039 107,642 93,694
Noninterest income................................. 44,734 39,627 38,480 35,923
Noninterest expense................................ 114,172 90,051 93,806 82,986
-------- -------- -------- --------
Income before income taxes......................... 60,751 57,615 52,316 46,631
Applicable income taxes............................ 22,880 21,286 18,380 16,434
-------- -------- -------- --------
Net income......................................... $ 37,871 $ 36,329 $ 33,936 $ 30,197
======== ======== ======== ========
EARNINGS PER SHARE
Net income:
Primary.......................................... $ 0.78 $ 0.88 $ 0.76 $ 0.78
Fully-diluted.................................... $ 0.77 $ 0.87 $ 0.75 $ 0.77
Average shares outstanding
Primary.......................................... 48,834 41,231 44,766 38,950
Fully-diluted.................................... 49,420 41,798 45,441 39,624
Cash dividends:
Common........................................... $ 0.30 $ 0.30 $ 0.27 $ 0.27
</TABLE>
55
<PAGE> 64
<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............. $483,086 $383,914 $287,920 $236,084 $226,057 $406,838 $341,826
Interest expense............ 235,551 186,957 116,875 92,813 100,932 205,843 170,483
-------- -------- -------- -------- -------- -------- --------
Net interest income......... 247,753 196,957 171,045 143,271 125,125 200,995 171,343
Provision for possible loan
losses.................... 14,862 10,248 9,246 15,234 18,207 12,545 8,986
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses.................... 232,673 186,709 161,799 128,037 106,918 188,450 162,357
Noninterest income.......... 81,663 64,748 57,671 55,649 50,217 72,382 60,527
Noninterest expense......... 219,418 172,147 161,581 144,335 129,476 178,851 150,654
SAIF special
assessment(1)............. 4,465 4,465
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes..................... 90,453 79,310 57,889 39,351 27,659 77,516 72,230
Applicable income taxes..... 32,655 28,202 19,091 12,265 7,793 27,303 25,765
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items..................... 57,798 51,108 38,798 27,086 19,866 50,213 46,465
Extraordinary items......... (396)
Cumulative effect of change
in accounting............. 3,933
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 57,798 $ 51,108 $ 38,798 $ 30,623 $ 19,866 $ 50,213 $ 46,465
======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 1.23 $ 1.17 $ .96 $ 0.73 $ 0.61 $ 1.26 $ 1.23
Fully diluted**........... 1.21 1.15 .95 0.73 0.61 $ 1.25 $ 1.19
Net income:
Primary**................. 1.23 1.17 .96 0.82 0.61 $ 1.26 $ 1.23
Fully diluted**........... 1.21 1.15 .95 0.82 0.61 $ 1.25 $ 1.19
Average shares outstanding
Primary**................. 47,112 43,507 40,625 37,194 32,361 39,764 37,912
Fully diluted**........... 48,014 45,542 42,101 39,380 35,025 40,623 39,796
Cash dividends:
Common**.................. $ 0.540 $ 0.338 $ 0.540 $ 0.338
Class A**................. $ 0.113 $ 0.040 $ 0.355 $ 0.335 $ 0.113
Class B**................. $ 0.063 $ 0.020 $ 0.155 $ 0.135 $ 0.063
<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**................. $ 0.040 $ 0.355 $ 0.335
Class B**................. $ 0.020 $ 0.155 $ 0.135
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interest business 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 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.
56
<PAGE> 65
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1997 1997 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
DATA
At year end:
Total assets............. $7,210,540 $6,100,616 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned
income............... 5,317,431 4,523,729 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for
sale................. 165,476 165,476 157,966 112,203 61,556 368,515 150,835
Deposits............... 5,707,328 4,747,342 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt......... 103,880 91,955 39,092 47,688 86,662 57,397 22,979
Shareholders' equity... 520,684 431,368 402,708 352,731 275,319 256,866 165,142
Average daily balances
Total assets........... 7,045,421 5,956,312 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning
assets............... 6,464,624 5,462,405 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned
income............... 5,245,494 4,479,967 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for
sale................. 127,862 127,862 135,135 98,785 135,046 248,502 121,820
Deposits............... 4,712,418 3,913,525 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity... 519,047 424,886 383,401 308,532 269,353 200,217 159,785
Book value per share**... 10.84 10.54 10.29 9.43 7.93 7.69 6.34
Tangible book value per
share**................ 9.18 $ 9.59 $ 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....... 1.08% 1.23% 0.95% 1.06% 0.93% 0.84% 0.72%
Average stockholders'
equity............. 14.59 17.240 13.09 15.06 12.81 12.68 11.61
Net income to:
Average assets....... 1.08 1.230 0.95 1.06 0.93 0.96 0.72
Average stockholders'
equity............. 14.59 17.240 13.09 15.06 12.81 14.42 11.61
Efficiency ratio(1)...... 65.65 58.090 64.94 64.39 69.83 71.96 73.16
Dividend payout.......... 32.29 33.66 42.86 36.59 41.67 38.59 50.00
Average equity to average
assets................. 7.37 7.13 7.25 7.06 7.26 6.64 6.16
Allowance for possible
loan losses to total
loans (Net of unearned
income)................ 1.29% 1.28% 1.27% 1.29% 1.55% 1.61% 1.50%
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interest business combinations 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 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.
57
<PAGE> 66
FIRST CENTRAL BANK
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables present selected historical financial data for First
Central Bank. These tables should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED AT AND FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
At Period End:
Cash and Cash equivalents.................. $ 3,447 $ 6,220 $ 2,717 $ 2,260 $ 2,177 $ 2,836
Investment securities, including Federal
funds sold............................... 11,230 10,865 12,799 11,819 13,263 11,974
Loans, net................................. 38,485 35,474 32,061 31,447 29,501 27,939
Other assets............................... 1,716 1,416 1,618 1,619 1,086 636
------- ------- ------- ------- ------- -------
Total assets........................ 54,878 $53,975 $49,195 $47,145 $46,027 $43,385
Deposits................................... 44,580 $44,551 $41,075 $40,399 $40,461 $38,474
Other liabilities.......................... 571 432 477 316 153 426
Shareholders' equity....................... 9,727 8,992 7,643 6,430 5,413 4,485
------- ------- ------- ------- ------- -------
Total liabilities and shareholders'
equity............................ 54,878 $53,975 $49,195 $47,145 $46,027 $43,385
For the Period:
Total interest income...................... 2,263 $ 4,360 $ 4,175 $ 3,727 $ 3,335 $ 3,353
Total interest expense..................... 498 980 1,050 843 825 998
------- ------- ------- ------- ------- -------
Net interest income................. 1,765 3,380 3,125 2,884 2,510 2,355
Provision for loan losses.................. 25 54 75 71 44 123
------- ------- ------- ------- ------- -------
Net interest income after provision
for loan losses................... 1,740 3,326 3,050 2,813 2,466 2,232
Noninterest income......................... 230 501 431 334 356 284
Noninterest expense........................ (754) (1,483) (1,465) (1,435) (1,330) (1,268)
------- ------- ------- ------- ------- -------
Income before taxes................. 1,216 2,344 2,016 1,712 1,492 1,248
Applicable income taxes.................... 440 862 758 643 564 477
------- ------- ------- ------- ------- -------
Net income.......................... $ 776 $ 1,482 $ 1,258 $ 1,069 $ 928 $ 771
======= ======= ======= ======= ======= =======
Net income per share....................... 2.21 4.28 3.67 3.16 2.79 2.38
Weighted average number of shares
outstanding.............................. 350,945 346,211 343,027 338,663 332,512 323,428
Actual shares outstanding at end of
period................................... 327,500 315,000 300,000 300,000 300,000 300,000
Book value per share....................... $ 29.70 $ 28.55 $ 25.47 $ 21.43 $ 18.04 $ 14.92
Ratios and other data:
Return on average assets................... 2.94% 2.85% 2.57% 2.22% 2.15% 2.02%
Return on average equity................... 16.42% 17.90% 17.74% 17.98% 18.52% 19.32%
Average equity to average assets........... 17.90% 15.86% 14.39% 12.26% 11.29% 10.33%
Net yield on average earning assets........ 9.26% 9.01% 8.54% 8.26% 8.08% 8.56%
Average earning assets to average
interest-bearing liabilities............. 1.49% 1.47% 1.40% 1.34% 1.30% 1.27%
Noninterest exp. to average assets......... 2.85% 2.85% 3.00% 2.98% 3.02% 3.18%
Nonperforming assets as percent of total
assets................................... 0.63% .49% .48% .73% 1.41% .23%
Allowance for loan losses to total loans... 1.43% 1.48% 1.50% 1.46% 1.51% 1.52%
</TABLE>
58
<PAGE> 67
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 Central 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 Central Bank (or the "Bank") is an FDIC-insured, state chartered
commercial bank headquartered in St. Petersburg, Florida and is a member of the
Federal Reserve System. The bank commenced operations on May 11, 1988. The Bank
has one branch office located in St. Petersburg, 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
residential mortgage loans, and the origination of loans secured by commercial
real estate properties.
At December 31, 1996, First Central had total assets of $54.0 million, an
increase of 9.7% over the $49.2 million recorded at December 31, 1995, and total
shareholders' equity of $9.7 million, up 17.7% over the $7.6 million at December
31, 1995. For the twelve months ended December 31, 1996 it had net earnings of
$1.5 million, an improvement of approximately $224,000 from the earnings
reported for the twelve months ending December 31, 1995 of $1.3 million.
During the year ended December 31, 1996, net loans increased 10.6% to $35.5
million from $32.1 million as of December 31, 1995. The Bank's portfolio of
investment securities decreased to $10.9 million as of December 31, 1996 from
$10.6 million as of December 31, 1995. The Bank's deposits increased to $44.6
million as of December 31, 1996 from $41.1 million at December 31, 1995. The
8.5% 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 ("Federal Reserve"). 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.
59
<PAGE> 68
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...................................... $220 $ 0 $ 0 $ 0 $ 98
Commercial....................................... 0 0 62 193 0
Consumer and other loans......................... 46 0 5 0 0
---- ---- ---- ---- ----
Total nonperforming loans................... $266 $ 0 $ 67 $193 $ 98
==== ==== ==== ==== ====
Other real estate owned:
Real estate acquired by foreclosure or deed in lieu
of foreclosure................................... 0% 235% 275% 455% 0%
Total nonperforming assets.................. 266% 235% 342% 648% 98%
Total nonperforming loans to total assets... 0.49% 0% 0.14% 0.42% 0.23%
Total nonperforming assets to total
assets.................................... 0.49% 0.48% 0.73% 1.41% 0.23%
</TABLE>
The following tables set forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average outstanding loans................ $34,002 $32,373 $30,801 $30,935 $27,177
Allowance at beginning of period......... 487 465 451 430 323
Loans charged-off
Residential real estate loans....... 7 0 53 25 0
Commercial real estate loans........ 0 0 19 9 0
Commercial loans.................... 0 53 0 7 20
Consumer loans...................... 1 0 0 0 0
------- ------- ------- ------- -------
Total loans charged-off........ 8 53 72 41 20
------- ------- ------- ------- -------
Recoveries............................. 0 0 15 18 4
------- ------- ------- ------- -------
Net charge-offs (recoveries)........... 8 53 57 23 16
Provisions for loan losses charged to
operating expenses.................. 54 75 72 44 123
------- ------- ------- ------- -------
Allowance at end of year................. $ 533 $ 487 $ 465 $ 451 $ 430
======= ======= ======= ======= =======
Net charge-offs to average loans
outstanding............................ 0.0002% 0.0016% 0.0019% 0.0007% 0.0006%
Allowance to period end loans............ 1.48% 1.50% 1.46% 1.51% 1.52%
Period end loans, net of deferred fees... $36,007 $32,548 $31,912 $29,952 $28,368
</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 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.
60
<PAGE> 69
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>
1996 1995 1994
--------------------------------- --------------------------------- ---------------------------------
AVG. BAL. INTEREST YIELD/RATE AVG. BAL. INTEREST YIELD/RATE AVG. BAL. INTEREST YIELD/RATE
--------- -------- ---------- --------- -------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans(1)........... $34,002 $3,501 10.30% $32,373 $3,391 10.47% $30,801 $2,962 9.62%
Investment
securities....... 10,639 659 6.19% 10,852 650 5.99% 11,317 650 5.74%
Federal funds
sold............. 3,814 200 5.24% 2,328 134 5.76% 2,981 115 3.86%
------- ------ ------- ------ ------- ------
Total earning
assets......... 48,455 $4,360 9.00% 45,553 $4,175 9.17% 45,099 3,727 8.26%
------ ------ ------
Non-earning assets... 4,070 4,953 3,864
------- ------- -------
Total assets..... $52,525 $50,506 $48,963
======= ======= =======
Interest-bearing
liabilities:
Savings and NOW
accounts......... $ 6,433 $ 90 1.40% $ 7,016 $ 115 1.64% $ 8,301 $ 138 1.66%
Money market
deposits......... 15,123 333 2.20% 14,201 355 2.50% 15,831 364 2.30%
Certificates of
deposit.......... 11,352 557 4.91% 11,533 578 5.01% 9,501 341 3.59%
Borrowings......... 0 0 0.00% 42 2 4.76% 0 0 0.00%
------- ------ ------- ------ ------- ------
Total interest-
bearing
liabilities.... 32,908 $ 980 2.98% 32,792 $1,050 3.20% 33,633 $ 843 2.51%
------- ------ ------- ------ -------
Non interest-
bearing
liabilities.... 11,363 10,676 9,432
Shareholders'
equity............. 8,254 7,038 5,898
------- ------- -------
Total liabilities
and equity..... $52,525 $50,506 $48,963
======= ======= =======
Net interest
income............. $3,380 $3,125 $2,884
====== ====== ======
Net interest
spread............. 6.02% 5.97% 5.75%
Ratio of average
earning assets to
average interest-
bearing
liabilities........ 1.47% 1.4% 1.34%
</TABLE>
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) (in thousands).
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<PAGE> 70
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 VS
1995
--------------------------------
INCREASE (DECREASE) DUE TO
--------------------------------
RATE VOLUME RATE/VOL TOTAL
---- ------ -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................................... $(55) $171 $ (6) $110
Investment securities..................................... 22 (13) 0 9
Other earning assets...................................... (12) 86 (8) 66
---- ---- ---- ----
Total............................................. (45) 244 (14) 185
---- ---- ---- ----
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts............................... (42) (10) 27 (25)
Money market accounts.................................. (43) 23 (2) (22)
Certificate accounts................................... (12) (9) 0 (21)
Borrowings................................................ (2) (2) 2 (2)
---- ---- ---- ----
Total............................................. (99) 2 27 (70)
---- ---- ---- ----
Net change in net interest income........................... $ 54 $242 $(41) $255
==== ==== ==== ====
</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
non-transaction 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 $14.6 million and $15.6 million, respectively, or approximately
32.7% and 38.09% 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 held to maturity:
U.S. treasury securities............................ $ 495 $ 492 $ 490
U.S. government agencies............................ 7,088 6,853 7,824
State county and municipal.......................... 215 215 215
------- ------- -------
Total held to maturity...................... $ 7,798 $ 7,560 $ 8,529
======= ======= =======
Securities available for sale:
U.S. treasury securities............................ $ 2,002 $ 1,504 $ 1,215
U.S. government agencies............................ 1,065 1,536 1,775
State county and municipal.......................... 0 0 0
------- ------- -------
Total available for sale.................... 3,067 3,040 2,990
------- ------- -------
Total investment securities................. $10,865 $10,600 $11,519
======= ======= =======
</TABLE>
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<PAGE> 71
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 HELD TO SECURITIES AVAILABLE
MATURITY FOR SALE
------------------ --------------------
AMORTIZE ESTIMATE AMORTIZE ESTIMATE
------------------ --------------------
COST FAIR VALUE COST FAIR VALUE
----- ---------- ------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in:
After one through five years...................... 4,271 4,276 2,993 2,992
After five through ten years...................... 1,334 1,329 0 0
Mortgage-backed securities/other.................. 2,193 2,237 0 0
----- ----- ----- -----
Total..................................... 7,798 7,842 2,993 2,992
===== ===== ===== =====
</TABLE>
At December 31, 1996 the securities portfolio carried a 6.19% aggregate
yield to maturity.
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 December 31, 1995, the Bank had
commitments to originate loans totaling $1.6 million and $1.2 million,
respectively. Scheduled maturities of certificates of deposit during the next 12
months following December 31, 1996 totaled $10.3 million.
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating the minimum capital adequacy of 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 table compares the minimum capital ratios required by the FDIC to
the ratios maintained by First Central:
<TABLE>
<CAPTION>
FOR CAPITAL
ADEQUACY
ACTUAL PURPOSES
--------------- --------------
<S> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to risk weighted assets)............ $9,490 23.80% $3,186 8.00%
Tier I Capital (to risk weighted assets)........... 8,992 22.60 1,593 4.00
Tier I Capital (to average assets)................. 8,992 17.10 2,101 4.00
</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 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
63
<PAGE> 72
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 December 31, 1995, 31.74% and 31.88%, 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 32.71% and 38.09%
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 $22 million,
representing 49.7% of total deposits at December 31, 1996 and $21 million or
51.1% of such deposits at December 31, 1995. These accounts bore a weighted-
average ratio of 1.96% 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 69%. 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 dependence
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.
