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As filed with Securities Exchange Commission January 23, 1997,
Registration No. 333- _____
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)
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)
------------------------------
W. FLAKE OAKLEY, IV
SECRETARY
POST OFFICE BOX 1108
MONTGOMERY, ALABAMA 36102
(Name and address of agent for service)
Copies to:
MICHAEL D. WATERS, ESQUIRE JEREMY P. ROSS, ESQ.
MILLER, HAMILTON, SNIDER & ODOM, L.L.C. BUSH ROSS GARDNER WARREN & RUDY, P.A.
ONE COMMERCE STREET, SUITE 802 220 SOUTH FRANKLIN STREET
P. O. BOX 19 TAMPA, FLORIDA 33602
MONTGOMERY, ALABAMA 36101-0019
facsimile: (334) 265-4533
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE (1)
============================================================================================================
Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered Offering Price Per Aggregate Offering Registration Fee
Registered Unit Price
- ------------------------------------------------------------------------------------------------------------
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Common Stock, par
value $2.50 per 1,034,542 Not Applicable Not Applicable $ 4,885.46
------------ -----------
============================================================================================================
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(1) Calculated pursuant to Rule 457(f)(2) based upon the aggregate book
value as of September 30, 1996 of the company acquired of $16,122,000
with 1,050,963 shares of company acquired, including 60,410 shares
subject to employee stock options.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON EACH SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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THE COLONIAL BANCGROUP, INC.
CROSS REFERENCE SHEET
TO ITEMS IN FORM S-4
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FORM S-4 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS OR OTHER
- -------------------------------- ------------------------------
LOCATION IN REGISTRATION STATEMENT
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Item 1. Forepart of Registration Statement Facing page,
and Outside Front Cover Page of Cross Reference Sheet,
Prospectus Outside front cover page of
Prospectus
Item 2. Inside Front and Outside Back "AVAILABLE INFORMATION,"
Cover Pages of Prospectus Inside front cover page of Prospectus,
"DOCUMENTS INCORPORATED BY REFERENCE,"
"TABLE OF CONTENTS"
Item 3. Risk Factors, Ratio of Earnings "SUMMARY," Cover Page of Pros-
to Fixed Charges and Other pectus, "PER SHARE
Information DATA," "THE MERGER," "PRO FORMA
FINANCIAL INFORMATION" AND
"SELECTED FINANCIAL DATA"
Item 4. Terms of the Transaction "THE MERGER," "DOCUMENTS INCORPORATED
BY REFERENCE"
Item 5. Pro Forma Financial Information "PER SHARE DATA," "CONDENSED PRO FORMA
STATEMENTS OF CONDITION," AND "CONDENSED
PRO FORMA STATEMENTS OF INCOME"
Item 6. Material Contacts with the Company "THE MERGER -- Background of the Merger,"
"Fort Brooke's Board of Directors' Reasons
for Approving the Merger," and "Interests of
Certain Persons in the Merger"
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Item 7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
Item 8. Interests of Named Experts and "LEGAL MATTERS" and
Counsel "EXPERTS"
Item 9. Disclosure of Commission Position Not Applicable; See Items
on Indemnification for Securities 20 and 22 below
Act Liabilities
Item 10. Information with Respect to S-3 "DOCUMENTS INCORPORATED
Registrants BY REFERENCE," "BUSINESS OF BANCGROUP"
Item 11. Incorporation of Certain Information "DOCUMENTS INCORPORATED
by Reference BY REFERENCE"
Item 12. Information with Respect to S-2 or Not Applicable
S-3 Registrants -- Item 12(b)
Item 13. Incorporation of Certain Information Not Applicable
by Reference
Item 14. Information with Respect to Not Applicable
Registrants Other Than S-3 or S-2
Registrants
Item 15. Information with Respect to S-3 Not Applicable
Companies
Item 16. Information with Respect to S-2 or Not Applicable
S-3 Companies
Item 17. Information with Respect to "BUSINESS OF FORT BROOKE,"
Companies Other than S-3 or S-2 "FINANCIAL STATEMENTS"
Companies
Item 18. Information if Proxies, Consents or "THE SPECIAL MEETING,"
Authorizations are to be Solicited "BUSINESS OF BANCGROUP - Voting Securities
and Principal Stockholders," "Security
Ownership of Management," "Management
Information"
Item 19. Information if Proxies, Consents or Not Applicable
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Authorizations are not to be
Solicited or in an Exchange Offer
Item 20. Indemnification of Directors and PART II, Item 20
Officers
Item 21. Exhibits and Financial Statement PART II, Item 21
Schedules
Item 22. Undertakings PART II, Item 22
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FORT BROOKE BANCORPORATION
510 VONDERBURG DRIVE
BRANDON, FLORIDA 33511
(813)685-2000
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY , 1997, AT 4:00 P.M.
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Fort Brooke Bancorporation ("Fort Brooke") will be held at the
office of Fort Brooke Bank, located at 510 Vonderburg Drive, Brandon, Florida,
on Thursday, February , 1997, at 4:00 p.m., local time, for the following
purposes:
1. Merger. To consider and vote upon the proposed merger (the
"Merger") of Fort Brooke with and into The Colonial BancGroup, Inc.
("BancGroup"), in accordance with an Agreement and Plan of Merger, dated as
of November 18, 1996 between Fort Brooke and BancGroup (the "Agreement").
BancGroup will be the surviving corporation in the Merger. Each share of
common stock of Fort Brooke outstanding at the time of the Merger will be
converted into the right to receive shares of BancGroup Common Stock with a
market value at the time of the Merger of $31.50, 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 Joint Proxy Statement and Prospectus. The
Agreement is attached to the Joint 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 Fort Brooke has fixed the close of business on
Monday, January 20, 1997, as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of record of the common stock of Fort Brooke at the close of business on
that date will be entitled to notice of and to vote at the Special Meeting or
any adjournments or postponements thereof.
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 Fort Brooke, by executing a
later dated proxy and delivering it to the Secretary of Fort Brooke, or by
attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN D. ADAMS
Secretary
Brandon, Florida
, 1997
<PAGE> 6
JOINT PROXY STATEMENT AND PROSPECTUS
THE COLONIAL BANCGROUP, INC.
COMMON STOCK
FORT BROOKE BANCORPORATION
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON THURSDAY, FEBRUARY , 1997
This Joint Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of Fort Brooke Bancorporation, a Florida
corporation ("Fort Brooke"), with and into The Colonial BancGroup, Inc., a
Delaware corporation ("BancGroup"). This Prospectus is being furnished to the
shareholders of Fort Brooke in connection with the solicitation of proxies by
the Board of Directors of Fort Brooke for use at a special meeting of the
shareholders of Fort Brooke (the "Special Meeting") to be held on Thursday,
February , 1997, at 4:00 p.m., local time, in the offices of Fort Brooke Bank,
located at 510 Vonderburg Drive, Brandon, Florida, including any adjournments or
postponements thereof. At the Special Meeting, shareholders of Fort Brooke will
consider and vote upon the matters set forth in the preceding Notice of Special
Meeting of the Shareholders, as more fully described in this Prospectus.
The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger dated as of November 18, 1996 by and between BancGroup and
Fort Brooke (the "Agreement"). The Agreement provides that, subject to the
approval of the Agreement by the shareholders of Fort Brooke 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, Fort Brooke
will be merged with and into BancGroup and BancGroup will be the surviving
corporation. Each issued and outstanding share of common stock, par value $8.00
per share, of Fort Brooke (the "Fort Brooke Common Stock"), shall be converted
into shares of the common stock, par value $2.50 per share, of BancGroup (the
"BancGroup Common Stock") with a market value of $31.50, subject to a maximum
and minimum number of shares to be issued, with the market value determined by
the average of the market price of BancGroup Common Stock for the 10 trading
days immediately preceding the Effective Date of the Merger. 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 January 20,
1997 was $40.125.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least a majority of the outstanding shares of Fort
Brooke 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 Fort Brooke Common Stock assumed by BancGroup
as part of the Merger. This document constitutes a Proxy Statement of Fort
Brooke in connection with the solicitation of proxies by Fort Brooke for the
Special Meeting and a Prospectus of BancGroup with respect to the BancGroup
Common Stock to be issued in the Merger and with respect to the BancGroup Common
Stock to be issued upon the exercise of employee stock options assumed in the
Merger. This Prospectus and accompanying form of proxy are first being mailed to
shareholders of Fort Brooke on or about the date set forth below.