64
<PAGE> 73
The following table sets forth certain information relating to the Bank's
earning assets and interest-bearing liabilities at December 31, 1996 that are
estimated to mature or are scheduled to reprice within the period shown:
<TABLE>
<CAPTION>
MORE THAN MORE
ONE YEAR THAN
ONE YEAR TO FIVE YEARS FIVE YEARS TOTAL
-------- ------------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Earning assets:
Fixed rate loans............................. $ 6,797 $16,260 $ 156 $23,213
Adjustable rate loans........................ 12,616 0 0 12,616
Investments.................................. 2,317 6,627 1,846 10,790
------- ------- ------ -------
Total earning assets................. $21,730 $22,887 $2,002 $46,619
======= ======= ====== =======
Interest-bearing liabilities
Certificates of deposit...................... $11,258 $ 703 $ 100 $12,061
Savings and NOW accounts..................... 6,640 0 0 6,640
Money market accounts........................ 15,502 0 0 15,502
------- ------- ------ -------
Total interest-bearing liabilities... $33,400 $ 703 $ 100 $34,203
======= ======= ====== =======
</TABLE>
Loan Maturities. The table below sets forth the contractual maturity of
the Bank's commercial loan and construction loan portfolios at December 31,
1996. 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.
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF SELECTED LOANS
-----------------------------------
OVER
0-12 1-5 5
MONTHS YEARS YEARS TOTAL
------- ------- ----- -------
<S> <C> <C> <C> <C>
Fixed interest rate......................................... $ 6,797 $16,260 $156 $23,213
Variable interest rate...................................... 8,452 4,164 0 12,616
------- ------- ---- -------
Total............................................. $15,249 $20,424 $156 $35,829
======= ======= ==== =======
</TABLE>
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,
---------------------------------------
1996 1995
------------------ -----------------
% OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT
-------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Demand deposits.................................. $ 10,348 23.23% $ 8,334 20.29%
Saving and NOWs deposits......................... 6,640 14.90 6,771 16.48
Money market deposits............................ 15,502 34.80 14,201 34.57
Certificates of deposit.......................... 12,061 27.07 11,769 28.65
-------- -------
Total.................................. $ 44,551 100.00% $41,075 100.00%
======== =======
</TABLE>
65
<PAGE> 74
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>
YEAR ENDING DECEMBER 31,
---------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
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.......................... $11,074 0.00% $10,573 0.00% $ 9,217 0.00%
NOW and savings accounts............ 6,433 1.40 7,016 1.64 8,301 1.66
Money market accounts............... 15,123 2.20 14,201 2.50 15,831 2.30
Certificate of deposit.............. 11,352 4.91 11,533 5.10 9,501 3.59
------- ------- -------
Total deposits............ $43,982 2.23% $43,323 2.42% $42,850 1.97%
======= ======= =======
</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........................................................ $10,943
1998........................................................ 1,018
1999........................................................ 100
-------
Total............................................. $12,061
=======
</TABLE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
General. Net income for the six months ended June 30, 1997 was $776,000 or
$2.21 per share compared to $705,000 or $2.05 per share for the same period in
1996. The increase in earnings was due primarily to an increase in interest
income.
Interest Income and Expense. Interest income increased $147,000 or 6.95%
to $2,263,000 during the six months ended June 30, 1997. Interest on loans
increased $175,000 to $1,891,000 due to an increase in the average loan
portfolio from $33,648,000 for the quarter ended June 30, 1996 to $36,613,000
for the quarter ended June 30, 1997. Interest on investment securities increased
$20,000 to $327,000 due to an increase in the average yield on securities during
first two quarters of 1997 compared with 1996.
Interest expense on deposit accounts remained the same at $497,000 for the
six months ended June 30, 1996 to $499,000 for the six months ended June 30,
1997.
Provisions 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. The provision for loan losses
decreased $1,000 from $26,000 at June 30, 1996 to $25,000 at June 30, 1997. The
allowance for loan losses increased from $505,000 at June 30, 1996 to $558,000
at June 30, 1997. Nonperforming loans as a percentage of total assets were .10%
at June 30, 1997 as compared to 0.0% at June 30, 1996. While management believes
that its allowance for loan losses was adequate as of June 30, 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.
Noninterest Income and Expense: Total noninterest income decreased 6.6%,
from $247,000 for the six months ended June 30, 1997 to $230,000 for the six
months ended June 30, 1997. This decrease is primarily due to a reduction in
other income after the sale of property held as other real estate. Total
noninterest expense increased 3% from $731,000 for the six months ended June 30,
1996 to $753,000 for the six months ended June 30, 1997. The increase was due to
normal growth.
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<PAGE> 75
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
General. Net income for the year ended December 31, 1996 was $1,482,000 or
$4.28 per share compared to a net income of $1,258,000 or $3.67 per share for
December 31, 1995. The increase in earnings of $224,000 was due primarily to an
increase in interest income and a decrease in interest expense.
Interest Income and Expense. Interest income increased $185,000 or 4.43%
to $4,360,000 during the year ended December 31, 1997. Interest on loans
increased $110,000 to $3,501,000 due to an increase in the average loan
portfolio from $32,373,000 during 1995 to $34,002,000 during 1996. Interest on
investment securities increased $9,000 to $659,000 due to an increase in the
average yield of securities during 1996 compared with 1995.
Interest expense on deposit accounts and short-term borrowings decreased
from $1,050,000 for the year ended December 31, 1995 to $980,000 for the year
ended December 31, 1996. This decrease was primarily the result of a decrease in
rates paid on deposit accounts.
Provisions for Credit Losses. The provision for loan losses decreased from
$75,000 for the year ended December 31, 1995 to $54,000 during 1996. The
allowance for loan losses increased from $487,000 at December 31, 1995 to
$533,000 at December 31, 1996. Nonperforming loans as a percentage of total
assets were 0.49% at December 31, 1996 as compared to 0% at December 31, 1995.
Noninterest Income and Expense. Total noninterest increased 15.8%, from
$432,000 for the year ended December 31, 1995 to $500,000 for the year ended
December 31, 1996. This increase is due to an increase in rental fees on
property held as other real estate and overdraft service charges. Total
noninterest expense increased 1.21% from $1,465,000 for the year ended December
31, 1995 to $1,483,000 for the year ended December 31, 1996. This increase is
due to normal growth.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
General. The net income for the year ended December 31, 1995 was
$1,258,000 or $3.67 per share compared to net income of $1,069,000 or $3.16 per
share for 1994. The increase in earnings was due primarily to increases in both
net interest income and noninterest income.
Interest Income. Interest income increased $448,000 or 12.02% during the
year ended December 31, 1995. Interest on loans increased $429,000 to $3,391,000
due to an increase in the average loan portfolio from $30,801,000 during 1994 to
$32,373,000 during 1995. Interest on investment securities remained the same at
$650,000 for the years ended 1994 and 1995, due to an increase in the average
yield earned on investment securities from 5.74% during 1994 to 5.99% during
1995, even though the average amount invested in securities decreased during
1995 as compared to 1994.
Interest Expense. Interest expense on deposit accounts and short-term
borrowings increased from $843,000 for the year ended December 31, 1994 to
$1,050,000 for the year ended December 31, 1995. This increase was primarily the
result of an increase in the average yield of deposits during 1995 as compared
to 1994.
Noninterest Income and Expense. Total noninterest income increased 29.5%,
from $334,000 for the year ended December 31, 1994 to $432,000 for the year
ended December 31, 1995. This increase is primarily due to the Bank's investment
in a salary continuation plan for three executive officers. Total noninterest
expense increased 2.27% from $1,435,000 for the year ended December 31, 1994 to
$1,467,000 for the year ended December 31, 1995. The increase was primarily due
to increase 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
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<PAGE> 76
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 . 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 , 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.
In June 1997, the FASB released SFAS No. 130, "Reporting of Comprehensive
Income" (SFAS 130), which established standards for reporting and display of
comprehensive income and its components. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. Management does
not expect this pronouncement to have a material effect on the financial
statements.
In June 1997, the FASB released SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131), which established
standards for reporting information about operating segments. SFAS 131 is
effective for fiscal years beginning December 15, 1997. Management does not
expect this pronouncement to have a material effect on the financial statements.
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<PAGE> 77
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1988 under the laws of Delaware 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 118 branches in Alabama, 5 branches in Tennessee, 14 branches in Georgia
and 51 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 $12.3
billion in residential loans and which originates residential mortgages in 37
states through four divisional offices. The above amounts and numbers were
calculated as of June 30, 1997. At June 30, 1997, BancGroup had consolidated
total assets of $6.1 billion and consolidated stockholders' equity of $431.4
million. Since June 30, 1997, BancGroup has acquired four banking institutions
with aggregate assets of $419.9 million and aggregate stockholders' equity of
$40.2 million. These acquisitions are included in the pro forma statements
included herein. See "Business of BancGroup." BancGroup's commercial banking
loan portfolio is comprised primarily of commercial real estate loans (24%) and
residential real estate loans (45%), a significant portion of which is located
within the States of Alabama and Florida, BancGroup's growth in loans over the
past several years has been concentrated in commercial and residential real
estate loans.
RECENTLY COMPLETED AND OTHER PROPOSED BUSINESS COMBINATIONS
Since June 1997, BancGroup has merged four banking institutions into
BancGroup: Great Southern, First Commerce, First Independence, Dadeland
Bancshares, Inc. and First Independence Bank of Florida, all located in Florida,
with aggregate assets and stockholders' equity acquired of $419.9 million and
$40.2 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 August 28,
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
632,362 shares of its Common Stock, depending upon the market value at the time
of such merger, and issue an aggregate amount of $7,724,813 in subordinated
debentures to the shareholders of ASB. This transaction is subject to, among
other things, approval by the stockholders of ASB and approval by appropriate
regulatory authorities and will be accounted for as a purchase. At June 30,
1997, ASB has assets of $142.2 million, deposits of $130.6 million and
stockholders' equity of $11.6 million.
BancGroup has entered into a definitive agreement dated as of September 4,
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 1,929,744 shares of its Common Stock to the shareholders of South
Florida. The transaction is subject to, among other things, approval by the
shareholders of South Florida and approval by appropriate regulatory authorities
and will be accounted for as a pooling of interests. At June 30, 1997, South
Florida has assets of $249.6 million, deposits of $210.4 million and
shareholders' equity of $16.1 million.
BancGroup has entered into a definitive agreement dated as of September 8,
1997 to acquire United American Bank of Central Florida ("United American").
United American is a Florida corporation located in Orlando, Florida. United
American will merge with BancGroup and following such merger United American
will merge with Colonial Bank. BancGroup will issue a maximum of 2,729,218
shares of its Common Stock to the shareholders of United American. The
transaction is subject to, among other things, approval by the
69
<PAGE> 78
shareholders of United American and approval by appropriate regulatory
authorities. At June 30, 1997, United American has assets of $240.8 million,
deposits of $209.9 million and shareholders' equity of $19.3 million.
YEAR 2000 COMPLIANCE
Most computer software programs and processing systems, including those
used by BancGroup and its subsidiaries in their operations have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse effects on the business and operations of any business,
including BancGroup, that relies on computers and associated technologies. In
response to the challenges of addressing such consequences in the banking
industry, bank regulatory agencies, including the Federal Reserve, BancGroup's
primary regulator, have established a Year 2000 Supervision Program and
published guidelines for implementing procedures to bring the computer software
programs and processing systems into year 2000 compliance.
In compliance with the guidelines of the Federal Reserve, BancGroup has
assigned staff on a full time basis to assess the impact of year 2000 on all
areas of BancGroup, Colonial Bank and the bank's mortgage company subsidiary.
The staff is responsible for developing and implementing a strategy to ensure
that all critical systems are year 2000 compliant and testing has begun by
fourth quarter 1998. All critical Bank software and processing systems are
currently being upgraded to year 2000 compliant status. The anticipated cost of
upgrading those systems for Colonial Bank is presently estimated to be
approximately $800,000. The mortgage company servicing system is scheduled to be
rewritten into year 2000 compliant format by November 1998. The cost of the
mortgage company servicing system rewrite, in addition to other systems upgrades
is estimated to be $2.7 million spread over the next two to three years.
BancGroup anticipates that these modifications will bring added functionality
and capacity to BancGroup. Micro computer based systems are currently being
assessed and the cost of bringing those systems into year 2000 compliance is not
currently ascertainable. The costs to bring other miscellaneous systems into
year 2000 compliance is not expected to be material.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
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.
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<PAGE> 79
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 outstanding
BancGroup 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) 6.78%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder............................................. 2,199,298 5.17%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder............................................ 2,146,106 5.04%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated for each person assuming the issuance of shares
of BancGroup 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) 6.78%*
John Ed Mathison............................................ 28,454 *
Milton E. McGregor.......................................... 0 *
John C.H. Miller, Jr........................................ 40,480(7) *
Joe D. Mussafer............................................. 20,264 *
William E. Powell, III...................................... 14,352 *
J. Donald Prewitt........................................... 222,940 *
Jack H. Rainer.............................................. 2,900 *
Jimmy Rane.................................................. 0 *
</TABLE>
71
<PAGE> 80
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ---- --------- --------------
<S> <C> <C>
Frances E. Roper............................................ 365,342 *
Simuel Sippial.............................................. 2,774 *
Ed V. Welch................................................. 30,454 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Purser L. McLeod, Jr........................................ 74,951 *
Young J. Boozer, III........................................ 96,920(9) *
W. Flake Oakley, IV......................................... 39,458(9) *
Michelle Condon............................................. 18,586(9) *
All Executive Officers and Directors as a Group............. 4,529,087(10) 10.64%
</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 71,604 shares subject to stock options.
(9) Young J. Boozer, III, W. Flake Oakley, IV, P.L. "Mac" McLeod, Jr., and
Michelle Condon, hold options respecting 25,000, 18,000, 26,000 and 11,000
shares of Common Stock, respectively, pursuant to BancGroup's stock option
plan.
(10) P.L. "Mac" McLeod, Jr. was nominated as President of BancGroup on August
12, 1997, and such nomination was approved by BancGroup's Board of
Directors on October 15, 1997.
(11) 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 (i) BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, at item 10, (ii) BancGroup's Proxy
Statement for its 1997 Annual Meeting, at items 10,11 and 13; and (iii)
BancGroup's Report on For 8-K dated October 30, 1997 and is incorporated herein
by reference.
72
<PAGE> 81
BUSINESS OF FIRST CENTRAL
GENERAL
First Central was incorporated on April 5, 1988, and chartered by the State
of Florida as a capital stock commercial bank on May 11, 1998. First Central is
a member of the Federal Reserve System, with deposits insured by the FDIC.
First Central has operated as a traditional commercial financial
institutions 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
Pinellas County, Florida. First Central 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 Central's major expense items.
First Central currently employs 14 individuals and engages in the general
business of personal and commercial banking primarily in Pinellas County
communities, including the greater St. Petersburg area. For its primary sources
of funds, First Central relies on personal and business deposits, money market
deposit accounts, and certificates of deposit. First Central'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
Central's major expense items.
MARKET AREA
First Central operates its business from a single location in St.
Petersburg. St. Petersburg is situated in Pinellas County, Florida with a
population of 235,000.
While hanging conditions involving the infrastructure requirements of
various geographic locations around the country have limited economic growth and
population expansion, First Central'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
Central's market area includes agriculture, services and government, tourism,
retail and real estate development and construction businesses. First Central
believes that its main office location is situated so as to take advantage of
the economic and demographic growth in the market area.
PROPERTIES
First Central's main office is located at 5858 Central Avenue, St.
Petersburg, Florida 37707, with First Central leasing and occupying 6,176 square
feet.
Management of First Central believes its main office to be convenient to
both commercial and individual customers and that such accessibility is a
competitive advantage.
COMPETITION
First Central ranks 22nd in Pinellas County deposits with a market share of
0.32%. Total deposits held by financial institutions in Pinellas County totaled
$13.0 billion as of June 30, 1996 and have increased 1.8% on a compound basis
since 1994, as compared to 1.9% for First Central over the same time period.
First Central ranks 14th in St. Petersburg deposits with a market share of
1.0%. Total deposits held by financial institutions in St. Petersburg totaled
$4.1 billion as of June 30, 1996 and have increased 0.84% on a compound basis
since 1994. The market share leaders in St. Petersburg include Barnett Banks
with a 27.2% market share, First Union Corp. with a 17.8% market share,
Nationsbank Corp. with an 11.9% market share, Suntrust Banks with a 8.9% market
share, SouthTrust Corp. with an 8.1% market share, and AmSouth Bancorp. With a
7.3% market share.
73
<PAGE> 82
Total population in Pinellas County is estimated at 871,000 as of 1996.
Population projections for 2001 indicate 1.3% growth in Pinellas County. St.
Petersburg's total population is estimated at 235,000 individuals as of 1996 and
is projected to remain at this level through 2001. The State of Florida is
projected to grow 7.7%, reaching 15.4 million individuals in 2001.
PRINCIPAL HOLDERS OF COMMON STOCK
First Central's authorized capital stock consists of 450,000 shares of
First Central Common Stock, par value $5.00 per share, of which 327,500 shares
are issued and outstanding as of the Record Date. There are 29,500 shares of
First Central Common Stock reserved for issuance upon exercise of First Central
Options.
The following table sets forth information as of the Record Date regarding
the ownership of First Central Common Stock by each director and executive
officer of First Central, by each person known to First Central to be the
beneficial owner of more than five percent of the First Central 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>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND POSITION OF BENEFICIAL OWNER OWNED(1) OWNERSHIP
- ------------------------------------- ------------ ----------
<S> <C> <C>
Mark Benjamin, M.D., Director............................... 10,000 3.05
Philip Benjamin, O.D., Director............................. 37,050 11.31
Scott Bogle, Senior Vice President.......................... 3,100 *
Robert P. Clark, Director................................... 10,000 3.05
E. Ralph Crawford, Chairman of the Board, President and
Chief Executive Officer................................... 84,500 23.97
Lawrence Floyd, Senior Vice President....................... 4,500 1.36
Timothy Joslin, Director.................................... 10,000 3.05
Irwin H. Miller, Director................................... 28,050 8.56
Craig Sher, Director........................................ 12,500 3.82
Kerry Westbrook, Cashier and Vice President................. 750 *
All Directors and executive officers as a group (7 persons,
including those names above).............................. 200,450 61.21
</TABLE>
- ---------------
(1) The stock ownership information shown has been furnished to First Central by
the named persons and group. Beneficial ownership as reported in the table
and elsewhere in the Proxy Statement has been determined in accordance with
Commission regulations and includes shares of First Central Common Stock
which may be acquired within 60 days upon the exercise of outstanding stock
options.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Agreement by First Central'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 Central Common Stock present in person or by proxy at the Special
Meeting to approve the Agreement, First Central'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 Central 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
74
<PAGE> 83
voting against the Agreement, an adjournment would afford First Central the
opportunity to solicit additional proxies in favor of the Agreement.
OTHER MATTERS
The Board of Directors of First Central 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 Central.
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER 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. as of September
30, 1997 beneficially owns 38,352 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
Central by the law firm of Werner & Blank, Toledo, Ohio.
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.
First Central's financial statements as of December 31, 1996 and 1995, and
for each of the three years ended December 31, 1996, included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
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 CENTRAL PRIOR TO
THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF FIRST CENTRAL PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING VOTING IN PERSON.
75
<PAGE> 84
FIRST CENTRAL BANK
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets.............................................. F-3
Statements of Income........................................ F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
First Central Bank:
We have audited the accompanying balance sheets of First Central Bank (a
Florida corporation) as of December 31, 1996 and 1995, and the related
statements of income, 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 Central Bank as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
January 10, 1997
F-2
<PAGE> 86
FIRST CENTRAL BANK
BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 6,220,959 $ 2,717,103
FEDERAL FUNDS SOLD.......................................... -- 2,200,000
INVESTMENT SECURITIES (Note 2):
Held to maturity.......................................... 7,798,326 7,561,743
Available for sale........................................ 2,992,055 2,963,125
Federal reserve stock..................................... 75,000 75,000
----------- -----------
10,865,381 10,599,868
LOANS, net (Notes 3 and 4).................................. 35,473,484 32,060,818
OTHER REAL ESTATE OWNED..................................... -- 235,000
PREMISES AND EQUIPMENT, net (Note 5)........................ 103,796 118,024
DEFERRED TAX ASSET (Note 6)................................. 171,000 180,000
OTHER ASSETS (Note 9)....................................... 1,140,893 1,084,472
----------- -----------
$53,975,513 $49,195,285
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing....................................... $10,348,174 $ 8,333,560
Interest-bearing --
NOW and money market accounts.......................... 20,973,626 19,841,299
Time, $100,000 and over................................ 4,595,458 5,106,195
Other time............................................. 7,465,514 6,662,738
Savings................................................ 1,168,613 1,130,975
----------- -----------
44,551,385 41,074,767
OTHER LIABILITIES (Notes 6 and 9)........................... 432,035 477,357
----------- -----------
Total liabilities................................. 44,983,420 41,552,124
----------- -----------
OFF-BALANCE SHEET RISK AND COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY (Note 8):
Common stock, $5 par value, 450,000 shares authorized,
315,000 and 300,000 shares issued and outstanding as of
December 31, 1996 and 1995............................. 1,575,000 1,500,000
Surplus................................................... 1,075,750 1,000,000
Unrealized loss on investment securities available for
sale, net of income tax effect......................... (770) (21,116)
Undivided surplus......................................... 6,342,113 5,164,277
----------- -----------
Total stockholders' equity........................ 8,992,093 7,643,161
----------- -----------
$53,975,513 $49,195,285
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 87
FIRST CENTRAL BANK
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................. $3,501,738 $3,391,655 $2,961,816
Interest on investment securities --
U.S. Treasury............................................ 138,463 93,024 79,389
U.S. Government agencies................................. 503,679 539,765 557,662
Other.................................................... 17,292 17,293 13,135
Interest on federal funds sold............................. 199,528 134,031 114,947
---------- ---------- ----------
Total interest income............................ 4,360,700 4,175,768 3,726,949
INTEREST ON DEPOSITS....................................... 980,170 1,049,984 842,266
---------- ---------- ----------
NET INTEREST INCOME........................................ 3,380,530 3,125,784 2,884,683
PROVISION FOR LOAN LOSSES (Note 4)......................... 54,000 74,500 71,500
---------- ---------- ----------
Net interest income after provision for loan
losses......................................... 3,326,530 3,051,284 2,813,183
---------- ---------- ----------
OTHER INCOME:
Service charges............................................ 383,572 359,461 315,613
Other...................................................... 116,729 72,547 18,124
---------- ---------- ----------
Total other income............................... 500,301 432,008 333,737
---------- ---------- ----------
OTHER EXPENSES:
Salaries and employee benefits............................. 859,663 781,826 704,762
Net occupancy expense...................................... 235,201 274,016 254,429
Other...................................................... 387,889 411,310 475,336
---------- ---------- ----------
Total other expenses............................. 1,482,753 1,467,152 1,434,527
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES................... 2,344,078 2,016,140 1,712,393
PROVISION FOR INCOME TAXES (Note 6)........................ 861,867 758,311 643,384
---------- ---------- ----------
NET INCOME................................................. $1,482,211 $1,257,829 $1,069,009
========== ========== ==========
PER SHARE DATA:
Earnings per common and common equivalent share............ $ 4.28 $ 3.67 $ 3.16
Weighted average common and common equivalent shares
outstanding.............................................. 346,211 343,027 338,663
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 88
FIRST CENTRAL BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK (LOSS) GAIN ON
---------------------- INVESTMENT
NUMBER SECURITIES UNDIVIDED
OF SHARES AMOUNT SURPLUS AVAILABLE FOR SALE SURPLUS TOTAL
--------- ---------- ---------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993................... 300,000 $1,500,000 $1,000,000 $ 459 $2,912,439 $5,412,898
Unrealized loss on
investment
securities available
for sale, net of
income tax effect
(Notes 1 and 2)..... -- -- -- (52,345) -- (52,345)
Net income............. -- -- -- -- 1,069,009 1,069,009
------- ---------- ---------- -------- ---------- ----------
BALANCE, December 31,
1994................... 300,000 1,500,000 1,000,000 (51,886) 3,981,448 6,429,562
Unrealized gain on
investment
securities available
for sale, net of
income tax effect
(Notes 1 and 2)..... -- -- -- 30,770 -- 30,770
Dividends.............. -- -- -- -- (75,000) (75,000)
Net income............. -- -- -- -- 1,257,829 1,257,829
------- ---------- ---------- -------- ---------- ----------
BALANCE, December 31,
1995................... 300,000 1,500,000 1,000,000 (21,116) 5,164,277 7,643,161
Stock options
exercised........... 15,000 75,000 75,750 -- -- 150,750
Dividends.............. -- -- -- -- (304,375) (304,375)
Unrealized gain on
investment
securities available
for sale, net of
income tax effect
(Notes 1 and 2)..... -- -- -- 20,346 -- 20,346
Net income............. -- -- -- -- 1,482,211 1,482,211
------- ---------- ---------- -------- ---------- ----------
BALANCE, December 31,
1996................... 315,000 $1,575,000 $1,075,750 $ (770) $6,342,113 $8,992,093
======= ========== ========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 89
FIRST CENTRAL BANK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $1,482,211 $1,257,829 $1,069,009
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization............................ 43,485 84,361 68,674
Amortization of premiums on investments, net of accretion
of discounts.......................................... (7,573) 8,688 31,110
(Increase) decrease in cash surrender value of life
insurance, net........................................ (31,092) (32,070) 6,674
Provision for loan losses................................ 54,000 74,500 71,500
Gain on sale of other real estate owned.................. (13,304) -- --
Provision for other real estate owned.................... 2,500 40,000 --
Deferred income tax benefit.............................. (3,276) (36,385) (43,671)
Change in assets and liabilities --
Increase in other assets.............................. (25,329) (61,417) (15,024)
(Decrease) increase in other liabilities.............. (49,072) 86,328 75,749
---------- ---------- ----------
Net cash provided by operating activities........ 1,452,550 1,421,834 1,264,021
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for premises and equipment............ (29,257) (21,118) (10,994)
Proceeds from sale of premises and equipment............... -- 10,200 --
Purchases of investment securities......................... (4,577,124) (998,281) (5,660,158)
Maturities and pay downs of investment securities.......... 4,351,806 1,957,717 3,289,863
Purchase of life insurance................................. -- -- (600,000)
Sale of other real estate owned............................ 245,804 -- 179,507
Net increase in loans...................................... (3,466,666) (688,426) (2,017,135)
---------- ---------- ----------
Net cash (used in) provided by investing
activities..................................... (3,475,437) 260,092 (4,818,917)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits........................ 3,476,618 675,494 (61,961)
Stock options exercised.................................... 150,750 -- --
Dividends paid............................................. (300,625) -- --
---------- ---------- ----------
Net cash provided by (used in) financing
activities..................................... 3,326,743 675,494 (61,961)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1,303,856 2,357,420 (3,616,857)
CASH AND CASH EQUIVALENTS, beginning of period............. 4,917,103 2,559,683 6,176,540
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period................... $6,220,959 $4,917,103 $2,559,683
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest..................................... $ 992,673 $1,023,869 $ 801,561
Cash paid for income taxes................................. $ 983,844 $ 759,999 $ 657,474
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Dividends declared not paid................................ $ 78,750 $ 75,000 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 90
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
First Central Bank (the Bank) is a Florida state chartered bank. The
accounting and reporting policies of the Bank are in accordance with generally
accepted accounting principles (GAAP) and conform to general practices within
the banking industry. The Bank's primary source of revenue is providing loans to
customers, who are primarily located in St. Petersburg, Florida.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold.
The Bank is required to maintain certain reserve balances pursuant to
regulations of the Federal Reserve Board. These balances must be maintained in
the form of vault cash or non-interest-bearing deposits at a Federal Reserve
Bank. The Bank exceeded these requirements as of December 31, 1996 and 1995.
INVESTMENT SECURITIES
Investment securities, which are classified as held to maturity, are
carried at cost, adjusted for amortization of premiums and accretion of
discounts. Management classifies as held to maturity those securities for which
management has the intent and ability to hold through their stated maturity
date. Investments classified as available for sale are recorded at fair value,
with unrealized gains and losses reported as a separate component of
stockholders' equity, net of income tax effect. Investment securities classified
as available for sale may be sold for liquidity or other purposes, but are not
actively traded. Gains and losses are determined using the specific
identification method.
LOANS
Collateral for secured loans varies but may include real estate, equipment,
inventory and accounts receivable. Interest on commercial and real estate loans
and substantially all installment loans is recognized monthly using the loan
balance outstanding. The Bank defers certain direct loan costs and fees and
recognizes them as adjustments to yield over the term of the related loan.
On January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan"
(SFAS 114), and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures" (SFAS 118). SFAS 114 provides
guidance for creditors to determine "impairment" of certain loans and requires
creditors to record a valuation allowance on impaired loans when the discounted
expected future cash flows are less than the recorded investment in the loan.
SFAS 118 permits creditors to use existing methods to recognize interest income
on impaired loans. The adoption of these standards did not have a material
impact on the financial statements.
F-7
<PAGE> 91
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RESERVE FOR POSSIBLE LOAN LOSSES
Losses are charged to the reserve for possible loan losses, and recoveries
are credited to the reserve. The reserve is an amount that management believes
will be adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrowers' ability to pay. The financial statements are dependent
upon estimates, appraisals and evaluation of loans that could require changes
because of changing economic conditions and the economic prospects of borrowers.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Amortization of leasehold improvements in the Bank's facility
is provided on a straight-line basis over the lease term of 10 years.
Depreciation is provided on furniture and equipment on a straight-line basis
over its useful life, which ranges from five to 10 years. Gains and losses on
dispositions are recorded in the period of disposition. Maintenance, repairs and
minor improvements are charged to operations as incurred.
RELATED PARTY TRANSACTIONS
Deposits owed to related parties were approximately $2,400,000 and
$3,300,000 at December 31, 1996 and 1995, respectively.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) released
SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121), which addresses when and how impairments
to the value of long-lived assets should be recognized. SFAS 121 is effective
for fiscal years beginning after December 15, 1995. The implementation of SFAS
121 did not have a material effect on the financial statements.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the FASB released SFAS No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), which established accounting and reporting
standards for stock-based compensation plans. SFAS 123 is effective for fiscal
years beginning after December 15, 1995. The implementation of SFAS 123 did not
have a material effect on the financial statements.
EARNINGS PER SHARE
Earnings per common and common equivalent share (EPS) have been computed
using the treasury stock method under which net income is divided by the
weighted average number of common and common equivalent shares outstanding
during the year. The treasury stock method requires the use of fair market value
to calculate common equivalent shares. Fair market value of the Bank was
determined utilizing an industry-accepted multiple of book value. Common
equivalent shares include options issued under the Incentive Stock Option Plan
(the Plan). Differences between primary and fully diluted EPS were not
significant.
In February 1997, the FASB released SFAS No. 128, "Earnings Per Share"
(SFAS 128), which established standards for computing EPS and requires
disclosure of basic and diluted EPS and a reconciliation between the two
amounts. SFAS 128 is effective for fiscal years beginning after December 15,
1997. Management has not determined the effects of this pronouncement.
F-8
<PAGE> 92
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
REPORTING OF COMPREHENSIVE INCOME
In June 1997, the FASB released SFAS No. 130, "Reporting of Comprehensive
Income" (SFAS 130), which established standards for reporting and display of
comprehensive income and its components. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. Management does
not expect this pronouncement to have a material effect on the financial
statements.
DISCLOSURES ABOUT SEGMENTS
In June 1997, the FASB released SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131), which established
standards for reporting information about operating segments. SFAS 131 is
effective for fiscal years beginning December 15, 1997. Management does not
expect this pronouncement to have a material effect on the financial statements.
2. INVESTMENT SECURITIES:
The cost and market value of investment securities by type and contracted
maturity as of December 31, 1996 and 1995, are summarized below. Principal
payments are received on mortgage-backed securities over the life of the
security and are not due at a single maturity date. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1996
--------------------------------------------
UNREALIZED
------------------ MARKET
HELD TO MATURITY COST GAIN (LOSS) VALUE
- ---------------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and government agencies:
Due after one year through five years..... $4,270,938 $19,951 $(14,932) $4,275,957
Due after five years through 10 years..... 1,333,892 1,692 (6,443) 1,329,141
Mortgage-backed securities.................. 1,978,496 50,733 (15,620) 2,013,609
Other, due after five years through 10
years..................................... 215,000 7,601 -- 222,601
---------- ------- -------- ----------
$7,798,326 $79,977 $(36,995) $7,841,308
========== ======= ======== ==========
AVAILABLE FOR SALE
- ------------------
U.S. Treasury and government agencies:
Due after one year through five years..... $2,993,289 $ 8,746 $ (9,980) $2,992,055
========== ======= ======== ==========
</TABLE>
F-9
<PAGE> 93
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995
--------------------------------------------
UNREALIZED
------------------ MARKET
HELD TO MATURITY COST GAIN (LOSS) VALUE
- ---------------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and government agencies:
Due in one year or less................... $ 500,000 $ -- $ (1,250) $ 498,750
Due after one year through five years..... 3,319,207 23,119 (27,322) 3,315,004
Due after five years through 10 years..... 1,000,000 625 (3,750) 996,875
Mortgage-backed securities.................. 2,527,536 57,399 (16,134) 2,568,801
Other, due after five years through 10
years..................................... 215,000 8,849 -- 223,849
---------- ------- -------- ----------
$7,561,743 $89,992 $(48,456) $7,603,279
========== ======= ======== ==========
AVAILABLE FOR SALE
- ------------------
U.S. Treasury and government agencies:
Due in one year or less................... $1,498,540 $ -- $ (3,230) $1,495,310
Due after one year through five years..... 1,498,441 7,499 (38,125) 1,467,815
---------- ------- -------- ----------
$2,996,981 $ 7,499 $(41,355) $2,963,125
========== ======= ======== ==========
</TABLE>
Investment securities with a carrying value of approximately $593,000 and
$666,000 and market value of approximately $599,000 and $676,000 as of December
31, 1996 and 1995, respectively, were pledged to secure public deposits.