THE BOARD OF DIRECTORS OF FORT BROOKE UNANIMOUSLY RECOMMENDS APPROVAL OF
THE MERGER.
---------------------
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 office and mailing address of Fort Brooke are 510 Vonderburg Drive,
Brandon, Florida 33511 (telephone 813-685-2000), and the principal office and
mailing address of BancGroup are Colonial Financial Center, One Commerce Street,
Post Office Box 1108, Montgomery, Alabama 36192 (telephone 334-240-5000).
THE DATE OF THIS PROSPECTUS IS , 1997.
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AVAILABLE INFORMATION
BancGroup and Fort Brooke are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by BancGroup and Fort Brooke, including proxy and information
statements, can be inspected and copied at the public reference facilities of
the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at certain regional offices: 7 World Trade Center, 13th Floor,
New York, New York 10048; Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; 1401 Brickell Avenue, Suite 200, Miami, Florida
33131; 1801 California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as BancGroup and Fort Brooke, that file electronically with
the Commission
The BancGroup Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under the
Securities Act to register the shares of BancGroup Common Stock being offered in
connection with the Merger. This Prospectus omits certain information contained
in the Registration Statement and exhibits thereto. Such Registration Statement,
including the exhibits thereto, can be inspected at the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such Registration Statement can be obtained at prescribed rates from the
Commission at that address.
The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning
Fort Brooke and its subsidiary has been furnished by Fort Brooke.
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, 1995;
(2) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
(3) BancGroup's Report on Form 8-K dated July 17, 1996;
(4) BancGroup's Report on Form 8-K/A dated October 9, 1996; and
(5) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting, or, in the case of the exercise of 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
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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 Fort Brooke regarding the
Merger described herein. Various provisions of the Agreement are summarized or
referred to in this Prospectus, and the Agreement 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
36192 (telephone 334-240-5000).
ii
<PAGE> 9
TABLE OF CONTENTS
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PAGE
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SUMMARY..............................................................................
THE SPECIAL MEETING..................................................................
General..............................................................................
Record Date; Shares Entitled to Vote; Vote Required for the Merger...................
Solicitation, Voting and Revocation of Proxies.......................................
Effect of Merger on Outstanding BancGroup Common Stock...............................
THE MERGER...........................................................................
General..............................................................................
Background of the Merger.............................................................
Fort Brooke's Board of Directors' Reasons for Approving the Merger...................
Opinions of Financial Advisors.......................................................
Recommendation of the Board of Directors of Fort Brooke..............................
BancGroup's Reasons for the Merger...................................................
Interests of Certain Persons in the Merger...........................................
Conversion of Fort Brooke Common Stock...............................................
Surrender of Fort Brooke Common Stock Certificates...................................
Certain Federal Income Tax Consequences..............................................
Other Possible Consequences..........................................................
Conditions to Consummation of the Merger.............................................
Amendment or Termination.............................................................
Regulatory Approvals.................................................................
Conduct of Business Pending the Merger...............................................
Commitments with Respect to Other Offers.............................................
Indemnification......................................................................
Rights of Dissenting Shareholders....................................................
Resale of BancGroup Common Stock Issued in the Merger................................
Accounting Treatment.................................................................
NYSE Reporting of BancGroup Common Stock Issued in the Merger........................
Treatment of Fort Brooke Options.....................................................
COMPARATIVE MARKET PRICES AND DIVIDENDS..............................................
BancGroup............................................................................
Fort Brooke..........................................................................
BANCGROUP CAPITAL STOCK AND DEBENTURES...............................................
BancGroup Common Stock...............................................................
Preference Stock.....................................................................
1986 Debentures......................................................................
Changes in Control...................................................................
COMPARATIVE RIGHTS OF STOCKHOLDERS...................................................
Director Elections...................................................................
Removal of Directors.................................................................
Voting...............................................................................
Preemptive Rights....................................................................
Directors' Liability.................................................................
Indemnification......................................................................
Special Meetings of Stockholders; Action Without a Meeting...........................
Mergers, Share Exchanges and Sales of Assets.........................................
Amendment of Certificate of Incorporation and Bylaws.................................
Rights of Dissenting Stockholders....................................................
Antitakeover Statutes................................................................
Preferred Stock......................................................................
Effect of the Merger on Fort Brooke Shareholders.....................................
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iii
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PRO FORMA INFORMATION................................................................
Condensed Pro Forma Statements of Condition (Unaudited)..............................
Condensed Pro Forma Statements of Income (Unaudited).................................
Pro Forma Selected Financial Data (Unaudited)........................................
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES........................................
Selected Interim Financial Data (Unaudited)..........................................
Selected Financial Data..............................................................
FORT BROOKE BANCORPORATION...........................................................
Selected Financial Data..............................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations
for the Fiscal Years Ended December 31, 1995, 1994 and 1993........................
BUSINESS OF BANCGROUP................................................................
General..............................................................................
Proposed Affiliate Banks.............................................................
Voting Securities and Principal Stockholders.........................................
Security Ownership of Management.....................................................
Management Information...............................................................
Certain Regulatory Considerations....................................................
BUSINESS OF FORT BROOKE..............................................................
ADJOURNMENT OF SPECIAL MEETING.......................................................
OTHER MATTERS........................................................................
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS...............................
LEGAL MATTERS........................................................................
EXPERTS..............................................................................
INDEX TO FINANCIAL STATEMENTS........................................................ F-1
APPENDIX A -- Agreement and Plan of Merger........................................... A-1
APPENDIX B -- Opinion of Financial Adviser........................................... B-1
APPENDIX C -- Sections 607.1301, 607.1302 and 607.1320 of the Florida Business
Corporation Act Regarding Dissenters' Rights........................... C-1
</TABLE>
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR FORT BROOKE.
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 FORT BROOKE 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.
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<PAGE> 11
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 Fort Brooke are urged to read
this Prospectus in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of Fort Brooke with and into BancGroup.
THE SPECIAL MEETING
The Special Meeting will be held at the office of Fort Brooke's subsidiary,
Fort Brooke Bank (the "Bank"), located at 510 Vonderburg Drive, Brandon, Florida
on Thursday, February , 1997, at 4:00 p.m., local time, for the purpose of
considering and voting upon the Merger and the Agreement. Only holders of record
of Fort Brooke Common Stock at the close of business on Monday, January 20, 1997
(the "Record Date") are entitled to the notice of and to vote at the Special
Meeting. As of the Record Date, 990,553 shares of Fort Brooke 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. BancGroup operates wholly owned commercial banking
subsidiaries in the states of Alabama, Florida, Georgia and Tennessee, each
under the name Colonial Bank, a second banking subsidiary in Florida, Colonial
Bank of South Florida, and a federal savings bank in Florida, Colonial Bank,
FSB. Colonial Bank conducts a full service commercial banking business in the
State of Alabama through 110 branches. In Tennessee, Colonial Bank conducts a
general commercial banking business through three branches. In Georgia, Colonial
Bank, operates eleven branches in the Atlanta area. In Florida, Colonial Bank
operates seventeen branches in the Orlando and Ormond Beach areas. Colonial Bank
of South Florida operates nine branches in Dade, Broward and Palm Beach
counties, and Colonial Bank, FSB, operates six branches in Eustis and Lake
County. BancGroup has also entered into agreements or letters of intent to merge
two additional banks into BancGroup. Colonial Mortgage Company, a subsidiary of
the Colonial Bank in Alabama, is a mortgage banking company which services
approximately $10 billion in residential loans and which originates residential
mortgages in 29 states through 6 regional offices. At September 30, 1996,
BancGroup had consolidated total assets of $4.7 billion and consolidated
stockholders' equity of $329.9 million. Since September 30, 1996, BancGroup has
merged three banks into BancGroup with aggregate assets of $700.7 million and
aggregate stockholders' equity of $52.3 million. These mergers are included in
the pro forma statements included herein. See "BUSINESS OF BANCGROUP."