3. LOANS:
Loans at December 31, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Real estate:
Commercial................................................ $15,936,679 $14,740,000
Residential............................................... 6,989,634 7,136,209
Construction and land development......................... 3,996,497 3,422,000
Commercial.................................................. 7,204,858 5,901,560
Consumer.................................................... 1,967,024 1,430,937
----------- -----------
36,094,692 32,630,706
Less - Reserve for possible loan losses..................... (533,177) (486,689)
- Deferred loan fees................................... (88,031) (83,199)
----------- -----------
$35,473,484 $32,060,818
=========== ===========
</TABLE>
The Bank has approved loans of approximately $378,000 to officers and
directors at December 31, 1996 and 1995. Approximately $346,000 and $337,000 of
these loans were outstanding at December 31, 1996 and 1995, respectively. In the
opinion of management, all of these loans were made in the normal course of
business on substantially the same terms as loans to other customers of
comparable size or financial stability and do not include more than normal risk
of collectibility or present other unfavorable features.
F-10
<PAGE> 94
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. RESERVE FOR POSSIBLE LOAN LOSSES:
Transactions in the reserve for possible loan losses for the years ended
December 31, 1996, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
BALANCE, beginning of period........................... $486,689 $465,268 $450,527
Provision for loan losses............................ 54,000 74,500 71,500
Loans charged-off.................................... (7,512) (53,279) (71,994)
Recoveries of charged-off loans...................... -- 200 15,235
-------- -------- --------
BALANCE, end of period................................. $533,177 $486,689 $465,268
======== ======== ========
</TABLE>
5. PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1996 and 1995, included:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Furniture and equipment..................................... $361,986 $474,461
Leasehold improvements...................................... 207,328 207,328
-------- --------
569,314 681,789
Less-Accumulated depreciation and amortization.............. (465,518) (563,765)
-------- --------
$103,796 $118,024
======== ========
</TABLE>
6. INCOME TAXES:
The components of the provision (benefit) for income taxes were as follows
as of December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current provision:
Federal.......................................... $779,558 $700,879 $597,738
State............................................ 85,585 93,817 89,317
-------- -------- --------
Total current provision.................. $865,143 $794,696 $687,055
======== ======== ========
Deferred benefit:
Federal.......................................... $ (2,850) $(31,655) $(37,994)
State............................................ (426) (4,730) (5,677)
-------- -------- --------
Total deferred benefit................... $ (3,276) $(36,385) $(43,671)
======== ======== ========
</TABLE>
A deferred tax provision (benefit) of approximately $12,000, $19,000 and
$(31,265) for the years ended December 31, 1996, 1995 and 1994, respectively,
arising from unrealized gains and losses on investment securities available for
sale, was recorded directly to stockholders' equity.
F-11
<PAGE> 95
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The net deferred tax asset, which includes no valuation allowance, was
comprised of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Provision for loan loss and deferred loan fees............ $181,600 $163,500
Other..................................................... 8,400 43,500
-------- --------
$190,000 $207,000
======== ========
Deferred tax liabilities.................................... $(19,000) $(27,000)
======== ========
</TABLE>
The Bank's effective tax rate differs from the federal statutory rate of 34
percent. The reasons for those differences are as follows for the years ended
December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Tax expense at the statutory rate.................. $796,987 $685,488 $582,214
State taxes, net of federal benefit................ 56,205 58,797 55,202
Other.............................................. 8,675 14,026 5,968
-------- -------- --------
Provision for income taxes............... $861,867 $758,311 $643,384
======== ======== ========
</TABLE>
7. OFF-BALANCE SHEET RISK AND COMMITMENTS:
OFF-BALANCE SHEET ITEMS
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest-rate risk that are not recognized in the accompanying
balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the
other parties to the financial instruments discussed above is represented by the
contractual amount of those instruments. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for on-balance
sheet instruments.
Summaries of the contractual amounts of financial instruments with
off-balance sheet risk at December 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Commitments to extend credit................................ $6,744,014 $5,765,012
Standby letters of credit................................... 447,560 100,560
---------- ----------
$7,191,574 $5,865,572
========== ==========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counterparty. Collateral held varies but may include
real estate, equipment, inventory and accounts receivable.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party, are issued only on
behalf of the Bank's strongest customers and typically do not extend beyond one
year. The credit risk involved in issuing letters of credit is essentially the
same as that
F-12
<PAGE> 96
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
involved in extending loan facilities to customers. The Bank typically holds
certificates of deposit as collateral supporting those commitments, depending on
the strength of the borrower. At both December 31, 1996 and 1995, the extent of
collateral held for those commitments varied from unsecured to fully secured.
COMMITMENTS
The Bank leases office space under a lease classified as an operating
lease. Future minimum lease payments are $120,000 per year for 1997 through
1998. The Bank has the option to renew the lease agreement for two additional
five-year periods at $144,000 and $173,000 per year, respectively. Total rent
expense was approximately $157,000 for the years ended December 31, 1996 and
1995, and approximately $155,000 for the year ended December 31, 1994.
8. STOCK OPTION PLAN:
The Bank has an employee Incentive Stock Option Plan (the Plan) dated
January 10, 1989. Under the Plan, a committee designated by the Board of
Directors is authorized to grant options to purchase up to 60,000 shares of
common stock to employees of the Bank. The committee administers the Plan and
designates the optionees and all terms.
The exercise prices of the option must be at least 100 percent of the fair
market value of the Bank's common stock on the effective date of grant, or 110
percent of such fair value for stockholders possessing more than 10 percent of
the combined voting power of the Bank's stock. Options must be granted within 10
years from the date of adoption of the Plan. Each option granted under the Plan
must be exercised, if at all, within 10 years from the date of grant (or within
five years from the date of grant for stockholders owning more than 10 percent
of the outstanding shares).
Combined stock option activity for the Plan for the years ended December
31, 1994, through December 31, 1996, is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER RANGE OF EXERCISE SHARES EXPIRATION
OF SHARES OPTION PRICES PRICE VESTED DATE
--------- ------------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Options outstanding at
December 31, 1993:.............. 57,000 $10.00-11.50 $10.07 55,100 1999-2000
1994 option activity-
Vested....................... -- $10.00-11.50 1,400 1999-2000
Options outstanding at
December 31, 1994:.............. 57,000 $10.00-11.50 $10.07 56,500 1999-2000
1995 option activity-
Vested....................... -- $ 11.50 500 2000
Options outstanding at
December 31, 1995:.............. 57,000 $10.00-11.50 $10.07 57,000 1999-2000
1996 option activity-
Exercised.................... (15,000) $10.00-11.50 $10.05 (15,000) 1999-2000
Options outstanding at
December 31, 1996............... 42,000 $10.00-11.50 $10.07 42,000 1999-2000
</TABLE>
F-13
<PAGE> 97
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. BENEFIT PLANS:
SPLIT DOLLAR INSURANCE PLAN AND DEFERRED COMPENSATION AGREEMENT
In December 1990, the Bank purchased a life insurance policy (the Policy)
on the life of a key officer. The officer is the owner of the Policy and has
designated the beneficiary as a party other than the Bank. Upon death or
termination of employment, the officer will pay the Bank an amount equal to the
cumulative net premiums paid by the Bank on the Policy (the Bank's interest in
the Policy).
Simultaneously, the Bank entered into a deferred compensation agreement
with the officer under which the Bank agreed to pay the officer, or a designated
beneficiary(ies), an amount equal to its interest in the Policy upon the
officer's death or termination of employment. Accordingly, other assets and
other liabilities included amounts representing this interest and obligation of
approximately $144,000 and $123,000 as of December 31, 1996 and 1995,
respectively. Total premiums paid by the Bank in each of the years ended
December 31, 1996, 1995 and 1994, were approximately $21,000, which are included
in salaries and employee benefits in the accompanying statements of income.
PROFIT SHARING PLAN
On January 1, 1992, the Bank established a 401(k) profit sharing plan under
which employees may contribute 2 percent to 16 percent of their earnings and the
Bank will match the contribution up to 6 percent. Bank cash contributions for
the years ended December 31, 1996, 1995 and 1994, were approximately $28,000,
$30,000 and $26,000, respectively.
SALARY CONTINUATION PLANS
During the year ended December 31, 1994, the Bank entered into deferred
compensation agreements with three of its employees providing for annual
payments for 15 years upon their retirement. The liabilities under these
agreements are being accrued over the employees' remaining periods of employment
so that, on the date of their retirement, the then-present value of the annual
payments will have been accrued. Deferred compensation related to the salary
continuation plans of approximately $87,000 and $45,000 is included in other
liabilities as of December 31, 1996 and 1995, respectively.
The Bank is the beneficiary of three life insurance policies with an
aggregate face amount of $1,485,000. Cash surrender value of approximately
$656,000 and $625,000 related to these policies is included in other assets as
of December 31, 1996 and 1995, respectively. Proceeds from the policies are
restricted for use to fund the deferred compensation agreements.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS:
For financial instruments which lack quoted market prices, a significant
number of assumptions must be used in determining estimated fair values. Such
assumptions include subjective assessments of current market conditions,
perceived risks associated with these financial instruments and other factors.
Different assumptions might be considered by the user of the financial
statements to be more appropriate, and the use of alternative assumptions or
estimation methodologies could have a significant effect on the resulting
estimated fair values.
For cash, due from banks, federal funds sold, demand deposits, NOW accounts
and savings accounts, carrying amounts are considered to equal fair value. The
Bank's loan portfolio and time deposits consist of instruments bearing rates
which approximate current market rates for instruments with similar maturities
and risk characteristics. Off-balance sheet commitments consist primarily of
instruments bearing variable interest rates which approximate their fair values.
F-14
<PAGE> 98
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. REGULATORY CAPITAL REQUIREMENTS:
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (as set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
As of July 31, 1996, the most recent notification from the Federal Reserve
Board categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Bank
must maintain minimum total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the institution's
category.
The Bank's actual capital amounts and ratios are also presented in the
table as follows:
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------------ -------------------- ------------------------
AS OF DECEMBER 31, 1996 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- ----------------------- ---------- ----- ----------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted
assets)............................ $9,490,000 23.8% $3,186,000 > 8.0% $3,983,000 > 10.0%
- -
Tier I capital (to risk weighted
assets)............................ 8,992,000 22.6% 1,593,000 > 4.0% 2,390,000 > 6.0%
- -
Tier I capital (to risk average
assets)............................ 8,992,000 17.1% 2,101,000 > 4.0% 2,626,000 > 5.0%
- -
</TABLE>
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------------ -------------------- ------------------------
AS OF DECEMBER 31, 1995 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- ----------------------- ---------- ----- ----------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted
assets)............................ $8,088,000 22.7% $2,846,000 > 8.0% $3,558,000 > 10.0%
- -
Tier I capital (to risk weighted
assets)............................ 7,643,000 21.5% 1,423,000 > 4.0% 2,135,000 > 6.0%
- -
Tier I capital (to risk average
assets)............................ 7,643,000 15.1% 2,020,000 > 4.0% 2,525,000 > 5.0%
- -
</TABLE>
12. EVENT SUBSEQUENT TO AUDITORS' REPORT (UNAUDITED):
In July 1997, the Bank entered into an employment agreement with the
President and CEO for a period of three years at a salary of $200,000 per year.
In September 1997, the Bank entered into an Agreement and Plan of Merger
(the Agreement) with The Colonial BancGroup, Inc. (Colonial), a multi-bank
holding company headquartered in Montgomery, Alabama. The Agreement relates to
the proposed acquisition of the Bank by Colonial and the conversion of the
Bank's common stock into Colonial's common stock. The transaction is subject to
a number of conditions, including prior approval by regulatory agencies and the
Bank's shareholders.
In September, 1997, the Bank and Colonial entered into a stock option
agreement (the Option Agreement). Under the Option Agreement, Colonial has the
option to purchase up to 65,172 shares, or 19.9% of the Bank's common stock at a
price of $62.46 per share. Both the number of shares subject to option and the
purchase price of those shares are subject to change under certain
circumstances. The Option Agreement was entered into as a condition to
Colonial's execution of the Agreement.
F-15
<PAGE> 99
FIRST CENTRAL BANK
BALANCE SHEETS -- JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 3,447,028 $ 6,220,959
FEDERAL FUNDS SOLD.......................................... 1,500,000 --
INVESTMENTS:
Held to maturity.......................................... 6,655,867 7,798,326
Available for sale........................................ 2,990,711 2,992,055
Federal reserve stock..................................... 83,300 75,000
----------- -----------
Total investments................................. 9,729,878 10,865,381
LOANS, net.................................................. 38,484,851 35,473,484
OTHER REAL ESTATE OWNED..................................... 292,647 --
PREMISES AND EQUIPMENT, net................................. 81,827 103,796
DEFERRED TAX ASSET.......................................... 180,000 171,000
OTHER ASSETS................................................ 1,162,002 1,140,893
----------- -----------
$54,878,233 $53,975,513
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing....................................... $11,535,073 $10,384,174
Interest-bearing-
NOW and money market accounts.......................... 17,456,392 20,973,626
Time, $100,000 and over................................ 7,001,309 4,595,458
Other time............................................. 7,252,733 7,465,514
Savings................................................ 1,334,958 1,168,613
----------- -----------
Total deposits.................................... 44,580,465 44,551,385
OTHER LIABILITIES........................................... 570,669 432,035
----------- -----------
Total liabilities................................. 45,151,134 44,983,420
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock -- $5 par value; 450,000 shares authorized,
327,500 and 315,000 shares issued and outstanding as of
June 30, 1997, and December 31, 1996................... 1,637,500 1,575,000
Surplus................................................... 1,138,250 1,075,750
Unrealized loss on investment securities available for
sale, net of income tax effect......................... (3,211) (770)
Undivided surplus......................................... 6,954,560 6,342,113
----------- -----------
Total stockholders' equity........................ 9,727,099 8,992,093
----------- -----------
$54,878,233 $53,975,513
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-16
<PAGE> 100
FIRST CENTRAL BANK
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................ $1,891,345 $1,715,797
Interest on investment securities --
U.S. Treasury.......................................... 75,643 61,709
U.S. Government agencies............................... 242,871 236,776
Other.................................................. 8,729 8,646
Interest on federal funds sold............................ 44,562 93,243
---------- ----------
Total interest income............................. 2,263,150 2,116,171
INTEREST ON DEPOSITS........................................ 498,424 498,985
---------- ----------
NET INTEREST INCOME......................................... 1,764,726 1,617,186
PROVISION FOR LOAN LOSSES................................... 25,000 26,000
---------- ----------
Net interest income after provision for loan
losses.......................................... 1,739,726 1,591,186
---------- ----------
OTHER INCOME:
Service fees.............................................. 191,489 197,163
Other..................................................... 38,995 49,639
---------- ----------
Total other income................................ 230,484 246,802
---------- ----------
OTHER EXPENSES:
Salaries and employee benefits............................ 447,156 413,963
Net occupancy expense..................................... 127,164 122,543
Other..................................................... 179,799 194,658
---------- ----------
Total other expenses.............................. 754,119 731,164
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES.................... 1,216,091 1,106,824
PROVISION FOR INCOME TAXES.................................. 439,894 401,255
---------- ----------
NET INCOME.................................................. $ 776,197 $ 705,569
========== ==========
PER SHARE DATA:
Earnings per common and common equivalent share........... $ 2.21 $ 2.05
Weighted average common and common equivalent shares
outstanding............................................ 350,945 344,947
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 101
FIRST CENTRAL BANK
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK LOSS ON
---------------------- INVESTMENT
NUMBER SECURITIES UNDIVIDED
OF SHARES AMOUNT SURPLUS AVAILABLE FOR SALE SURPLUS TOTAL
--------- ---------- ---------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 315,000 $1,575,000 $1,075,750 $ (770) $6,342,113 $8,992,093
Stock options
exercised........... 12,500 62,500 62,500 -- -- 125,000
Dividends.............. -- -- -- -- (163,750) (163,750)
Unrealized loss on
investment
securities available
for sale, net of
income tax effect... -- -- -- (2,441) -- (2,441)
Net income............. -- -- -- -- 776,197 776,197
------- ---------- ---------- ------- ---------- ----------
BALANCE, June 30, 1997... 327,500 $1,637,500 $1,138,250 $(3,211) $6,954,560 $9,727,099
======= ========== ========== ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-18
<PAGE> 102
FIRST CENTRAL BANK
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 776,197 $ 705,564
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization.......................... 21,951 21,257
Amortization of premiums on investments, net of
accretion of discounts................................ (5,363) (8,565)
Increase in cash surrender value of life insurance,
net................................................... (35,969) (15,443)
Provision for loan losses.............................. 25,000 26,000
Deferred income tax benefit............................ (9,000) (36,156)
Changes in assets and liabilities --
Decrease in other assets............................... 14,878 (59,424)
Increase in other liabilities.......................... 138,634 26,120
----------- -----------
Net cash provided by operating activities......... 926,328 734,170
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments securities....................... (8,300) (4,628,906)
Investment in federal funds sold.......................... (1,500,000) 1,000,000
Sales and maturities of investment securities............. 1,146,725 3,800,267
Net increase in loans..................................... (3,329,014) (1,240,715)
----------- -----------
Net cash used in investing activities............. (3,690,589) (1,098,622)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.................................. 29,080 901,174
Stock options exercised................................... 125,000 12,500
Dividends paid............................................ (163,750) (150,000)
----------- -----------
Net cash used in financing activities............. (9,670) 763,674
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (2,773,931) 399,222
CASH AND CASH EQUIVALENTS, beginning of period.............. 6,220,959 2,717,103
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,447,028 $ 3,116,325
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 346,162 $ 350,793
Cash paid for income taxes................................ $ 390,675 $ 278,878
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Dividends declared not paid............................... $ 81,875 $ 75,313
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE> 103
FIRST CENTRAL BANK
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements of First Central Bank (the
Bank) have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and notes required by generally accepted
accounting principals for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further information,
refer to the financial statements and notes thereto for the year ended December
31, 1996.
Operating results for the six months ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
2. RECENT ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board (FASB) released
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(SFAS 128), which established standards for computing EPS and requires
disclosure of basic and diluted EPS and a reconciliation between the two
amounts. SFAS 128 is effective for fiscal years beginning after December 15,
1997. Management has not determined the effects of this pronouncement.
In June 1997, the FASB released SFAS No. 130, "Reporting of Comprehensive
Income" (SFAS 130), which established standards for reporting and display of
comprehensive income and its components. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. Management does
not expect this pronouncement to have a material effect on the financial
statements.
In June 1997, the FASB released SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131), which established
standards for reporting information about operating segments. SFAS 131 is
effective for fiscal years beginning after December 15, 1997. Management does
not expect this pronouncement to have a material effect on the financial
statements.
3. SUBSEQUENT EVENT:
In July 1997, the Bank entered into an employment agreement with the
President and CEO for a period of three years at a salary of $200,000 per year.
In September 1997, the Bank entered into an Agrement and Plan of Merger
(the Agreement) with The Colonial BancGroup, Inc. (Colonial), a multi-bank
holding company headquartered in Montgomery, Alabama. The Agreement relates to
the proposed acquisition of the Bank by Colonial and the conversion of the
Bank's common stock into Colonial's common stock. The transaction is subject to
a number of conditions, including prior approval by regulatory agencies and the
Bank's shareholders.
In September, 1997, the Bank and Colonial entered into a stock option
agreement (the Option Agreement). Under the Option Agreement, Colonial has the
option to purchase up to 65,172 shares, or 19.9% of the Bank's common stock at a
price of $62.46 per share. Both the number of shares subject to option and the
purchase price of those shares are subject to change under certain
circumstances. The Option Agreement was entered into as a condition to
Colonial's execution of the Agreement.
F-20
<PAGE> 104
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
COLONIAL BANK
AND
FIRST CENTRAL BANK
DATED AS OF
SEPTEMBER 9, 1997
A-1
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................ A-5
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law.............................................. A-5
2.2 Corporate Existence......................................... A-5
2.3 Articles of Incorporation and Bylaws........................ A-5
2.4 Resulting Corporation's Officers and Board.................. A-6
2.5 Shareholder Approval........................................ A-6
2.6 Further Acts................................................ A-6
2.7 Effective Date and Closing.................................. A-6
ARTICLE 3 -- CONVERSION OF ACQUIRED BANK STOCK
3.1 Conversion of Acquired Bank Stock........................... A-6
3.2 Surrender of Acquired Bank Stock............................ A-7
3.3 Fractional Shares........................................... A-7
3.4 Adjustments................................................. A-7
3.5 BancGroup Stock............................................. A-7
3.6 Dissenting Rights........................................... A-7
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................ A-8
4.2 Capital Stock............................................... A-8
4.3 Financial Statements; Taxes................................. A-8
4.4 No Conflict with Other Instrument........................... A-9
4.5 Absence of Material Adverse Change.......................... A-9
4.6 Approval of Agreements...................................... A-9
4.7 Tax Treatment............................................... A-9
4.8 Title and Related Matters................................... A-9
4.9 Subsidiaries................................................ A-10
4.10 Contracts................................................... A-10
4.11 Litigation.................................................. A-10
4.12 Compliance.................................................. A-10
4.13 Registration Statement...................................... A-10
4.14 SEC Filings................................................. A-11
4.15 Form S-4.................................................... A-11
4.16 Brokers..................................................... A-11
4.17 Government Authorization.................................... A-11
4.18 Absence of Regulatory Communications........................ A-11
4.19 Disclosure.................................................. A-11
4.20 Environment Laws............................................ A-11
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED
BANK
5.1 Organization................................................ A-11
5.2 Capital Stock............................................... A-12
5.3 Subsidiaries................................................ A-12
5.4 Financial Statements; Taxes................................. A-12
5.5 Absence of Certain Changes or Events........................ A-13
5.6 Title and Related Matters................................... A-14
5.7 Commitments................................................. A-14
</TABLE>
A-2
<PAGE> 106
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.8 Charter and Bylaws.......................................... A-14
5.9 Litigation.................................................. A-14
5.10 Material Contract Defaults.................................. A-15
5.11 No Conflict with Other Instrument........................... A-15
5.12 Governmental Authorization.................................. A-15
5.13 Absence of Regulatory Communications........................ A-15
5.14 Absence of Material Adverse Change.......................... A-15
5.15 Insurance................................................... A-15
5.16 Pension and Employee Benefit Plans.......................... A-15
5.17 Buy-Sell Agreement.......................................... A-16
5.18 Brokers..................................................... A-16
5.19 Approval of Agreements...................................... A-16
5.20 Disclosure.................................................. A-16
5.21 Registration Statement...................................... A-16
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-16
5.23 Environmental Matters....................................... A-17
5.24 Transfer of Shares.......................................... A-17
5.25 Collective Bargaining....................................... A-17
5.26 Labor Disputes.............................................. A-17
5.27 Derivative Contracts........................................ A-17
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-17
6.2 Additional Covenants of Acquired Bank....................... A-19
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-21
7.2 Press Release............................................... A-21
7.3 Mutual Disclosure........................................... A-21
7.4 Access to Properties and Records............................ A-21
7.5 Notice of Adverse Changes................................... A-21
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-22
8.2 Regulatory Authority Approval............................... A-22
8.3 Litigation.................................................. A-22
8.4 Registration Statement...................................... A-22
8.5 Tax Opinion................................................. A-22
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED BANK
9.1 Representations, Warranties and Covenants................... A-23
9.2 Adverse Changes............................................. A-23
9.3 Closing Certificate......................................... A-23
9.4 Opinion of Counsel.......................................... A-24
9.5 NYSE Listing................................................ A-24
9.6 Other Matters............................................... A-24
9.7 Material Events............................................. A-24
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-24
10.2 Adverse Changes............................................. A-24
10.3 Closing Certificate......................................... A-24
10.4 Opinion of Counsel.......................................... A-25
10.5 Controlling Shareholders.................................... A-25
10.6 Other Matters............................................... A-25
</TABLE>
A-3
<PAGE> 107
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
10.7 Dissenters.................................................. A-25
10.8 Material Events............................................. A-25
10.9 Pooling of Interests........................................ A-25
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES......... A-25
ARTICLE 12 -- NOTICES............................................... A-26
ARTICLE 13 -- AMENDMENT OR TERMINATION.............................. A-26
13.1 Amendment................................................... A-26
13.2 Termination................................................. A-26
13.3 Damages..................................................... A-27
ARTICLE 14 -- DEFINITIONS........................................... A-27
ARTICLE 15 -- MISCELLANEOUS......................................... A-31
15.1 Expenses.................................................... A-31
15.2 Benefit and Assignment...................................... A-31
15.3 Governing Law............................................... A-31
15.4 Counterparts................................................ A-31
15.5 Headings.................................................... A-31
15.6 Severability................................................ A-32
15.7 Construction................................................ A-32
15.8 Return of Information....................................... A-32
15.9 Equitable Remedies.......................................... A-32
15.10 Attorneys' Fees............................................. A-32
15.11 No Waiver................................................... A-32
15.12 Remedies Cumulative......................................... A-32
15.13 Entire Contract............................................. A-32
</TABLE>
A-4
<PAGE> 108
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
9th day of September 1997, by and among FIRST CENTRAL BANK ("Acquired Bank"), a
Florida state-chartered commercial bank, COLONIAL BANK ("Colonial Bank"), an
Alabama banking corporation and THE COLONIAL BANCGROUP, INC. ("BancGroup"), a
Delaware corporation.
WITNESSETH
WHEREAS, Acquired Bank operates as a Florida state-chartered commercial
bank with its principal office in St. Petersburg, Florida; and
WHEREAS, BancGroup is a bank holding company with its Subsidiary bank,
Colonial Bank, operating 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 choices 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-5
<PAGE> 109
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 Shareholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Bank at the Shareholders 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 (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 5:00 p.m. on a date specified by
BancGroup that shall be as soon as reasonably practicable after the later to
occur of the Shareholder 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 $62.46 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. Regardless
of the Market Value, however, the maximum number of shares of BancGroup Common
Stock to be issued in the Merger shall be 841,796 (based upon a minimum Market
Value of $24.30) and the minimum number of shares of BancGroup Common Stock to
be issued in the Merger shall be 688,742 (based upon a maximum Market Value of
$29.70) assuming 327,500 shares of Acquired Bank Stock outstanding. To the
extent that the number of shares of Acquired Bank Stock may increase based upon
the exercise of Acquired Bank Options, the number of shares of BancGroup Common
Stock to be issued in the Merger shall be increased with each share of Acquired
Bank Stock outstanding at the Effective Date exchanged for shares of BancGroup
Common Stock equal to $62.46 divided by the Market Value, provided that for this
purpose the Market Value shall be deemed to be no less than $24.30 and no
greater than $29.70.
(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
A-6
<PAGE> 110
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. For purposes of this section 3.1(b)(i), the "Exchange Ratio" shall
mean the result obtained by dividing $62.46 by the Market Value. It is intended
that the assumption by BancGroup of the Acquired Bank 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.
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, or who votes against this Agreement, and who
has complied with the applicable procedures set
A-7
<PAGE> 111
forth in the FBC, relating to rights of 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. However, in accordance with the FBC, such consideration shall be paid in
cash and not in BancGroup Common Stock.
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 an Alabama state banking corporation duly organized,
validly existing and in good standing under the Laws of the State of Alabama.
Colonial Bank has the necessary corporate powers to carry on its business as
presently conducted.
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 June 30, 1997, 41,912,989 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, December 31, 1996,
and June 30, 1997;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June 30,
1997;
(iii) Consolidated statements of cash flows for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June 30,
1997; and
(iv) Consolidated statements of changes in shareholders' equity for the
three years ended December 31, 1994, 1995 and 1996, and for the six months ended
June 30, 1997.
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
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
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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. The foregoing representation, insofar as
they relate to the unaudited interim financial statements of BancGroup for the
six months ended June 30, 1997, are subject in all cases to normal recurring
year-end adjustments and the omission of footnote disclosure.
(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. Prior to the Effective Date, the board of
directors of Colonial Bank shall have approved this Agreement and the
transactions contemplated by it and shall have authorized the execution and
delivery of this Agreement. 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 of directors' approval of the
shares to be issued in the merger, BancGroup and Colonial Bank have 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, that
are material to the business of BancGroup, 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
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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 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
violation of its respective certificate of incorporation or bylaws or in Default
in the performance or observance of any material obligation, agreement, covenant
or condition contained in any Contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which it is a party or by which it or its
property may be bound.
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 is likely to 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; (iii) Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31 and June 30, 1997;
and (iv) 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.
4.20 Environment Laws. The officers signing this agreement are not aware
of any violation of Environment Laws which taken in the aggregate would have a
Material Adverse Effect.
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
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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.
5.2 Capital Stock. (i) As of the date of this Agreement, the authorized
capital stock of Acquired Bank consisted of 450,000 shares of common stock,
$5.00 par value per share, 327,500 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 29,500
shares of its common stock subject to exercise at any time pursuant to Acquired
Bank Options. 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 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, and as of June 30, 1997;
(ii) Statements of income for each of the three years ended December
31, 1994, 1995 and 1996, and for the six months ended June 30, 1997;
(iii) Statements of stockholders' equity for each of the three years
ended December 31, 1994, 1995, and 1996, and for the six months ended June
30, 1997; and
(iv) Statements of cash flows for the three years ended December 31,
1994, 1995 and 1996, and for the six months ended June 30, 1997.
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. The foregoing representations
insofar as they relate to the unaudited interim financial statements of Acquired
Bank for the six months ended June 30, 1997, are subject in all cases to normal
recurring year-end adjustments and the omission of footnote disclosure.
(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
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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 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 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 except that Acquired Bank may pay cash dividends at its current
rate and at times consistent with past practice;
(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.
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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 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, that are material to the
business of Acquired Bank, 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 June 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. As set forth in Schedule 5.7, Acquired
Bank has entered into an employment agreement, dated as of July 9, 1997, with E.
Ralph Crawford.
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. 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
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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, 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 sec-
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tion 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 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. 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. Except for fees to be paid to Austin Associates, Inc., 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 and
complies with all Laws to which it is subject. 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.
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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 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 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
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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).
(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. 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
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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.
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 each Acquired
Bank Company 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 any Acquired Bank Company 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.
Acquired Bank shall enter into the Stock Option Agreement with BancGroup
dated as of the date of this Agreement.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Bank agree to support publicly the Merger.
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(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) any 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.
(h) Certain Practices. (a) Beginning with the date of this Agreement,
(i) Acquired Corporation shall consult with BancGroup and advise BancGroup
in advance of all of the Bank's loan requests over $100,000 or of any other
loan request outside the normal course of business, except for
single-family residential loan requests and renewals of existing loans
which do not increase the outstanding principal amount of the loan, (ii)
Acquired Corporation shall furnish to BancGroup promptly upon their
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availability copies of all minutes of loan committee meetings of the Bank
for meetings occurring after the date of this Agreement, and (iii) Acquired
Corporation 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 Regulation.
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. (a) 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.
(b) Each Party shall have obtained any and all other Consents required for
consummation of the Merger (other than those referred to in Section 8.2(a) of
this Agreement) for the preventing of any Default under any Contract or Permit
of such Party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such Party. No
Consent obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic or business benefits of the transactions 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
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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 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.
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
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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.
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
referenced in section 5.8 hereof remain in full force and effect and have
not been amended or modified since the date hereof;
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(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 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
Werner & Blank, 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 or she 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.
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
the last sentences of Sections 7.4 and 6.2(c), and Sections 7.2, 7.4, 13.3,
Article 11, Article 12, Article 15, any applicable definitions of Article 14,
shall survive. Items disclosed in the Exhibits and Schedules attached hereto are
incorporated into this Agreement and form a part of the representations,
warranties, covenants or agreements to which they relate. Information provided
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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 or other communications which are required or permitted
hereunder shall be in writing and delivered by hand, by facsimile transmission,
by registered or certified mail, postage pre-paid, or by courier or overnight
carrier, to the persons at the addresses set forth, below (or at such other
address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so received:
(a) If to Acquired Bank to Ralph Crawford, at First Central Bank, 5858
Central Avenue, St. Petersburg, Florida 33707, facsimile 831-347-4744, with
copies to Martin D. Werner, Werner & Blank, 7205 West Central Avenue,
Toledo, Ohio 43617, facsimile 419-841-8380, 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 Hugh C. Nickson, III, 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 May 31, 1998, if the failure to consummate the
transactions provided for in this Agreement on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this section 13.2(d); or
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13.3 Damages. In the event of termination pursuant to section 13.2, this
Agreement shall become void and have no effect, except as provided in Article II
and except that Acquired Bank and BancGroup shall be liable for damages for any
willful breach of warranty, representation, covenant or other agreement
contained in this Agreement.
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 Central Bank, 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
29,500 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.
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 submission of the certificates of officers,
legal opinions and other actions required to be
taken in order to consummate the Merger in
accordance with this Agreement.
Code....................... The Internal Revenue Code of 1986, as amended.
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Common Stock............... BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.
Colonial Bank.............. An Alabama state banking corporation which is a
wholly owned subsidiary of BancGroup.
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 $62.46 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.
GAAP....................... Means generally accepted accounting principles
applicable to banks and bank holding companies,
consistently applied during the periods involved.
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, 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,
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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, (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, and (iv) Liens which are not
reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
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, but shall not include regular,
periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities,
relating to or affecting a Party, its business, its
Assets (including Contracts related to it) or
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 ending on the trading day
five calendar days preceding the Effective Date.
Regardless of such average, the Market Value shall
be deemed to be no less than $24.30 and no greater
than $29.70.
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.
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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 effect" shall not
be deemed to include the impact of (w) changes in
banking and similar laws of general applicability
or interpretations thereof by courts or
governmental authorities, (x) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, (y) actions and
omissions of a Party (or any of its Subsidiaries)
taken with the prior informed consent of the other
Party in contemplation of the transactions
contemplated hereby, 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 Colonial Bank 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 offered to stockholders of the Bank pursuant
to his Agreement, including the Proxy Statement.
Resulting Corporation...... Colonial Bank, as the surviving corporation
resulting from the Merger.
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SEC........................ United States Securities and Exchange Commission.
Shareholders Meeting....... The special meeting of shareholders of Acquired
Bank called to approve the transactions
contemplated by this Agreement.
Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Bank granting to BancGroup
the right to acquire up to 19.9 percent of Acquired
Bank Stock.
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.
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. (a) Except as otherwise provided in this Section 15.1, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that BancGroup shall bear and pay the filing
fees payable in connection with the Registration Statement and printing costs
incurred in connection with the printing of the Registration Statement.