Fort Brooke. Fort Brooke is also a bank holding company under the BHCA,
having been incorporated as of March 14, 1996 solely for the purpose of
acquiring the outstanding shares of the Bank so as thereafter to constitute its
sole shareholder. Such acquisition was concluded as of July 10, 1996 (the
"Effective Date of the Bank's Subsidiary Status"). As of September 30, 1996,
Fort Brooke's consolidated assets totaled $192.6 million. Fort Brooke presently
has 642 registered shareholders who own an aggregate of 990,553 shares of its
single class of common stock, and an additional 59,875 shares of that same
class, presently authorized but unissued, are reserved for future issuance to
the employees of the Bank, upon their exercise of options that have been granted
under the terms of an outstanding Non-Qualified Stock Option Plan. Fort Brooke's
sole operating subsidiary, Fort Brooke Bank, is an independent, Florida
chartered commercial bank headquartered in Brandon, Florida, originally formed
in March 1981 as a Florida chartered savings and loan association. In December
1991, that entity commenced operations as a commercial bank. Currently, the Bank
operates seven branch offices widely dispersed throughout Hillsborough County,
Florida. At September 30, 1996, the Bank's assets totaled approximately $192
million, its deposits $173.8 million and its total shareholder's equity $16.1
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<PAGE> 12
million, and its Tier I capital, stated as a percentage of average total assets,
was 8.59%. See "BUSINESS OF FORT BROOKE."
TERMS OF THE MERGER
The Agreement provides for the Merger of Fort Brooke with and into
BancGroup, with BancGroup to be the surviving corporation. Upon the date of
consummation of the Merger (the "Effective Date"), each outstanding share of
Fort Brooke Common Stock shall be converted by operation of law and without any
action by any holder thereof into shares of BancGroup Common Stock with a market
value of $31.50. The number of shares of BancGroup Common Stock into which each
outstanding share of Fort Brooke Common Stock on the Effective Date shall be
converted shall be equal to $31.50 divided by the "Market Value" (the "Merger
Consideration"). 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 BancGroup Common Stock as
reported by the NYSE on each of the 10 trading days ending on the trading day
immediately preceding the Effective Date provided that the Market Value shall
not be less than $32.00 nor more than $39.00, regardless of the actual market
value as calculated. Accordingly, the maximum number of shares of BancGroup
Common Stock to be issued in the Merger shall be 975,076 (based upon a minimum
Market Value of $32.00) and the minimum number of shares of BancGroup Common
Stock to be issued in the Merger shall be 800,062 (based upon a maximum Market
Value of $39.00), assuming 990,553 shares of Fort Brooke Common Stock
outstanding as of January 20, 1997. To the extent that as of the Effective Date
the number of shares of Fort Brooke Common Stock outstanding has increased based
upon the exercise of employee stock options for Fort Brooke Common Stock after
January 20, 1997, the number of shares of BancGroup Common Stock to be issued in
the Merger shall increase with each share of Fort Brooke Common Stock
outstanding at the Effective Date exchanged for a number of shares of BancGroup
Common Stock equal to $31.50 divided by the Market Value and the minimum and
maximum number of shares of BancGroup Common Stock shall also be adjusted to
take into account increases in the number of shares of Fort Brooke Common Stock
outstanding in excess of 990,553 shares as a result of such exercises.
On January 15, 1997, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend. Stockholders of record of BancGroup Common Stock
will receive one share of BancGroup Common Stock for each share they hold as of
February 4, 1997. The additional shares will be distributed pursuant to the
stock split on February 11, 1997.
The Agreement provides that stockholders of Fort Brooke will receive in the
Merger an appropriate adjustment to reflect the stock split. Accordingly, the
Market Value as defined in the Agreement will be adjusted so that, following the
stock split, the Market Value will not be less than $16.00 and not more the
$19.50. Based upon such adjusted Market Values, the maximum number of shares of
BancGroup Common Stock to be issued in the Merger will be 1,950,151 and the
minimum number of shares to be issued will be 1,600,124 assuming 990,553 shares
of Fort Brooke Common Stock outstanding at the Merger.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. To the extent cash is paid in lieu of fractional shares, the
cash will be paid based upon the Market Value.
As of the date of this Prospectus, the Bank had granted options,
subsequently assumed by Fort Brooke, (the "Fort Brooke Options") which entitle
the holders thereof to acquire up to 59,875 shares of Fort Brooke Common Stock.
On the Effective Date, BancGroup shall assume all Fort Brooke Options
outstanding, and each such option shall represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the Fort Brooke
Options. The number of shares of BancGroup Common Stock to be issued pursuant to
such options shall equal the number of shares of Fort Brooke Common Stock
subject to such Fort Brooke Options multiplied by the Exchange Ratio, as defined
below, provided that no fractions of shares of BancGroup Common Stock shall be
issued. The number of shares of BancGroup Common Stock to be issued upon the
exercise of Fort Brooke 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. The exercise price for the acquisition of BancGroup
Common Stock shall be the exercise price for each share of Fort Brooke Common
Stock subject to such options divided by the Exchange Ratio, adjusted
appropriately for any
2
<PAGE> 13
rounding to whole shares that may be required. The "Exchange Ratio" shall mean
the result obtained by dividing $31.50 by the Market Value.
Fort Brooke shareholders will be given notice of the Merger promptly after
the Effective Date of the Merger. Certificates for the shares of BancGroup
Common Stock issued will not be distributed or dividends paid on such shares
until shareholders surrender their certificates representing their shares of
Fort Brooke Common Stock.
See "THE MERGER -- Conversion of Fort Brooke Common Stock," "Surrender of
Fort Brooke Common Stock Certificates," and "Treatment of Fort Brooke Options."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and Fort Brooke, see "THE
MERGER -- Rights of Dissenting Shareholders," "-- Conversion of Fort Brooke
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 FORT BROOKE -- Principal Holders of
Common Stock."
RECOMMENDATION OF FORT BROOKE'S BOARD OF DIRECTORS
The Board of Directors of Fort Brooke has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF FORT BROOKE BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FORT BROOKE, 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 "Fort Brooke's
Board of Directors' Reasons for Approving the Merger."
OPINION OF FINANCIAL ADVISOR
Fort Brooke has received an opinion from The Carson Medlin Company that the
Merger is fair to the shareholders of Fort Brooke from a financial point of
view. See "THE MERGER -- Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of the executive officers of the Bank hold Fort Brooke Options
which entitle them to purchase, in the aggregate, up to 59,875 shares of Fort
Brooke Common Stock. Under the terms of the Agreement, any Fort Brooke Options
which are not exercised prior to the Effective Date will be assumed by
BancGroup. See "THE MERGER -- Conversion of Fort Brooke Common Stock" and
"Treatment of Fort Brooke Options."
The Agreement stipulates that it is a condition to BancGroup's obligation
to close the Merger that Richard H. Eatman, president of Fort Brooke and the
Bank, enter into a severance agreement with Colonial Bank that will provide a
lump-sum payment to Mr. Eatman equal to the annual cash salary paid to Mr.
Eatman at the time of termination if Colonial Bank terminates Mr. Eatman's
employment, under certain circumstances.
On the Effective Date, and subject to the existing agreements referenced
above, all employees of Fort Brooke shall, 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 Fort Brooke who become employees of BancGroup or its
subsidiaries on the Effective Date shall 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.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of Fort Brooke against certain claims and liabilities arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Date, to the extent that Fort Brooke would have been permitted under
Florida law, or
3
<PAGE> 14
under its Articles of Incorporation or Bylaws, to indemnify such persons (and
also to advance expenses as incurred to the fullest extent permitted under
applicable law).
Except as indicated above, none of the directors or executive officers of
Fort Brooke, 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 Fort Brooke 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 Fort Brooke
Common Stock. Each share of Fort Brooke 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, 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 Fort Brooke 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, 990,553 shares of Fort Brooke Common Stock were issued and
outstanding. As of the Record Date, the directors and executive officers of Fort
Brooke and the Bank held approximately 28.62% of the outstanding shares of Fort
Brooke Common Stock. As of the same date, the directors, executive officers and
affiliates of BancGroup held no shares of Fort Brooke Common Stock. See "THE
SPECIAL MEETING."
The directors of Fort Brooke own 282,106 shares of Fort Brooke Common Stock
representing approximately 28.48% of the outstanding shares and have agreed with
BancGroup to vote their shares in favor of the Merger. Directors and executive
officers of BancGroup beneficially own in the aggregate 2,165,671 shares of
BancGroup Common Stock representing approximately 10.95% of the outstanding
shares, but no vote of BancGroup stockholders is required to approve the Merger.
See "THE SPECIAL MEETING."
Proxies should be returned to Fort Brooke in the envelope enclosed
herewith. Shareholders of Fort Brooke submitting proxies may revoke their
proxies by (i) giving notice of such revocation in writing to the Secretary of
Fort Brooke at or prior to the Special Meeting, (ii) by executing and delivering
a proxy bearing a later date to the Secretary of Fort Brooke at or prior to the
Special Meeting, or (iii) by attending the Special Meeting and voting in person.
Because approval of the Merger requires the approval of at least a majority of
the outstanding shares of Fort Brooke 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 Fort Brooke Common Stock as of the Record Date are entitled to
dissenters' rights of appraisal pursuant to Sections 607.1301, 607.1302 and
607.1320 of the FBCA. The FBCA, as explained more fully in "THE MERGER -- Rights
of Dissenting Shareholders", below, permits a shareholder to dissent from the
Merger and obtain payment for the fair value of his shares. Such "fair value"
may be determined in a judicial proceeding, the result of which cannot be
predicted. Failure to take any steps required by Sections 607.1301, 607.1302 and
607.1320 of the FBCA on a timely basis may result in the loss of appraisal
rights.
CONDITIONS TO THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The mutual obligations of the parties to consummate the Merger are subject
to the following conditions, among others: (i) the approval of the Agreement by
the holders of at least a majority of the outstanding shares of Fort Brooke
Common Stock; (ii) the approval of the Merger by The Board of Governors of the
Federal
4
<PAGE> 15
Reserve System (the "Federal Reserve") and the approval of the Merger of the
Bank with Colonial Bank in Florida by the Florida Department of Banking and
Finance (the "Florida Department") and the Federal Deposit Insurance Corporation
("FDIC"); (iii) the absence of any pending or threatened litigation which seeks
to restrain or prohibit the Merger; (iv) the consummation of the Merger on or
before June 30, 1997; and (v) receipt of opinions of counsel as to certain
matters, including tax matters.
The obligation of Fort Brooke to consummate the Merger is further subject
to several conditions, including: (i) the absence of any material adverse
changes in the financial condition or affairs of BancGroup; and (ii) the shares
of BancGroup Common Stock to be issued under the Agreement shall have been
approved for listing on the NYSE.
The obligations of BancGroup to consummate the Merger are subject to
various conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of Fort Brooke; (ii) the holders of not more
than 10% of the outstanding shares of Fort Brooke Common Stock shall have
exercised dissenters' rights with respect to their shares; and (iii) the receipt
of a letter from Coopers & Lybrand LLP, BancGroup's independent accountants, to
the effect that the independent accountants concur with the conclusions of
BancGroup's and Fort Brooke's management that no conditions exist with respect
to each company which would preclude accounting for the Merger as a pooling of
interests.
Applications for appropriate regulatory approvals by the Federal Reserve,
the Florida Department and the FDIC will be filed with such agencies on or about
January 15, 1997. The regulatory approval process is expected to take
approximately three months from that date, and it is anticipated that the Merger
will be consummated in the second quarter of 1997.
See "THE MERGER -- Conditions to Consummation of the Merger" and
"Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
The Boards of Directors of BancGroup and Fort Brooke may agree to amend or
terminate the Agreement at any time prior to the Effective Date. However, the
Board of Directors of Fort Brooke shall not agree to any amendments to the
Agreement which would alter the Merger Consideration or which, in the opinion of
the Board of Directors of Fort Brooke, would adversely affect the rights of the
shareholders of Fort Brooke, unless such amendments are approved by the holders
of a majority of the outstanding Fort Brooke Common Stock. Such amendments may
require the filing of an amendment of the Registration Statement, of which this
Prospectus forms a part, with the Commission. See "THE MERGER -- Amendment or
Termination."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the holders of the Fort Brooke 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 in the section of this
Prospectus at "COMPARATIVE RIGHTS OF STOCKHOLDERS."
FEDERAL INCOME TAX CONSEQUENCES
No ruling with respect to the federal income tax consequences of the Merger
to Fort Brooke's shareholders will be requested from the Internal Revenue
Service (the "IRS"). Fort Brooke has received an opinion from Coopers & Lybrand
LLP, that, among other things, a shareholder of Fort Brooke who exchanges shares
of Fort Brooke Common Stock for BancGroup Common Stock shall not recognize gain
except that, shareholders of Fort Brooke will recognize gain to the extent such
shareholders receive cash in lieu of fractional shares of BancGroup Common
Stock. See "APPROVAL OF THE MERGER -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The acquisition of Fort Brooke will be treated as a "pooling-of-interests"
transaction by BancGroup for accounting purposes. See "THE MERGER -- Accounting
Treatment."
5
<PAGE> 16
RECENT PER SHARE MARKET PRICES
Fort Brooke. Although the shares of the Bank's common stock prior to the
formation of the Bank's holding company and the shares of Fort Brooke's Common
Stock thereafter held other than by "affiliates" of Fort Brooke (as that quoted
term is defined in the Securities Act of 1933) have generally been freely
transferable, no public trading market for their future transfer has been
developed, nor has any licensed securities broker in the past made, or indicated
an expectation in the future to make, a market in Fort Brooke's outstanding
securities. Prior trading transactions have therefore been infrequent and
negotiated privately between the purchaser and seller (with the Bank, in certain
of those instances, supplying one with the identity of the other as a possible
purchaser or seller). Management of Fort Brooke is aware that shares have traded
during the past two years at prices ranging from $15.00 to $20.00 and the most
recent trade occurred in August, 1996 when 200 shares were sold at $19.50 per
share. Presently, Fort Brooke's Common Stock is not eligible for listing on any
securities exchange nor for quotation by any NASDAQ system.
BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." The following table indicates the high and low closing prices
of the BancGroup Class A Common Stock and the BancGroup Common Stock as reported
on the NASDAQ System and the NYSE, respectively, for the last two full fiscal
years. Prior to February 21, 1995, BancGroup had two classes of Common Stock
outstanding, Class A and Class B. Class B was not publicly traded. Class A was
traded as a NASDAQ security under the symbol "CLBGA" until February 24, 1995. On
February 21, 1995, the BancGroup Class A and Class B Common Stock were
reclassified into BancGroup Common Stock.
<TABLE>
<CAPTION>
PRICE PER SHARE
OF
COMMON STOCK
----------------
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter(1)......................................................... 23 5/8 19 1/2
Second Quarter........................................................... 27 1/2 23 1/8
Third Quarter............................................................ 29 7/8 27 1/2
Fourth Quarter........................................................... 32 7/8 28 1/2
1996
First Quarter............................................................ 36 1/2 30
Second Quarter........................................................... 36 1/8 31 1/4
Third Quarter............................................................ 35 7/8 31 1/4
Fourth Quarter........................................................... 40 1/4 34 3/4
1997
First Quarter (through January 20)....................................... 40 1/8 37 3/8
---- ---
</TABLE>
- ---------------
(1) Trading on the NYSE commenced on February 24, 1995.
On September 23, 1996, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $34 3/4 per share. The following table presents the market value of
BancGroup Common Stock on that date, and the market value and equivalent per
share value of Fort Brooke Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP FORT BROOKE BANCGROUP
COMMON STOCK COMMON STOCK COMMON STOCK
(PER SHARE) (PER SHARE) (PER SHARE)
------------ ------------ ------------
<S> <C> <C> <C>
Comparative Market Value.................. $34.75(1) $19.50(2) $31.50
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on September 23, 1996.