(b) Nothing contained in this Section 15.1 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
15.2 Benefit and Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and
assigns.
15.3 Governing Law. Except as the provisions of the FBA apply to the
Merger, this Agreement shall be governed by, and construed in accordance with
the Laws of the State of Alabama, without regard to any conflict of Laws.
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.
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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 reasonable
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.
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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> <C> <C>
ATTEST: FIRST CENTRAL BANK
BY: /s/ PHILIP BENJAMIN BY: /s/ E. RALPH CRAWFORD
------------------------------------------ ------------------------------------------
ITS: Vice-Chairman ITS: Chairman, President and CEO
------------------------------------------ ------------------------------------------
(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>
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APPENDIX B
, 1997
Board of Directors
First Central Bank
5858 Central Avenue
St. Petersburg, FL 33707
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to First Central Bank ("First Central") and its shareholders of the
terms of the Agreement and Plan of Merger dated as of September , 1997
("Agreement") between First Central, The Colonial BancGroup, Inc., Montgomery,
Alabama ("BancGroup"), and Colonial Bank, a wholly owned subsidiary of
BancGroup. The terms of the Agreement provide for the acquisition of First
Central by BancGroup (the "Merger"). The Merger will be completed through a
merger of First Central with and into Colonial Bank. As a result of the Merger,
First Central's banking office will become a banking office of Colonial Bank.
The terms of the Agreement provide for each outstanding share of First
Central common stock to be converted into shares of BancGroup common stock. The
number of shares of BancGroup stock into which each First Central share will be
converted shall be equal to $62.46 divided by the Market Value. The Market Value
will be determined by calculating the average of the closing prices of BancGroup
common stock as reported by the New York Stock Exchange on each of the ten
trading days ending on the trading day five calendar days preceding the
effective date of the Merger. The Agreement further provides for BancGroup to
assume all outstanding First Central options.
In carrying out our engagement, we have reviewed and analyzed material
bearing upon the financial and operating condition of First Central and
BancGroup, including but not limited to the following: (i) the Proxy Statement
and Prospectus; (ii) the financial statements of First Central and BancGroup for
the period 1992 through June, 1997; (iii) certain other publicly available
information regarding First Central and BancGroup; (iv) publicly available
information regarding the performance of certain other companies whose business
activities were believed by Austin Associates to be generally comparable to
those of First Central and BancGroup; (v) the financial terms, to the extent
publicly available, of certain comparable transactions; and (vi) such other
analysis and information as we deemed relevant.
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the financial and other information provided to us or publicly
available, and have not attempted to verify the same. We have made no
independent verification as to the status of individual loans made by First
Central or BancGroup, and have instead relied upon representations and
information concerning loans of First Central and BancGroup in the aggregate. In
rendering our opinion, we have assumed that the transaction will be a tax-free
reorganization with no material adverse tax consequences to First Central or
BancGroup, or to First Central shareholders receiving BancGroup stock. In
addition, we have assumed in the course of obtaining the necessary regulatory
approvals for the transaction, no condition will be imposed that will have a
material adverse effect on the contemplated benefits of the transaction to First
Central and its shareholders.
Based upon our analysis and subject to the qualifications described herein,
we believe that as of the date of this letter, the terms of the Agreement are
fair, from a financial point of view, to First Central and its shareholders.
For our services in rendering this opinion, First Central will pay us a fee
and indemnify us against certain liabilities.
Austin Associates, Inc.
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APPENDIX C
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 not 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
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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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APPENDIX D
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 9, 1997 (the "Agreement"), by
and between First Central Bank, a Florida state-chartered commercial bank
("Issuer"), and The Colonial BancGroup, Inc., a Delaware corporation
("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of September 9, 1997 (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Colonial Bank, a wholly
owned subsidiary of Grantee, with Colonial Bank as the surviving corporation;
and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
from time to time up to 65,172 shares (as adjusted as set forth herein) (the
"Option Shares"), of Common Stock, par value $5.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
equal to $62.46; provided, however, that in no event shall the number of shares
for which this option is exercisable exceed 19.9% of the outstanding shares of
Issuer Common Stock.
3. Exercise of Option. (a) Provided that (i) Grantee shall not be in
material breach of the agreements or covenants contained in this Agreement or
the Merger Agreement, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any court
of competent jurisdiction in the United States shall be in effect, Grantee may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as defined below); provided that
the Option shall terminate and be of no further force or effect upon the
earliest to occur of (A) the Effective Date, or (B) termination of the Merger
Agreement in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, (C) termination of the Merger
Agreement in accordance with the terms thereof after the occurrence of a
Purchase Event or a Preliminary Purchase Event (other than a termination of the
Merger Agreement by Grantee due to a material breach by Issuer in accordance
with Section 13.2(b) of the Merger Agreement or a termination due to the failure
to fulfill conditions set forth in Sections 8.1, 10.1, 10.3, 10.4, 10.6, 10.7 or
10.9 of the Merger Agreement), or (D) eighteen months after termination of the
Merger Agreement following the occurrence of a Purchase Event or a Preliminary
Purchase Event, provided that the termination of the Merger Agreement was due to
one of the reasons listed in the parenthetical of Clause (C) above; and provided
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law including, without limitation, the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). The rights set
forth in Section 8 shall terminate when the right to exercise the Option
terminates (other than as a result of a complete exercise of the Option) as set
forth herein.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed, or publicly announced an
intention to authorize, recommend, or propose, or shall have entered into
any agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation, or other business combination involving Issuer, (B) the
disposition, by sale, lease, exchange, or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case all or
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substantially all of the consolidated assets of Issuer, or (C) the
issuance, sale, or other disposition of (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 25% or more of the voting power of Issuer; or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934 (the "1934
Act")) of or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the 1934 Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the 1934 Act),
or shall have filed a registration statement under the 1933 Act with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) (1) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, (2) such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement, (3) the Issuer's Board of Directors or any person representing
such Board shall have commenced negotiations with any person other than
Grantee regarding an Acquisition Transaction, or (4) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly announced
(or otherwise disclosed to the Issuer prior to such public announcement)
that any person (other than Grantee or any subsidiary of Grantee) shall
have (A) made, or disclosed to Issuer an intention to make, a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or filed
a registration statement under the 1933 Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in draft or
final form, under the BHC Act, the Bank Merger Act, or the Change in Bank
Control Act of 1978, or other appropriate banking agency, for approval to
engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the 1934 Act.
(d) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall (i) pay to Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date,
and (ii) present and surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 11(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Grantee (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges, and encumbrances of any kind
whatsoever and subject to no pre-emptive rights,
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and (B) if the Option is exercised in part only, an executed new agreement with
the same terms as this Agreement evidencing the right to purchase the balance of
the shares of Issuer Common Stock purchasable hereunder, and (ii) Grantee shall
deliver to Issuer a letter agreeing that Grantee shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE LAW AND THE TRANSFER OF THE STOCK
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A
STOCK OPTION AGREEMENT DATED AS OF SEPTEMBER 9, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from the
date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance), upon
exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances of
any kind or nature whatsoever, including any statutory preemptive rights of
any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
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(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
7. Adjustment upon Changes in Capitalization, etc. (a) In the event of a
change in Issuer Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, subject to the
limitation set forth in Section 2 hereof, and proper provision shall be made in
the agreements governing such transaction so that Grantee shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or a sale of the Issuer
Common Stock for cash at its fair market value), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, the shares of Issuer Common Stock subject to the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equal 19.9%
of the number of shares of Issuer Common Stock then issued and outstanding.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of the Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company; or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below), (y) any person that controls the Acquiring
Corporation, or (z) in the case of a merger described in clause (ii), the Issuer
(in each case, such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Grantee. The Substitute Option Issuer shall also enter into
an agreement with the then-holder or holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of the Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of the Substitute Common Stock (the "Substitute Purchase
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of the Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or surviving
corporation of a consolidation or merger with the Issuer (if other than the
Issuer), (y) the Issuer in a merger in which the Issuer is the continuing
or surviving person, and (z) the transferee of all or substantially all of
the Issuer's assets.
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(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person after the date hereof (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid by
any person (other than the Grantee) pursuant to an agreement with the
Issuer, or (z) the highest closing sales price per share of Issuer Common
Stock quoted on the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ/NMS") (or if Issuer Common Stock
is not quoted on the NASDAQ/NMS, the highest bid price per share on any day
as quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by Grantee
or, if there is no such information available, the value of such shares as
determined by a nationally recognized investment banking firm selected by
Grantee) within the six-month period immediately preceding the Agreement;
provided, however, that in the event of a sale of all or substantially all
of the Issuers' assets, the Assigned Value shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in interest
of the Grantees if there shall be more than one Grantee (a "Grantee
Majority")), divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event-higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger, or sale, provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the Issuer, the person
merging into the Issuer or by any company which controls or is controlled
by such merger person, as Grantee may elect, and provided further that if
there is no such trading information available, the price of such shares
shall be determined by a nationally recognized investment banking firm
selected by Grantee.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in subsection (b)
of this Section 7 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assumes in writing all the obligations of Issuer
hereunder and takes all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
Substitute Option Issuer) (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities as
defined in Rule 144 under the 1933 Act or any successor provision).
(h) The provisions of Sections 8, 9, and 10 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable pursuant
to this Section 7 and, as applicable, references in such sections to "Issuer,"
"Option," "Purchase Price," and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer," "Substitute Option," "Substitute
Purchase Price," and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Grantee. (a) Subject to the last sentence
of Section 3(a), at the request of Grantee at any time commencing upon the first
occurrence of a Repurchase Event (as defined in
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Section 8(d)) and ending 30 days immediately thereafter, Issuer shall, to the
extent permitted by applicable law, repurchase from Grantee the Option and all
shares of Issuer Common Stock purchased by Grantee pursuant hereto with respect
to which Grantee then has beneficial ownership. The date on which Grantee
exercises its right under this Section 8 is referred to as the "Request Date".
Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;
(ii) The excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by
the number of such shares.
(b) If Grantee exercises its right under this Section 8, Issuer shall, to
the extent permitted by applicable law, within 10 business days after the
Request Date, pay the Section 8 Repurchase Consideration to Grantee in
immediately available funds, and contemporaneously with such payment Grantee
shall surrender to Issuer the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all liens, claims, charges, and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Board of Governors of the Federal Reserve System or other
regulatory authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to this Section 8,
in whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Board of Governors of the Federal Reserve System or
any other regulatory authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Grantee. If the Board of Governors of the Federal Reserve System or
other agency prohibits the repurchase in part but not in whole, then Grantee
shall have the right (i) to revoke the repurchase request, or (ii) to the extent
permitted by the Board of Governors of the Federal Reserve System or other
agency, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Grantee shall thereupon have the
right to exercise the Option as to the number of Options Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Grantee shall notify Issuer of its
determination under the preceding sentence within five (5) days of receipt of
notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of the Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i); (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii); or (iii) the highest closing sales
per share of Issuer Common Stock quoted on the NASDAQ/NMS (or if Issuer Common
Stock is not quoted on the market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Grantee and reasonably
acceptable to
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<PAGE> 146
Issuer) during the 60 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer as determined by
a nationally recognized investment banking firm selected by Grantee, divided by
the number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either of
the foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Grantee and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of the
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the 1934
Act), or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the 1934 Act) shall have been formed which beneficially
owns or has the right the acquire beneficial ownership of, 50% or more of the
then outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii), or 7(b)(iii) shall be consummated.
(e) In connection with the application of the provisions of this Section 8,
Grantee acknowledges that Issuer's ability to fund the Section 8 Repurchase
Consideration in accordance with the provisions of this Section 8 may be
dependant upon the ability of Issuer to obtain the prior approval of the Board
of Governors of the Federal Reserve System and applicable provisions of Florida
law and that, unless there has been an agreement of the type described in
Section 7(b), Issuer's obligations under this Section 8 do not impose on the
Issuer an obligation to otherwise finance the payment of the Section 8
Repurchase Consideration through the incurrence of indebtedness or the issuance
of capital instruments or securities by Issuer in either case sufficient in
amount to satisfy the payment of the Section 8 Repurchase Consideration.
Accordingly, Issuer shall not be deemed to be in breach of this Section 8 if,
after making its best efforts to obtain regulatory authorization for a capital
distribution required to pay the Section 8 Repurchase Consideration, it is
unable to do so.
9. Quotation: Listing. If the Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the NASDAQ/NMS or any securities exchange, Issuer, upon
the request of Grantee, will promptly file an application, if required, to
authorize for quotation or trading or listing shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on the NASDAQ/NMS or
such other securities exchange and will use its best effort to obtain approval,
if required, of such quotation or listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the Option of the Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction, or mutilation of
this Agreement, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of the Issuer, whether or not
the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous. (a) Expenses. Each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendments. Any provision of this Agreement may be waived
at any time in writing by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended,
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<PAGE> 147
altered, or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) Entire Agreement: No Third-Party Beneficiary: Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferee of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any terms, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants, and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to Acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to Acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Alabama without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The description headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Issuer to: First Central Bank
5858 Central Avenue
St. Petersburg, Florida 33707
Telecopy Number: (813) 347-4744
Attention: Ralph Crawford
Chairman, President and CEO
with a copy to: Werner & Blank, P.A.
7205 West Central Avenue
Toledo, Ohio 43617
Telecopy Number:(419) 841-8380
Attention: Martin D. Werner, Esq.
If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36101
Telecopy Number (334) 240-5069
Attention: W. Flake Oakley, IV
Chief Financial Officer
with a copy to: Miller, Hamilton, Snider & Odom, L.L.C.
Suite 802
One Commerce Street
Montgomery, Alabama 36104
Telecopy Number (334) 265-4533
Attention: Hugh C. Nickson, III, Esq.
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(g) Counterparts. This Agreement and all amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests,
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief, and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
<TABLE>
<S> <C>
ATTEST: FIRST CENTRAL BANK
By: By: /s/ RALPH CRAWFORD
-----------------------------------------------
- ----------------------------------------------- Ralph Crawford
Secretary Chairman, President and CEO
[CORPORATE SEAL]
ATTEST: THE COLONIAL BANCGROUP, INC.
By: By: /s/ W. FLAKE OAKLEY, IV
-----------------------------------------------
- ----------------------------------------------- W. Flake Oakley, IV
Assistant Secretary Chief Financial Officer
[CORPORATE SEAL]
</TABLE>
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<PAGE> 149
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 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,
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<PAGE> 150
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger among The Colonial BancGroup,
Inc., Colonial Bank and First Central Bank, dated as of
September 9, 1997, included in the Prospectus portion of
this Registration Statement at Appendix A and incorporated
herein by reference.
2.2 -- First Central Bank Stock Option Plan.
4.1 -- 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.
</TABLE>
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<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
4.2 -- 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.
4.3 -- 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.
4.4 -- 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.
4.5 -- 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.
4.6 -- 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.
5.1 -- Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.
8.1 -- Tax Opinion of Coopers & Lybrand L.L.P.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Miller, Hamilton, Snider & Odom, L.L.C.
23.3 -- Consent of Arthur Andersen L.L.P.
23.4 -- Consent of Austin Associates, Inc.
24.1 -- Power of Attorney
99.1 -- Form of Proxy of First Central Bank
</TABLE>
(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
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<PAGE> 152
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, 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.
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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 31st day of October, 1997.
THE COLONIAL BANCGROUP, INC.
By: /s/ ROBERT E. LOWDER
------------------------------------
Robert E. Lowder
Its Chairman of the Board of
Directors,
and Chief Executive Officer
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ROBERT E. LOWDER Chairman of the Board of October 31, 1997
- --------------------------------------------------- Directors and Chief Executive
Robert E. Lowder Officer
/s/ W. FLAKE OAKLEY, IV Chief Financial Officer, October 31, 1997
- --------------------------------------------------- Secretary and Treasurer
W. Flake Oakley, IV (Principal Financial Officer
and Principal Accounting
Officer)
* Director **
- ---------------------------------------------------
Lewis Beville
* Director **
- ---------------------------------------------------
Young J. Boozer
* Director **
- ---------------------------------------------------
William Britton
* 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
</TABLE>
II-5
<PAGE> 154
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Director **
- ---------------------------------------------------
Harold D. King
* Director **
- ---------------------------------------------------
John Ed Mathison
* Director **
- ---------------------------------------------------
Milton E. McGregor
* Director **
- ---------------------------------------------------
John C. H. Miller, Jr.
* 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
</TABLE>
- ---------------
* 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: October 31, 1997
II-6
<PAGE> 155
================================================================================
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)
================================================================================
<PAGE> 156
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ------------
<C> <C> <S> <C>
2.1 -- Agreement and Plan of Merger among The Colonial BancGroup,
Inc., Colonial Bank and First Central Bank, dated as of
September 9, 1997, included in the Prospectus portion of
this Registration Statement at Appendix A and incorporated
herein by reference.........................................
2.2 -- First Central Bank Stock Option Plan........................
4.1 -- 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............................
4.2 -- 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............................
4.3 -- 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.....
4.4 -- 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.........................................
4.5 -- 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...................................................
4.6 -- 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.........
5.1 -- Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered..................................................
8.1 -- Tax Opinion of Coopers & Lybrand L.L.P......................
23.1 -- Consent of Coopers & Lybrand L.L.P..........................
23.2 -- Consent of Miller, Hamilton, Snider & Odom, L.L.C...........