(2) Represents the most recent sales price of which Fort Brooke is aware.
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
6
<PAGE> 17
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup Common Stock from engaging in a "business
combination" with BancGroup unless certain conditions are satisfied. Also, the
Change in Bank Control Act of 1978 prohibits a person from acquiring "control"
of BancGroup unless certain notice provisions with the Federal Reserve Board
have been satisfied.
BancGroup's Restated Certificate of Incorporation and bylaws also contain
provisions which may deter or prevent a takeover of BancGroup that is not
supported by BancGroup's Board of Directors. These provisions include: (1) a
classified board of directors, (2) supermajority voting requirements for certain
"business combinations" that exceed the provisions of Delaware law described
above, (3) flexibility for the board to consider non-economic and other factors
in evaluating a "business combination," (4) inability of stockholders to call
special meetings and act by written consent, and (5) certain advance notice
provisions for the conduct of business at stockholder meetings.
See "BANCGROUP CAPITAL STOCK AND DEBENTURES" and "COMPARATIVE RIGHTS OF
STOCKHOLDERS."
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 Fort Brooke 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.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR YEAR YEAR
SEPTEMBER 30, SEPTEMBER 30, ENDED ENDED ENDED
1996 1995 1995 1994 1993(A)
------------- ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
BancGroup-Historical:
Net Income
Primary.................................. $ 2.39 $ 2.19 $ 2.63 $ 2.00 $ 1.65
Fully diluted............................ 2.37 2.13 2.56 1.97 1.64
Book value at end of period................. 20.24 17.71 18.65 15.62 14.40
Dividends per share:
Common Stock............................. 0.81 0.45 0.675
Common A................................. 0.225 0.225 0.80 0.71
Common B................................. 0.125 0.125 0.40 0.31
</TABLE>
7
<PAGE> 18
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR YEAR YEAR
SEPTEMBER 30, SEPTEMBER 30, ENDED ENDED ENDED
1996 1995 1995 1994 1993(A)
------------- ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fort Brooke:
Net Income
Historical:
Primary................................ 1.20 1.17 1.65 0.63 0.95
Fully diluted.......................... 1.20 1.17 1.65 0.63 0.95
Pro forma equivalent assuming combination
with completed business combinations
and Fort Brooke(b)(d):
Primary................................ 1.78 1.62 2.00 1.53 1.27
Fully diluted.......................... 1.76 1.60 1.96 1.52 1.27
Pro forma equivalent assuming combination
with completed business combinations
and Fort Brooke and other proposed
mergers(b)(d):
Primary................................ 1.79 1.62 2.00 1.53 1.28
Fully diluted.......................... 1.77 1.58 1.96 1.52 1.27
Book value at end of period
Historical............................... 16.26 15.25 15.71 13.68 13.93
Pro forma equivalent assuming
combination with completed business
combinations and Fort Brooke(b):.... 16.41 N/A N/A N/A N/A
Pro forma equivalent assuming
combination with completed business
combinations and Fort Brooke, and
other proposed mergers(b):.......... 16.44 N/A N/A N/A N/A
Dividends per share
Historical............................... 0.25 0.00 0.00 0.00 0.25
Pro forma equivalent assuming
combination with completed business
combinations and Fort Brooke(c):.... 0.66 0.55 0.73 0.65 0.58
Pro forma equivalent assuming
combination with completed business
combinations and Fort Brooke and
other proposed mergers(c):.......... 0.66 0.55 0.73 0.65 0.58
BancGroup-Pro Forma Combined (completed
business combinations and Fort Brooke only):
Net Income
Primary(d):.............................. 2.19 1.99 2.46 1.88 1.57
Fully diluted(d):........................ 2.17 1.97 2.40 1.87 1.57
Book value at end of period................. 20.22 N/A N/A N/A N/A
BancGroup-Pro Forma Combined (completed
business combinations and Fort Brooke and
other proposed mergers):
Net Income
Primary(d):.............................. 2.20 1.99 2.46 1.89 1.58
Fully diluted(d):........................ 2.18 1.95 2.40 1.87 1.57
Book value at end of period................. 20.25 N/A N/A N/A N/A
</TABLE>
8
<PAGE> 19
<TABLE>
<S> <C>
- ---------------
N/A Not applicable due to pro forma balance sheet being presented only at September 30,
1996 which assumes the transaction was consummated on the latest balance sheet date in
accordance with Rule 11.02(b) of Regulation S-X.
(a) Net Income per share for the year ended December 31, 1993 represents income before
extraordinary items and cumulative effect of change in accounting principle.
(b) 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 Fort Brooke. For the purposes of these pro forma
equivalent per share amounts, a .8116 BancGroup common stock share conversion ratio is
utilized. The ratio is based on an assumed Market Value of BancGroup common stock
calculated as of January 10, 1997, of $38.81 ($31.50/$38.81 = 0.8116).
(c) Pro forma equivalent dividends per share are shown at BancGroup's Common Stock
dividend per share rate multiplied by the .8116 conversion ratio per share of Fort
Brooke common stock (see note (b)). 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.
(d) Pro forma net income excludes two non-recurring charges for employee severance and
bonuses resulting from the pooling-of-interests business combination with Jefferson
Bancorp, Inc. ("Jefferson") in the amount of $3.2 million, net of tax. Jefferson was
merged into BancGroup on January 3, 1997.
</TABLE>
9
<PAGE> 20
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of Fort Brooke in
connection with the solicitation of proxies by the Board of Directors of Fort
Brooke for use at the Special Meeting. The purpose of the Special Meeting is to
consider and vote upon the proposed Merger of Fort Brooke with and into
BancGroup. BancGroup will be the surviving corporation in the Merger.
This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. No vote of
BancGroup stockholders is required to approve the Merger.
THE BOARD OF DIRECTORS OF FORT BROOKE BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF FORT BROOKE AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE MERGER (ITEM 1 ON THE PROXY CARD).
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of Fort Brooke has fixed the close of business on
January 20, 1997, as of the Record Date for determination of shareholders
entitled to vote at the Special Meeting. There were 669 record holders of Fort
Brooke Common Stock and 990,553 shares of Fort Brooke Common Stock outstanding,
each entitled to one vote per share as of the Record Date. Fort Brooke is
obligated to issue an additional 60,410 shares of Fort Brooke Common Stock upon
the exercise of outstanding Fort Brooke Options.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Fort Brooke 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 Fort Brooke 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.
As of the Record Date, directors and executive officers of Fort Brooke and
the Bank, as well as their affiliates, were the owners of 283,471 shares of Fort
Brooke Common Stock, representing approximately 28.62% of the outstanding shares
of Fort Brooke Common Stock.
If the Merger is approved at the Special Meeting, Fort Brooke is expected
to merge with and into BancGroup promptly after the other conditions to the
Agreement are satisfied. See "THE MERGER -- Conditions of Consummation of the
Merger."
THE BOARD OF DIRECTORS OF FORT BROOKE URGES THE SHAREHOLDERS OF FORT BROOKE
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 MERGER AND IN FAVOR OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF
NECESSARY.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of Fort Brooke, without receiving special compensation therefor, may
solicit proxies from Fort Brooke'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 Fort Brooke Common Stock.
Fort Brooke will bear the cost of assembling and mailing this Prospectus
and other materials furnished to shareholders of Fort Brooke. It will also pay
all other expenses of solicitation, including the expenses of brokers,
custodians, nominees, and other fiduciaries who, at the request of Fort Brooke,
mail material to or
10
<PAGE> 21
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 Fort Brooke 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 FORT BROOKE COMMON STOCK
REPRESENTED BY THE PROXY WILL BE VOTED "FOR" THE PROPOSAL TO APPROVE THE
AGREEMENT AND FOR ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY. A
shareholder may revoke any proxy given pursuant to this solicitation by: (i)
delivering to the Secretary of Fort Brooke, prior to or at the Special Meeting,
a written notice revoking the proxy; (ii) delivering to the Secretary of Fort
Brooke, at or prior to the Special Meeting, a duly executed proxy relating to
the same shares and bearing a later date; or (iii) voting in person at the
Special Meeting. All written notices of revocation and other communications with
respect to the revocation of Fort Brooke's proxies should be addressed to:
Fort Brooke Bancorporation
510 Vonderburg Drive
Brandon, Florida 33511
Attention: John D. Adams, Secretary
Attendance at the Special Meeting will not, in and of itself, constitute a
revocation of a proxy.