23.3 -- Consent of Arthur Andersen L.L.P............................
23.4 -- Consent of Austin Associates, Inc.
24.1 -- Power of Attorney...........................................
99.1 -- Form of Proxy of First Central Bank.........................
</TABLE>
<PAGE> 1
EXHIBIT 2.2
FIRST CENTRAL BANK
EMPLOYEES STOCK OPTION PLAN
60,000 Shares of $5.00 par value Common Stock
Adopted by Board of Directors
on
January 10, 1989
and amended effective
February 23, 1989
First Central Bank
5858 Central Avenue
St. Petersburg, Florida 33707
Baynard, Harrell, Mascara &
Ostow, P.A.
100 Second Avenue South
Suite 1202
St. Petersburg, Florida 33701
<PAGE> 2
FIRST CENTRAL BANK
EMPLOYEES STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. DEFINITIONS 1
(a) Affiliates 1
(b) Board of Directors 1
(c) Code 1
(d) Committee 1
(e) Common Stock 1
(f) Company 1
(g) Employee 1
(h) Fair Market Value 1
(i) Full-Time Employee 2
(j) Incentive Option 2
(k) NASDAQ System 2
(l) Non-Statutory Option 2
(m) Option 2
(n) Option Agreement 2
(o) Optionee 2
(p) Parent2
(q) Plan 2
(r) Subsidiary 2
2. ADMINISTRATION 3
(a) Establishment of Committee 3
(b) Power of Committee 3
(c) Limitations on Authority 3
3. TYPES OF OPTIONS 4
(a) In General 4
(b) Limitation 4
4. STOCK SUBJECT TO OPTIONS 4
(a) Description of Stock 4
(b) Number of Shares Available 4
5. ELIGIBILITY 4
6. TERMS OF OPTION AGREEMENTS 4
(a) Designation of Type of Option 5
(b) Duration of Option 5
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
(c) Minimum Exercise Requirement 5
(d) Installment Exercise 5
(e) General Exercise Restriction 5
(f) Exercise Price 5
(g) Transferability Limitation 6
(h) Compliance with Securities Laws 6
(i) Commencement of Ownership Rights 6
(j) Termination For Cause 7
7. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE 7
(a) Method 7
(b) Payment 7
8. USE AND ALLOCATION OF PROCEEDS 7
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION 7
(a) Internal Recapitalizations 7
(b) Reorganizations 8
(c) No Fractional Shares 8
10. TERMINATION OF EMPLOYMENT OR SERVICE 8
(a) Death8
(b) Disability 8
(c) Termination for Reasons Other Than Death or
Disability 9
11. AMENDMENT OF THE PLAN 9
(a) Right to Amend 9
(b) No Option Impaired 9
12. TERMINATION OR SUSPENSION OF PLAN 10
(a) Right to Terminate 10
(b) No Option Impaired 10
13. NONEXCLUSIVITY OF PLAN 10
14. TAX WITHHOLDING 10
15. CONTINUATION OF EMPLOYMENT 10
16. EXCULPATION AND INDEMNIFICATION 10
17. STOCKHOLDER AND DEPARTMENT APPROVALS 10
18. FINAL TERMINATION DATE 10
</TABLE>
<PAGE> 4
FIRST CENTRAL BANK
EMPLOYEES STOCK OPTION PLAN
THIS IS THE EMPLOYEES STOCK OPTION PLAN (the "Plan") of FIRST CENTRAL
BANK (the "Company") and is made with reference to the following facts:
A. The Company believes it is in its best interest and in the best
interest of its stockholders to provide key personnel with an additional
incentive to promote its success and to encourage them to remain in the service
of the Company.
B. The Company believes these objectives will be achieved through the
granting of certain stock options designed to facilitate an increase in its key
personnel's proprietary interest in the success of the Company.
C. The provisions of Florida law, including Section 658.35, Florida
Statutes, and regulations thereunder, and provisions of applicable federal law
permit the granting of stock options as contemplated hereby.
NOW, THEREFORE, FIRST CENTRAL BANK hereby declares that the terms of
its Employees Stock Option Plan are as follows:
1. DEFINITIONS. Whenever used herein, the following terms shall
have the meanings indicated unless the context clearly
indicates otherwise:
(a) "Affiliates" shall mean any Parent and any Subsidiaries
of the Company.
(b) "Board of Directors" shall mean the Board of Directors
of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the stock option plan committee
established to administer the Plan pursuant to section
2 below.
(e) "Common Stock" shall mean the Company's authorized but
unissued common stock of the par value of five dollars
($5.00) per share.
(f) "Company" shall mean FIRST CENTRAL BANK, a Florida
banking corporation.
(g) "Employee" shall mean an individual employed by the
Company.
(h) "Fair Market Value" shall mean that amount which is:
(1) Not less than the average of the bid and asked
prices (or not less than the average of the highest and lowest quoted selling
price, if the Common Stock is within the National Market System ["NMS"] list of
securities) of the Common Stock on the NASDAQ System on the date the Option is
granted or the last date preceding such date for which bid and asked quotations
were made (or sales were made if the Common Stock is within the NMS list of
securities), if the Common Stock is admitted to quotation on such system on the
date the Option is granted;
(2) Not less than the average of the highest and lowest
quoted selling prices for the Common Stock on a national securities exchange or
exchanges on the date the Option is granted or on the principal such exchange
on such date or on the last date preceding such date on which a sale was
reported, if the Common Stock is admitted to trading on such an exchange or
exchanges on the date the Option is granted (whether or not the Common Stock
shall at that time also be admitted to quotation on the NASDAQ System); or
<PAGE> 5
(3) If not admitted to quotation on the NASDAQ System
or listed on a national securities exchange, not less than the amount
determined in good faith by the Board of Directors, on the basis of such
factors as it deems appropriate (including book value), on the date the Option
is granted.
(i) "Full-Time Employee" shall mean an Employee who
customarily performs, or may be expected to perform, at least one thousand
(1,000) hours of service during a calendar year for the Company.
(j) "Incentive Option" shall mean an incentive stock
option as defined in Section 422A of the Code.
(k) "NASDAQ System" shall mean the National Association
of Securities Dealers Automated Quotation System or other comparable system.
(l) "Non-Statutory Option" shall mean a stock option
that is not an Incentive Option. To the extent that the aggregate Fair Market
Value of Common Stock with respect to which Incentive Options (determined
without reference to this sentence) are exercisable for the first time by any
Optionee during any calendar year (under all stock option plans of the Company,
any Affiliate and any predecessor corporation of either the Company or any
Affiliates) exceeds One Hundred Thousand Dollars ($100,000), such options
shall, to the extent of such excess only, also be treated as a Non-Statutory
Option notwithstanding anything to the contrary in the grant thereof or the
Option Agreement relating thereto.
(m) "Option" shall mean an Incentive Option and/or a
Non-Statutory Option (as the context dictates) granted under this Plan.
(n) "Option Agreement" shall mean the written agreement
executed and delivered by the Company and an Optionee evidencing the grant of
an Option to the Optionee.
(o) "Optionee" shall mean the person to whom an Option
is granted.
(p) "Parent" shall mean a corporation that owns stock
of the Company possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock of the Company.
(q) "Plan" shall mean the Employees Stock Option Plan
of the Company set forth in this instrument.
(r) "Subsidiary" shall mean a corporation in which the
Company owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock of said corporation.
2. ADMINISTRATION.
(a) Establishment of Committee. The Plan shall be
administered by a Committee of not less than three individuals, none of whom is
a Full-Time Employee (the "Committee"). Unless the Board of Directors by
resolution otherwise directs, all directors of the Company who are not
Full-Time Employees shall serve on the Committee. A majority vote of the
members of the full Committee shall be required for all its actions. In
addition, any action, decision or determination reduced to writing and signed
by all of the members of the Committee shall be fully effective as if it had
been made by a majority vote at a meeting duly called and held.
(b) Power of Committee. The Committee shall have the power,
subject to, and within the limits of, the express provisions of the Plan:
(1) To select those eligible persons to whom
Options shall be granted;
(2) To determine the time or times at which Options
shall be granted;
(3) To determine the purchase price and the number
of shares to be subject to an Option;
(4) To determine the time or times at which an
Option may be exercised and whether in whole or in installments;
<PAGE> 6
(5) To prescribe the other terms and provisions
(which need not be identical) of each Option;
(6) To modify or amend any Option with the consent
of the holder thereof, and to accelerate any exercise date of any Option;
(7) To construe and interpret the Plan, Options and
Option Agreements and to establish, amend and rescind rules and regulations
relating to administration of the Plan. The Committee, in the exercise of this
power, may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Option Agreement, in the manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
In exercising this power, the Committee may retain counsel at the expense of
the Company. All decisions and determinations by the Committee in exercising
this power in accordance with the Plan shall be final and binding upon the
Company and the Optionees.
(8) To determine the duration and purposes of
leaves of absence that may be granted to an Optionee without constituting a
termination of the Optionee's employment for purposes of the Plan; and
(9) Generally, to exercise such powers and to
perform such acts as are deemed necessary or expedient to promote the best
interests of the Company with respect to the Plan.
(c) Limitations on Authority. Notwithstanding anything
herein to the contrary, the Committee shall not:
(1) Grant an Option with a per share exercise price
of less than the par value per share of the Common Stock subject to the Option;
or
(2) Grant an Option to any person covering a number
of shares of Common Stock that is unreasonable in relation to the purpose of
the Plan and the needs of the Company.
The grant of an Option to the individual who is the President and Chief
Executive Officer of the Company at the time this Plan is adopted by the Board
of Directors covering a number of shares of Common Stock that is not in excess
of seventeen percent (17%) of the aggregate number of shares of Common Stock
then issued and outstanding shall for all purposes be considered as reasonable
for the purposes of subsection (c)(2) above.
3. TYPES OF OPTIONS.
(a) In General. The Options granted under this Plan shall
be:
(1) Incentive Options; or
(2) Non-Statutory Options.
(b) Limitation. Notwithstanding anything to the contrary in
this Plan, Incentive Options and Non-Statutory Options shall not be granted in
tandem.
4. STOCK SUBJECT TO OPTIONS.
(a) Description of Stock. The stock subject to Options
shall be shares of Common Stock.
(b) Number of Shares Available. The number of shares
available for the grant of Options shall be an aggregate of sixty thousand
(60,000) shares of Common Stock; provided, however, the following shall apply:
(1) Whenever any outstanding Option expires or is
cancelled or otherwise terminated without having been exercised in full, the
shares of Common Stock allocable to the unexercised portion of that Option may
again be subject to Options; and
(2) The number of shares shall be subject to
adjustment pursuant to section 9 below.
3
<PAGE> 7
5. ELIGIBILITY. Subject to the other provisions of this Plan, the
Committee may from time to time grant Options to one or more eligible Full-Time
Employees. An Optionee may receive and hold more than one Option.
6. TERMS OF OPTION AGREEMENTS. Each Option Agreement shall contain
such terms and provisions consistent with this Plan as the Committee shall in
its sole discretion determine. Option Agreements need not be identical, but
each Option Agreement shall by appropriate language include the substance of
all of the provisions described in this section.
(a) Designation of Type of Option. Each Option Agreement
shall designate the type of Option granted thereby.
(b) Duration of Option. Each Option Agreement shall specify
the expiration date of the Option granted thereby, which date shall be no later
than ten (10) years from the date the Option was granted; provided, however, if
an Optionee, at the time an Incentive Option is granted to him, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of any of its Affiliates [or, under
Section 425(d) of the Code, is deemed to own stock possessing more than ten
percent (10%) of the total combined voting power of all such classes of stock
by reason of the ownership of such classes of stock, directly or indirectly, by
or for any brother, sister, spouse, ancestor or lineal descendant of such
Optionee, or by or for any corporation, partnership, estate or trust of which
such Optionee is a shareholder, partner or beneficiary], the Incentive Option
granted to such Optionee shall not be exercisable after the expiration of five
(5) years from the date of grant or such earlier termination as provided in
this Plan or as provided in any particular Option Agreement.
(c) Minimum Exercise Requirement. Each Option Agreement
shall specify that the minimum number of shares of Common Stock with respect to
which an Option may be exercised at any one time shall be fifty (50) shares,
unless the number of shares to be purchased is the total number available at
such time for purchase under the Option. No Option may be exercised for a
fraction of a share of Common Stock.
(d) Installment Exercise. Each Option Agreement shall
specify whether or not, and to what extent, Options granted thereby shall be
exercisable in installments, the amount of each installment (which need not be
equal) and the time or times of exercise. Each Option Agreement shall also
specify whether or not, and to what extent, such installments that are not
exercised shall accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable; provided, however, any such unexercised
installments shall expire not later than the date the Option expires.
(e) General Exercise Restriction. Each Option Agreement
shall specify that, unless otherwise designated therein, no Option shall be
exercisable within one (1) year from the date on which the Option was granted
except in the event of a change in control, or threatened change in control, of
the Company, in which event, all Options granted prior to such change in
control, or threatened change of control, shall become immediately exercisable;
provided, however, section 6(h) shall continue to apply. The term "control"
shall refer to the acquisition of twenty-five percent (25%) or more of the
voting securities of the Company, or of any Parent, by any person or persons
acting as a group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934. The phrase "threatened change" as used in the phrase
"threatened change in control" shall refer to an offer to acquire twenty-five
percent (25%) or more of the voting securities of the Company, or of any
Parent, by any person or persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934. The term "person" refers
to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organizations or
any other form of entity not specifically listed herein.
(f) Exercise Price. Each Option Agreement shall specify
that the exercise price per share of Common Stock under each Option shall be
not less than the Fair Market Value of the Common Stock on the date the Option
is granted; provided, however, if an Optionee, at the time an Incentive Option
is granted to him, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates [or, under Section 425(d) of the Code, is deemed to own stock
possessing more than ten percent (10%) of the total combined voting power of
all such classes of stock by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendant of such Optionee, or by or for any
4
<PAGE> 8
corporation, partnership, estate or trust of which such Optionee is a
shareholder, partner or beneficiary], the purchase price per share under such
Incentive Option shall not be less than one hundred and ten percent (110%) of
the Fair Market Value per share. In all events, such exercise price shall be in
compliance with section 2(c)(1) above.
(g) Transferability Limitation. Except as provided in
section 10 below, each Option Agreement shall specify that:
(1) Each Option shall be non-transferable except by
will or the laws of descent and distribution, and shall be exercisable during
the Optionee's lifetime only by the Optionee (or his legal representative); and
(2) No assignment or transfer of any Option, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise, shall vest in the assignee or transferee any interest or
right in the Option whatsoever, but immediately upon any attempt to assign or
transfer the Option, the Option shall terminate and be of no force or effect.
(h) Compliance with Securities Laws. Each Option Agreement
shall specify that all Options granted thereby, and all shares of Common Stock
issued upon exercise thereof, are subject to any provisions necessary to assure
compliance with federal and state securities laws. If determined by the
Committee, upon advice of counsel, to be necessary to assure such compliance,
such provisions shall include an investment representation letter from the
Optionee at the time an Option is exercised and legends restricting or
conditioning transfer of the Common Stock acquired upon exercise of an Option.
Each Option Agreement shall also specify that if at any time the Committee
shall determine, in its discretion, that the listing, registration, or
qualification of the Option evidenced thereby, or the Common Stock covered
thereby, upon any securities exchange, or under any federal or state law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Common Stock thereunder, such Option may not be
exercised in whole or in part unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.
(i) Commencement of Ownership Rights. Each Option Agreement
shall specify that an Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common Stock
subject to an Option unless and until the Option shall have been properly
exercised pursuant to the terms thereof, the Company shall have issued and
delivered the shares to the Optionee, and the Optionee's name shall have been
entered as the holder of record of such shares on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such shares of Common Stock.
(j) Termination For Cause. Each Option Agreement shall
specify that if the employment of an Optionee is terminated by the Company or
an applicable regulatory agency "for cause", Options held by such Optionee
shall, to the extent not theretofore exercised, be cancelled upon such
termination and shall not thereafter be exercisable under any circumstances. As
used herein, the phrase "for cause" shall mean a willful and knowing violation
of Section 658.77, Florida Statutes, that has a material negative impact on the
Company, or a willful and knowing violation of any final regulatory cease and
desist order that has a material negative impact on the Company, or conviction
for willful violation of any law amounting to a felony or for any defalcation
or breach of fiduciary duty involving the receipt of an improper personal
benefit, or such other willful acts involving moral turpitude or malfeasance or
misfeasance as shall have been determined to be included within such phrase at
least thirty (30) days in advance of any application thereof by resolution of
the Board of Directors. Any such resolution shall be applicable prospectively,
furnished to each Optionee within five (5) days of its adoption, and made a
part of each Option Agreement executed after the date the resolution is
adopted. The specification herein pursuant to regulatory requirements of a
definition of the phrase "for cause" and a method of providing notice of any
change therein shall not limit in any way the meaning of that or any similar
phrase in any employment agreement or employment arrangement between the
Company and any Employee. Notwithstanding anything in this Plan or in any
Option Agreement to the contrary, an Optionee whose rights under an Option
Agreement are terminated pursuant to this provision shall have the right to
contest such termination de novo in a court of competent jurisdiction.
5
<PAGE> 9
7. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE.