Proxies marked as abstentions and shares held in street name which have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast. Such proxies will, however, be counted for purposes of determining
whether a quorum is present at the Special Meeting.
The Board of Directors of Fort Brooke is not aware of any business to be
acted upon at the Special Meeting other than consideration of the Merger
described herein. If, however, other matters are properly brought before the
Special Meeting, or any adjournments or postponements thereof, the persons
appointed as proxies will have the discretion to vote or act on such matters
according to their best judgment. Proxies voted in favor of the Merger, or
proxies as to which no voting instructions are given, will be voted to adjourn
the Special Meeting, if necessary, in order to solicit additional proxies in
favor of the Merger. Proxies voted against the Merger and abstentions will not
be voted for an adjournment. See "ADJOURNMENT OF THE SPECIAL MEETING."
EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
Assuming a Market Value calculated as of January 10, 1997 of $38.8125,
BancGroup would issue 803,927 shares of BancGroup Common Stock to the
shareholders of Fort Brooke pursuant to the Merger, not counting any BancGroup
Common Stock to be issued pursuant to Fort Brooke Options and prior to giving
effect to the stock split of BancGroup, to be effective February 11, 1997. These
803,927 shares of BancGroup Common Stock would represent approximately 4.1% 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 ALL MATERIAL PROVISIONS OF THE
AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT
ATTACHED HERETO AS APPENDIX A. ALL FORT BROOKE SHAREHOLDERS ARE URGED TO READ
THE AGREEMENT AND THE APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement provides that, subject to shareholder ratification and
confirmation, receipt of necessary regulatory approval and certain other
conditions described below at "Conditions to Consummation of the Merger," Fort
Brooke will merge with and into BancGroup. Upon completion of the Merger, the
corporate existence of Fort Brooke will cease, and BancGroup will succeed to the
business formerly conducted by Fort Brooke.
BACKGROUND OF THE MERGER
As part of its long-term effort to maximize shareholder value, Fort Brooke
(and the Bank prior to Fort Brooke's recent formation) has formulated and
pursued a growth policy largely dependent upon the production of new business
from the Bank's existing customer base and the expansion of that base through
the establishment of branch facilities on the periphery of its core market area.
It has also, however, given continuing attention to the potential for rapid
growth through the medium of acquisitions, both from an acquiror and a target
point of view. In that latter regard, Fort Brooke's management has been
cognizant of the significant consolidation in the Tampa Bay and general Florida
financial institution markets, and that larger entities emerging therefrom may
hold substantial competitive advantages, including cost savings through the
integration of overlapping support functions, greater diversity in asset base,
improved access to capital and other transactions to maximize shareholder value
and the ability to spread the cost of new products and services over a wider
base. Management has therefore been increasingly receptive to the idea that
rapid and yet stable growth could likely be achieved by a merger with and into a
regional banking group having no presence within but seeking to enter the Tampa
Bay market, as long as such group maintained a strong capital base, high quality
assets and a commitment to the efficient delivery of personalized financial
services. In furtherance of that view, in 1995 the Bank's directors considered,
and then rejected as inadequate, the efforts of one such entity.
As a result of contacts commenced by BancGroup representatives in late July
1996 for the purpose of determining the level of Fort Brooke's interest in being
acquired by that regional holding company, Fort Brooke's board, led by its
chairman, concluded, after significant due diligence review of BancGroup's
operational and administrative efforts, results and goals, that, for the reasons
described in the preceding paragraph, BancGroup's advances should be given the
most serious consideration. Such determination led Fort Brooke's board of
directors to: engage the services of The Carson Medlin Company ("Carson
Medlin"), a recognized and experienced investment banking firm specializing in
the analysis and evaluation of banks and bank holding companies operating in
Florida and other southeastern states, particularly in connection with mergers
and acquisitions and other transactions, to act as Fort Brooke's financial
advisor in connection with the potential transaction and related matters; and to
authorize Fort Brooke's President, Mr. Eatman, to execute and deliver to
BancGroup a non-binding letter of intent, dated September 23, 1996.
FORT BROOKE'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
Following further due diligence review and the negotiation by Fort Brooke
officials and legal counsel of the terms of a definitive merger agreement, at a
board of director meeting convened on November 8, 1996, Fort Brooke's board was
presented with a detailed analysis, prepared by Carson Medlin, of the financial
terms of the BancGroup offer embodied in the draft agreement, and the basis upon
which Carson Medlin had determined the terms of the merger proposal to be fair
to the unaffiliated shareholders of Fort Brooke from a financial point of view.
At such meeting, management gave an overview of its past activities related to
the transaction negotiations and Fort Brooke counsel reviewed the terms and
structure of the Agreement. Legal counsel and representatives of Carson Medlin
provided their views of the transaction and responded to director
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questions. A lengthy discussion among board members then took place with respect
to the desirability of the proposed transaction, including the terms of the
Agreement. After such discussion, the board concluded that the Agreement was
fair and that its consummation was in the best interest of the Fort Brooke
shareholders from a financial point of view and therefore voted to approve the
same, subject to its subsequent consideration and approval by a requisite number
of Fort Brooke's shareholders. As a result of that direction, the Agreement was
signed by Mr. Eatman, on behalf of Fort Brooke, on November 18, 1996.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated October 15, 1996, Fort Brooke
engaged Carson Medlin to provide the Board of Directors of Fort Brooke with a
written opinion regarding the fairness of the Merger from a financial point of
view. Fort Brooke selected Carson Medlin as its financial advisor on the basis
of Carson Medlin's experience and expertise in representing community banks in
acquisition transactions. Carson Medlin is an investment banking firm which
specializes in the securities of financial institutions located in the
southeastern United States. As part of its investment banking activities, Carson
Medlin is regularly engaged in the valuation of financial institutions and
transactions relating to their securities.
On November 8, 1996, Carson Medlin delivered its written opinion to the
Board of Directors of Fort Brooke that the aggregate consideration provided for
in the Agreement is fair, from a financial point of view, to the unaffiliated
shareholders of Fort Brooke. The full text of Carson Medlin's written opinion
dated November 8, 1996 is attached as Appendix B to this Prospectus. It sets
forth the procedures followed, assumptions made, matters considered and
qualifications and limitations on the review undertaken by Carson Medlin in
connection with its opinion. The following summary of the opinion is qualified
in its entirety by reference to the full text of such opinion.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for purposes of its
opinion. Carson Medlin did not undertake any independent evaluation or appraisal
of the assets and liabilities of Fort Brooke, nor was it furnished with any such
appraisals.
Carson Medlin is not expert in the evaluation of loan portfolios, including
under-performing or non-performing assets, charge-offs or the allowance for loan
losses. It has not reviewed any individual credit files of Fort Brooke or
BancGroup. Instead, it has assumed that the allowances for each of Fort Brooke
and BancGroup are adequate to cover their potential loan losses. Carson Medlin
assumed that the Merger will be recorded as a pooling of interests under
generally accepted accounting principles. Carson Medlin's opinion is necessarily
based on economic, market and other conditions existing on the date of its
opinion, and on information as of various earlier dates made available to it.
Carson Medlin reviewed certain financial projections prepared by Fort
Brooke and BancGroup. Carson Medlin assumed that these projections were prepared
on a reasonable basis utilizing the best and most current information available
to the managements of Fort Brooke and BancGroup, and that such projections will
be realized in the amounts and at the times contemplated thereby. Neither Fort
Brooke nor BancGroup publicly discloses internal management projections of the
type provided to Carson Medlin. Such projections were not prepared for, or with
a view toward, public disclosure.