(a) Method. An Option may only be exercised by the Optionee
delivering to the Committee on any business day a written notice, together with
the appropriate payment specified in subsection (b) below, identifying such
Option and specifying the number of shares of Common Stock the Optionee then
desires to purchase (the "Notice").
(b) Payment. Payment for the shares of Common Stock
purchased pursuant to the exercise of an Option shall be in cash equal to the
option exercise price for the number of shares specified in the Notice.
8. USE AND ALLOCATION OF PROCEEDS. Proceeds from the sale of
Common Stock pursuant to the exercise of Options shall constitute general funds
of the Company. Such proceeds shall be credited to the capital accounts of the
Company in accordance with generally accepted accounting principles and the
requirements of applicable law.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Internal Recapitalizations. If the outstanding shares
of Common Stock as a whole are increased, decreased, or changed into, or
exchanged for, a different number or kind of shares or securities of the
Company through recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares or similar event not involving
a reorganization, merger or consolidation with another entity, an appropriate
and proportionate adjustment shall be made by the Committee in the number and
kinds of shares subject to the Plan, and in the number, kinds, and per share
exercise price of shares subject to the Plan, and in the number, kinds, and per
share exercise price of shares subject to unexercised Options or portions
thereof granted prior to any such change. Any such adjustment in an outstanding
Option, however, shall be made without a change in the total price applicable
to the unexercised portion of the Option but with a corresponding adjustment in
the price for each share of Common Stock covered by the Option.
(b) Reorganizations. Upon the effective date of a
dissolution or liquidation of the Company, or upon the sale of substantially
all of the property of the Company, or upon a reorganization, merger or
consolidation involving the Company and another entity, each Optionee to whom
an Option has been granted under this Plan shall be entitled during the period
of time commencing with the public announcement of, as applicable, the adoption
of implementing resolutions by the Board of Directors (in the event of such a
dissolution, liquidation or sale) or the execution of the definitive agreement
(in the event of such a reorganization, merger or consolidation) and ending
five (5) business days prior to the effective date of any such transaction:
(1) To exercise, in whole or in part, his or her
rights under any Option granted to him or her without regard to any
restrictions on exercise in this Plan or in the applicable Option Agreement
[other than such restrictions as may be required by section 6(h)] that would
otherwise apply; or
(2) To surrender any such Option to the Company
(along with the applicable consideration otherwise payable upon exercise of
such Option) in exchange for receipt of such shares of stock or other
securities as the Optionee would have received had the Optionee exercised the
right to exercise any Option on account of any such transaction without regard
to any restriction on exercise in this Plan or in the applicable Option
Agreement [other than such restrictions as may be required by section 6(h)]
that would otherwise apply.
Provided, however, to the extent that such exercise or surrender under (1) or
(2) immediately above is with respect to more shares of Common Stock than would
otherwise be available for purchase through exercise of such Option by the
Optionee at such time, such exercise or surrender shall be contingent upon the
consummation of such transaction. Provided further, however, nothing in this
section 9(b) shall extend the date on which any Option would otherwise expire.
(c) No Fractional Shares. No fractional shares of Common
Stock shall be issued on account of any event under this section 9.
10. TERMINATION OF EMPLOYMENT OR SERVICE.
6
<PAGE> 10
(a) Death. In the event of the death of an Optionee while
in the employ of the Company, any and all Options held by such Optionee at the
time of death, whether or not exercisable at such time, may be exercised as
provided in section 7 above by the estate of the Optionee, or by a person who
acquires the right to exercise such Option by bequest or inheritance from such
Optionee, within one (1) year after the date of such death, but not later than
the date on which the Option would otherwise expire; provided, however, section
6(h) shall continue to apply.
(b) Disability. If the employment of an Optionee is
terminated by reason of his disability, within the meaning of Section 422A(c)7
of the Code, any and all Options held by such Optionee may be exercised,
whether or not exercisable at the time of such termination, within one (1) year
after such termination, but not later than the date on which such Options would
otherwise expire; provided, however, section 6(h) shall continue to apply.
(c) Termination for Reasons Other Than Death or Disability.
If the employment of an Optionee is terminated for any reason other than death
or disability, Options held by such Optionee shall, to the extent not
theretofore exercised, be cancelled upon such termination and shall not
thereafter be exercisable; provided, however, to the extent such Options are
exercisable as of the date of such termination of employment, such Optionee
shall be permitted to exercise such Options for a period of three (3) months
after the date of such termination; provided further, however, that an Optionee
whose employment is terminated by retirement in accordance with the Company's
normal retirement policies, as determined by the Committee, or whose employment
or service is voluntarily or involuntarily terminated within six (6) months
after a change in control [as defined in section 6(e) above] of the Company or
of any Parent, shall be permitted to exercise any and all Options held by such
Optionee, whether or not exercisable at the time of such termination, for a
period of three (3) months after the date of such termination, but not later
than the date on which the Options would otherwise expire; provided further,
however, section 6(h) shall continue to apply. No Option, however, shall in any
event be exercisable if the employment of Optionee is terminated for cause as
provided in section 6(j) above.
11. AMENDMENT OF THE PLAN.
(a) Right to Amend. The Board of Directors at any time, and
from time to time, may amend this Plan, subject to any required regulatory
approval and to the limitation that, except as provided in section 9 above, no
amendment shall be effective unless approved by a vote of a majority of the
outstanding shares of Common Stock at an annual or special meeting held within
twelve (12) months before or after the date of such amendment's adoption, where
such amendment will:
(1) Increase the number of shares of Common Stock
as to which Options may be granted under the Plan;
(2) Change, in substance, section 5 above relating
to eligibility to participate in the Plan:
(3) Change the minimum exercise price or the method
of computing the exercise price; or
(4) Increase the maximum term of Options as
provided herein.
Notwithstanding the foregoing, upon the occurrence of any of the events
described in section 9(a) above, the Committee shall have the authority to
amend this Plan to reflect the appropriate and proportionate adjustments
referred to therein.
(b) No Option Impaired. Except as provided in section 9
above, rights and obligations under any Option granted before amendment of the
Plan shall not be adversely affected or impaired by amendment of the Plan,
except with the consent of the person to whom the Option was granted.
7
<PAGE> 11
12. TERMINATION OR SUSPENSION OF PLAN.
(a) Right to Terminate. The Board of Directors at any time
may terminate or suspend this Plan, but such termination or suspension shall
not affect any Option theretofore granted. No Option may be granted while this
Plan is suspended or after it is terminated.
(b) No Option Impaired. Rights and obligations under any
Options granted while this Plan is in effect shall not be adversely affected or
impaired by suspension or termination of this Plan, except as provided in
section 9 above or with the consent of the Optionee.
13. NONEXCLUSIVITY OF PLAN. Neither the adoption of this
Plan by the Board of Directors, nor the submission of this Plan to the
stockholders of the Company for approval, shall be construed as creating any
limitations on the power of the Board of Directors to adopt such other
incentive arrangements as it may deem desirable, including the granting of
stock options otherwise than under this Plan. Any such other arrangements may
be either applicable generally or only in specific cases.
14. TAX WITHHOLDING. The Company shall have the right to
deduct or otherwise effect a withholding of any amount required by federal or
state laws to be withheld from the compensation of an Optionee with respect to
the grant, exercise, or surrender of any Option or portion thereof, or the sale
of stock acquired upon the exercise of an Incentive Option, in order for the
Company to obtain a tax deduction available to the Company as a consequence of
such grant, exercise, surrender, or sale, as the case may be, by such Optionee.
15. CONTINUATION OF EMPLOYMENT. Nothing contained in this
Plan (or in any Option Agreement) shall obligate the Company to continue to
employ, for any period, an Optionee.
16. EXCULPATION AND INDEMNIFICATION. The Company shall
indemnify and hold harmless the members of the Board of Directors and the
members of the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act, or omission to act,
in connection with the performance of such persons' duties, responsibilities,
and obligations under this Plan, other than such liabilities, costs and
expenses as may result from the negligence, bad faith, willful conduct, or
criminal acts of such person.
17. STOCKHOLDER AND DEPARTMENT APPROVALS. The effectiveness
of this Plan is conditioned upon the receipt, prior to January 9, 1990, of the
approval of this Plan by the affirmative vote of a majority of the outstanding
shares of Common Stock. The effectiveness of this Plan is also conditioned upon
the receipt of the approval hereof by the Department of Banking and Finance of
the State of Florida. Options may not be granted prior to the receipt of such
affirmative vote and approval.
18. FINAL TERMINATION DATE. Unless sooner terminated, this
Plan shall terminate on January 9, 1999, but such termination shall not affect
any Option theretofore granted.
8
<PAGE> 1
EXHIBIT 5.1
OPINION AS TO CERTAIN DELAWARE LAW ISSUES OF THE SECURITIES
BEING REGISTERED
<PAGE> 2
October 30, 1997
Montgomery Office
The Colonial BancGroup, Inc.
P.O Box 1109
Montgomery, AL 36101
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 Central Bank
("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 September 9, 1997
(the "Agreement"), by and among the Company, Colonial Bank and First Central
Bank and the issuance by the Company of its Common Stock pursuant to stock
options 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
<PAGE> 3
The Colonial BancGroup
October 30, 1997
Page 2
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 amended.
Sincerely yours,
/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C
<PAGE> 1
EXHIBIT 8.1
Mr. Flake Oakley
Chief Financial Officer
Colonial Bancgroup, Inc.
P.O. Box 1109
Montgomery, AL 36101
Dear Mr. Oakley:
For valid business reasons, First Central Bank (Acquired Bank) and The Colonial
Bancgroup, Inc. (Bancgroup) have entered into an Agreement and Plan of Merger
(Agreement) on September 9, 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 St.
Petersburg, 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 $62.46 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 entitled to
receive payment for the fair value of his or her Acquired Bank stock.
<PAGE> 2
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.
- - If nonqualified stock options to purchase Acquired Corporation common stock
are exchanged for nonqualified stock options to purchase BancGroup common stock,
then the difference between the option price and fair market value of BancGroup
common stock subject to options immediately after the exchange will be equal to
(or greater than) the difference between the option
<PAGE> 3
price and the fair market value of Acquired Corporation common stock subject to
options immediately before the exchange. All other terms of the BancGroup
nonqualified stock options will be the same as those of Acquired Corporation's
nonqualified stock options.
- - 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.
- - Colonial Bank will acquire "substantially all" of the assets of Acquired Bank
as part of the merger. Generally, the "substantially all" requirement will be
satisfied if there is a transfer of assets representing at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Acquired Bank immediately prior to the transfer.
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
<PAGE> 4
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) 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.
<PAGE> 5
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 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 CORPORATION OPTIONS INTO BANCGROUP OPTIONS
INCENTIVE STOCK OPTIONS
The assumption and conversion of Acquired Corporation 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 may disqualify the option as an
incentive stock option.
NONQUALIFIED STOCK OPTIONS
The assumption and conversion of Acquired Corporation 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 Corporation 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
<PAGE> 6
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 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.
SUMMARY
The merger of Colonial Bank and Acquired Bank will qualify as a tax-free
reorganization 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 and those
shareholders who receive solely cash in the exchange upon perfecting their
dissenter's rights. 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.
If you have any questions or comments, please call Thomas Lee or Mark Borden at
(205) 252-8400.
Very truly yours,
/s/ Coopers & Lybrand L.L.P.
<PAGE> 1
EXHIBIT 23.1
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, except Notes 1 and 2 as to
which the date is June 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 years in the period ended December 31, 1996. We also
consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand LLP
Montgomery, Alabama
October 29, 1997
CONSENT OF TAX ACCOUNTANTS
We consent to reference in this Registration Statement on Form S-4 of our firm
under the caption "The Merger - Certain Federal Income Tax Consequences" and to
the inclusion of our opinion at Exhibit 8.1 of the Registration Statement.
/s/ Coopers & Lybrand LLP
Birmingham, Alabama
October 31, 1997
<PAGE> 1
EXHIBIT 23.2
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.
OCTOBER 30, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Tampa Florida
October 29, 1997
<PAGE> 1
EXHIBIT 23.4
[AUSTIN ASSOCIATES, INC. LETTERHEAD]
CONSENT
We hereby consent to the discussion relative to our opinion delivered to the
Board of Directors of First Central Bank in connection with its proposed
acquisition by The Colonial BancGroup, Inc. in the Proxy Statement and
Prospectus included in The Colonial BancGroup, Inc.'s Registration Statement on
Form S-4 under the heading "Opinion of Financial Advisor," to the references to
our firm in such Proxy Statement and Prospectus and to the inclusion of such
opinion as an Appendix to the Proxy Statement and Prospectus.
Austin Associates, Inc.
By: /s/ Craig J. Mancinotti
---------------------------------------------------
Craig J. Mancinotti
Executive Vice President and Principal
October 30, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert E. Lowder, Young J. Boozer, III, and W.
Flake Oakely, and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, to sign any reports or other filings which may be required to
be filed with the Securities and Exchange Commission on behalf of The Colonial
BancGroup, Inc. (the "Registrant"), in relation to BancGroup's proposed
acquisition of ASB Bancshares, Inc., South Florida Banking Corp., United
American Holding Corporation and First Central Bank of Florida (collectively,
the "Acquisitions"); to sign any registration statement and any amendments
thereto of the Registrant for the purpose of registering under the Securities
Act of 1933, as amended, shares to be offered and sold by the Registrant in
relation to the Acquisitions; to file such other reports or other filings, such
registration statements and amendments thereto, with all exhibits thereto, and
any documents in connection therewith with the Securities and Exchange
Commission; and to file such notices, reports or registration statements (and
amendments thereto) with any such securities authority of any state which may
be necessary to register or qualify for an exemption from registration any
securities offered or sold by BancGroup in such states in relation to the
Acquisitions, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite to be done
in and about the premises as fully and to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney may be executed in counterparts, each of which
shall be deemed to constitute an original.
Done this 30th day of October, 1997, in Montgomery, Alabama.
/s/ Robert E. Lowder Chairman of the Board
- -------------------- and Chief Executive Officer
Robert E. Lowder
/s/ Lewis Beville Director
- --------------------
Lewis Beville
/s/ Young J. Boozer Director
- --------------------
Young J. Boozer
/s/ William Britton Director
- --------------------
William Britton
<PAGE> 2
/s/ Jerry J. Chesser Director
- -------------------------------
Jerry J. Chesser
/s/ Augustus K. Clements, III Director
- -------------------------------
Augustus K. Clements, III
/s/ Robert Craft Director
- -------------------------------
Robert Craft
/s/ Patrick F. Dye Director
- -------------------------------
Patrick F. Dye
/s/ Clinton Holdbrooks Director
- -------------------------------
Clinton Holdbrooks
/s/ D.B. Jones Director
- -------------------------------
D.B. Jones
/s/ Harold D. King Director
- -------------------------------
Harold D. King
/s/ John Ed Mathison Director
- -------------------------------
John Ed Mathison
/s/ Milton McGregor Director
- -------------------------------
Milton McGregor
/s/ John C.H. Miller, Jr. Director
- -------------------------------
John C.H. Miller, Jr.
/s/ Joe D. Mussafer Director
- -------------------------------
Joe D. Mussafer
/s/ William E. Powell, III Director
- -------------------------------
William E. Powell, III
/s/ J. Donald Prewitt Director
- -------------------------------
J. Donald Prewitt
/s/ Jack H. Rainer Director
- -------------------------------
Jack H. Rainer
/s/ Jimmy Rane Director
- -------------------------------
Jimmy Rane
<PAGE> 3
/s/ Frances E. Roper Director
- ----------------------------------
Frances E. Roper
/s/ Simuel Sippial Director
- ----------------------------------
Simuel Sippial
/s/ Ed V. Welch Director
- ----------------------------------
Ed V. Welch
<PAGE> 1
PROXY PROXY FOR SPECIAL STOCKHOLDERS MEETING OF
FIRST CENTRAL BANK
ST. PETERSBURG, FLORIDA
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of First
Central Bank ("First Central"), do hereby nominate, constitute, and appoint
, and , or any one of them (with full power
of substitution for me and in my name, place and stead) to vote all the common
stock of First Central, standing in my name on its books on , at the
Special Meeting of its stockholders to be held at the main office of First
Central, 5858 Central Avenue, St. Petersburg, Florida, on , at
p.m. local time, or any adjournments thereof with all the powers the undersigned
would possess if personally present as follows:
1. To ratify, confirm, approve and adopt an Agreement and Plan of Merger dated
September 9, 1997, (the "Agreement") by and between First Central, Colonial
BancGroup, Inc. and Colonial Bank with such agreement providing for, among
other things, the merger of First Central with and into Colonial Bank. Each
outstanding share of First Central common stock will be converted into
common shares of Colonial BancGroup, Inc. in accordance with the terms of
the Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
This proxy confers authority to vote "FOR" the propositions listed above
unless "AGAINST" or "ABSTAIN" is indicated. If any other business is presented
at said meeting, this proxy shall be voted in accordance with the
recommendations of management. All shares represented by properly executed
proxies will be voted as directed.
The Board of Directors recommends a vote "FOR" the propositions. THIS PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and may be revoked prior to its
exercise by either written notice or personally at the meeting or by a
subsequently dated proxy.
Date: , 1997
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(Signature(s) of Shareholder(s))
(When signing as Attorney,
Executor, Administrator,
Trustee, or Guardian, please
give full title. If more than
one Trustee, all should sign.
All joint owners must sign.)