In connection with rendering its opinion, Carson Medlin performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate methods of financial analysis and the
application of those methods to the particular circumstances. Carson Medlin
believes that its analyses must be considered together as a whole and that
selecting portions of such analyses and the facts considered therein, without
considering all other factors and analyses, could create an incomplete or
inaccurate view of the analyses and the process underlying Carson Medlin's
opinion. In its analyses, Carson Medlin made numerous assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond the control of Fort Brooke and BancGroup and which may
not be realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which such
companies or their
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securities may actually be sold. Except as described below, none of the analyses
performed by Carson Medlin were assigned a greater significance by Carson Medlin
than any other.
In connection with its opinion dated November 8, 1996, Carson Medlin
reviewed: (i) the Agreement; (ii) the annual reports to shareholders of
BancGroup, including the audited financial statements for the five years ended
December 31, 1995; (iii) audited financial statements of Fort Brooke for the
five years ended December 31, 1995; (iv) the unaudited interim financial
statements of BancGroup for the nine months ended September 30, 1996; (v) the
unaudited interim financial statements of Fort Brooke for the nine months ended
September 30, 1996; and, (vi) certain other financial and operating information
with respect to the business, operations and prospects of Fort Brooke and
BancGroup. In addition, Carson Medlin: (a) held discussions with members of the
senior management of Fort Brooke and BancGroup regarding the historical and
current business operations, financial condition and future prospects of their
respective companies; (b) reviewed the historical market prices and trading
activity for the common stock of Fort Brooke and BancGroup and compared them
with those of certain publicly traded companies which it deemed to be relevant;
(c) compared the results of operations of Fort Brooke and BancGroup with those
of certain banking companies which it deemed to be relevant; (d) compared the
proposed financial terms of the Merger with the financial terms, to the extent
publicly available, of certain other recent business combinations of commercial
banking organizations; (e) analyzed the pro forma financial impact of the Merger
on BancGroup; and (f) conducted certain other studies, analyses, inquiries and
examinations as Carson Medlin deemed appropriate.
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.
SUMMARY OF PROPOSAL. Carson Medlin reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
Carson Medlin reviewed the implied value of the consideration offered based upon
the closing share price of BancGroup Common Stock on November 6, 1996 which
showed that the implied value of the BancGroup proposal was approximately $31.50
per share of Fort Brooke Common Stock, representing a total transaction value of
approximately $31.2 million. Based on the price of $38.625 per share for
BancGroup Common Stock, Carson Medlin calculated that the aggregate transaction
value represented 194% of stated book value at September 30, 1996, 15.2 times
normalized 1996 estimated earnings, a 10.9% core deposit premium (defined as the
aggregate transaction value minus stated book value divided by core deposits)
and 17.2% of total assets of Fort Brooke at September 30, 1996. Carson Medlin
did not participate in the negotiation of the Agreement and was not involved in
the determination of the amount of consideration to be paid.
INDUSTRY COMPARATIVE ANALYSIS. In connection with rendering its opinion,
Carson Medlin compared selected operating results of Fort Brooke to those of 53
publicly-traded community commercial banks in Alabama, Florida, Georgia, North
Carolina, South Carolina, Virginia and West Virginia (the "SIBR Banks") as
contained in the Southeastern Independent Bank Review(TM), a proprietary
research publication prepared by Carson Medlin quarterly since 1991. The SIBR
Banks range in asset size from approximately $95 million to $2.1 billion and in
shareholders' equity from approximately $7.9 million to $211.8 million. Carson
Medlin considers this group of financial institutions more comparable to Fort
Brooke than larger, more widely traded regional financial institutions. Carson
Medlin compared, among other factors, profitability, capitalization, and asset
quality of Fort Brooke to these financial institutions. Carson Medlin noted that
based on results through the first six months of 1996: (i) Fort Brooke had a
return on average assets (ROA) for the six months ended June 30, 1996 of 1.09%,
compared to mean ROA of 1.26% for the SIBR Banks; (ii) Fort Brooke had a return
on average equity (ROE) for the six months ended June 30, 1996 of 12.8%,
compared to mean ROE of 11.8% for the SIBR Banks; (iii) Fort Brooke had common
equity to total assets at June 30, 1996 of 8.8%, compared to mean common equity
to total assets of 9.7% for the SIBR Banks; and (iv) Fort Brooke had
non-performing assets (defined as loans 90 days past due, nonaccrual loans and
other real estate) to total loans net of unearned income and other real estate
at June 30, 1996 of 1.46%, compared to mean non-performing assets to total loans
net of unearned income and other real estate of 1.01% for the SIBR Banks. This
comparison indicated that Fort Brooke's financial performance was near the
average for the SIBR Banks for most of the factors considered.
Carson Medlin also compared selected operating results of BancGroup to
those of 8 other publicly-traded mid-size regional bank holding companies
defined as those with assets between $4 and $25 billion (the "Peer
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<PAGE> 25
Banks") located in the Southeast. The Peer Banks include: AmSouth
Bancorporation, Compass Bancshares, Inc., First American Corporation, First
Tennessee National Corporation, National Commerce Bancorporation, Regions
Financial Corporation, SouthTrust Corporation, and Union Planters Corporation.
Carson Medlin considers this group of financial institutions comparable to
BancGroup as to financial characteristics, stock price performance and trading
volume. Carson Medlin compared selected balance sheet data, asset quality,
capitalization, profitability ratios and market statistics using financial data
at or for the nine months ended September 30, 1996 and market data as of
November 6, 1996. This comparison showed, among other things, that (i) for the
nine months ended September 30, 1996, BancGroup's net interest margin was 4.17%
compared to a mean of 4.09% and a median of 4.02% for the Peer Banks; (ii) for
the nine months ended September 30, 1996, efficiency ratio (defined as non
interest expense divided by the sum of non interest income and taxable
equivalent net interest income before provision for loan losses) was 58.9%
compared to a mean of 57.9% and a median of 56.7% for the Peer Banks; (iii) for
the nine months ended September 30, 1996, BancGroup's ROA was 1.20% compared to
a mean of 1.24% and a median of 1.23% for the Peer Banks; (iv) for the nine
months ended September 30, 1996, BancGroup's ROE was 17.05% compared to a mean
of 16.15% and a median of 16.03% for the Peer Banks; (v) at September 30, 1996,
BancGroup's stockholders' equity to total assets was 7.00% compared to a mean of
7.71% and a median of 7.68% for the Peer Banks; (vi) at September 30, 1996,
BancGroup's non-performing assets to total assets were 0.65% compared to a mean
of 0.32% and a median of 0.32% for the Peer Banks; (vii) at September 30, 1996,
the ratio of BancGroup's loan loss reserves to non-performing assets was 148%
compared to a mean of 329% and a median of 270% for the Peer Banks; and, (viii)
at November 6, 1996, BancGroup's market capitalization was $629 million compared
to the Peer Banks which ranged from a low of $860 million to a high of $3.2
billion. This comparison indicated that BancGroup's financial performance is
average in comparison to the Peer Banks.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to Fort Brooke or the contemplated
transaction. Accordingly, the results of these analyses necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of Fort Brooke and other factors that could affect the
value of the companies to which it is being compared. Mathematical analysis
(such as determining the average or median) is not, in itself, a meaningful
method of using comparable industry or transaction data.
COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain
information relating to 15 selected Florida bank mergers announced or completed
since January 1993 in which the acquired bank had total assets from $100 million
to $600 million, (the "Comparable Transactions"). The Comparable Transactions
were (acquiree/acquiror): AmSouth Bancorporation/FNB of Clearwater; AmSouth
Bancorporation/Orange Banking Corp; SouthTrust/Cypress Banks Inc.; AmSouth
Bancorporation/Charter Banking Corp; Compass Bancshares/1st Performance; AmSouth
Bancorporation/Parkway Bancorp; AmSouth Bancorporation/Citizens National;
Northern Trust Corp./Beach One Financial; AmSouth Bancorporation/Tampa Banking
Co.; Huntington Bancshares/Peoples Bank of Lakeland; Compass Bancshares/CFB
Bancorp; Colonial BancGroup/Southern Banking Corp; FNB Corporation/Southwest
Banks; Compass Bancshares/Enterprise National Bank; and Huntington
Bancshares/Citi-Bancshares, Inc. Carson Medlin considered, among other factors,
the earnings, capital level, asset size and quality of assets of the acquired
financial institutions. Carson Medlin compared the transaction prices to
trailing four quarters earnings, stated book values, total assets and core
deposit premiums.
On the basis of the Comparable Transactions, Carson Medlin calculated a
range of purchase prices as a percentage of stated book value for the Comparable
Transactions from a low of 136.4% to a high of 348.8%, with a mean of 222.3%.
These transactions indicated a range of values for Fort Brooke from $22.21 per
share to $56.78 per share, with a mean of $36.19 per share (based on Fort
Brooke's stated book value of $16.28 per share at September 30, 1996). The
aggregate consideration implied by the terms of the Agreement is approximately
$31.50 per share and implies a price to stated book value multiple of 194% which
falls slightly below the average of the range for the Comparable Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions, from a low of 12.9 times to a high of
23.0 times, with a mean of 16.8 times. These transactions indicated a range of
values for Fort Brooke from $26.83 to $47.84 per share, with a mean of $34.94
per share
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(based on Fort Brooke's normalized 1996 estimated earnings of $2.08 per share,
excluding the SAIF assessment). The aggregate consideration implied by the terms
of the Agreement is approximately $31.50 per share and implies a price to
earnings multiple of 15.1 times which falls below the average of the range for
the Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 3.8% to a high of 25.3%,
with a mean of 13.2%. The premium on Fort Brooke's core deposits implied by the
terms of the Agreement is 10.9%, below the average of the range for the
Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 11.3%
to a high of 27.9%, with a mean of 18.4%. The percentage of total assets implied
by the terms of the Agreement is approximately 17.2%, slightly below the average
of the range for the Comparable Transactions.
PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value of Fort
Brooke assuming that Fort Brooke remained an independent bank. For purposes of
this analysis, Carson Medlin utilized certain projections of Fort Brooke's
future earnings. It assumed that all of these earnings would be retained and
that the Fort Brooke Common Stock would be sold at the end of 5 years at 200% of
book value. This value was then discounted to present value utilizing discount
rates of 14% through 18%. These rates were selected because, in Carson Medlin's
experience, they represent the rates that investors in securities such as the
Fort Brooke Common Stock would demand in light of the potential appreciation and
risks. On the basis of these assumptions, Carson Medlin calculated that the
present value of Fort Brooke as an independent bank ranged from $27.24 per share
to $32.10 per share. The aggregate consideration implied by the terms of the
Agreement is approximately $31.50 per share which falls slightly below the high
end of the range under present value analysis. Carson Medlin noted that the
present value analysis was included because it is a widely used valuation
methodology, but noted that the results of such methodology are highly dependent
upon the numerous assumptions, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for the BancGroup Common Stock on a monthly basis
from December 1992 to October 1996. Carson Medlin also compared price
performance of the BancGroup Common Stock during this period to the Peer Banks.
During the four quarters ending September 30, 1996, the ratio of stock
price to trailing 12 months earnings per share for the Peer Banks was: a low of
11.6 times, a high of 14.4 times, and a mean of 12.8 times. BancGroup's recent
price to earnings ratio ranged from a low of 10.6 times to a high of 12.1 times
with a mean of 11.0 times. BancGroup Common Stock has traded on average at a
lower price to earnings ratio than the Peer Banks.
During the four quarters ending September 30, 1996, the stock price as a
percentage of book value for Peer Banks was: a low of 180%, a high of 206%, and
a mean of 193%. BancGroup's recent price to book ratio ranged from a low of 169%
to a high of 189% with a mean of 177%. BancGroup Common Stock has traded on
average at a lower price to book value ratio than the Peer Banks.
Carson Medlin also examined the recent trading volume in BancGroup Common
Stock with that of the Peer Banks. During the four quarters ending September 30,
1996, the quarter end monthly trading volume of outstanding shares of the Peer
Banks ranged from a low of 3.7% to a high of 6.6% with a mean of 4.9%.
BancGroup's quarter end monthly trading volume to outstanding shares ranged from
a low of 1.1% to a high of 2.1% with a mean of 1.4%. Carson Medlin considers
BancGroup Common Stock to be liquid and marketable in comparison with these Peer
Banks and other bank holding companies.
Carson Medlin also examined the trading prices and volumes of Fort Brooke
Common Stock. Fort Brooke Common Stock has not traded in volumes sufficient to
be meaningful, therefore, Carson Medlin did not place any weight on the market
price of the Fort Brooke Common Stock.
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CONTRIBUTION ANALYSIS. Carson Medlin reviewed the relative contributions
in terms of various balance sheet items, net income and market capitalization to
be made by Fort Brooke and BancGroup to the combined institution based on (i)
balance sheet data at September 30, 1996, and (ii) nine month earnings as of
September 30, 1996. The income statement and balance sheet components analyzed
included total assets, total loans (net), total deposits, shareholders' equity,
and nine months net income. This analysis showed that, while Fort Brooke
shareholders would own approximately 4.9% of the aggregate outstanding shares of
the combined institution based on the Exchange Ratio, Fort Brooke was
contributing 3.9% of total assets, 3.6% of total loans (net), 4.7% of total
deposits, 4.7% of shareholders' equity, and 3.0% of nine months net income.
OTHER ANALYSIS. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for BancGroup. In addition, Carson Medlin
prepared an overview of historical financial performance of BancGroup, an
analysis of the total return of BancGroup's Common Stock for the five year
period ended December 31, 1995, and a shareholder claims analysis.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of the
date of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of Fort
Brooke could materially affect the assumptions used in preparing the opinion.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF FORT BROOKE
The Board of Directors of Fort Brooke has determined that the Merger is in
the best interests of Fort Brooke and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FORT BROOKE VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AND THE AGREEMENT.
BANCGROUP'S REASONS FOR THE MERGER
The Board of Directors of BancGroup has unanimously approved the Merger and
the Agreement. BancGroup has been seeking to expand its banking operations in
the state of Florida. BancGroup currently operates a commercial bank in the
Orlando, Ormond Beach and the Miami Beach areas. The Board of Directors of
BancGroup believes that the combination with Fort Brooke and the Bank is
consistent with that strategy.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account: (i) the financial performance and condition of Fort
Brooke, including its strong capital and good asset quality; (ii) similarities
in the philosophies of BancGroup and Fort Brooke, including Fort Brooke's
commitment to delivering high quality personalized financial services to its
customers; and (iii) Fort Brooke's management's knowledge of and experience in
the Tampa, Florida market.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers of the Bank hold Fort Brooke Options which
entitle them to purchase, in the aggregate, up to 59,875 shares of Fort Brooke
Common Stock. Under the terms of the Agreement, any Fort Brooke Options which
are not exercised prior to the Effective Date will be assumed by BancGroup
giving the holders of such options the right to acquire shares of BancGroup
Common Stock. See "Conversion of Fort Brooke Common Stock" and "Treatment of
Fort Brooke Options."
The Agreement provides that it is a condition to BancGroup's obligation to
close the Merger that Richard H. Eatman, president of Fort Brooke and the Bank,
execute a severance agreement with Colonial Bank. Mr. Eatman and BancGroup have
agreed upon the terms of the severance agreement which will generally provide
that (i) for a period of three years following the Effective Date, Colonial Bank
may terminate Mr. Eatman's employment at any time by paying Mr. Eatman a
lump-sum payment equal to Mr. Eatman's annual cash salary (inclusive of prior
bonuses) at the time the notice of termination is given; (ii) Colonial Bank's
obligation to make the payment referenced in the foregoing clause (i) shall not
apply if BancGroup
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terminates Mr. Eatman for "cause", as defined in the severance agreement, or if
Mr. Eatman voluntarily terminates his employment; and (iii) Mr. Eatman will
agree not to compete with Colonial Bank in Hillsborough County for a period of
12 months following his termination provided he has received the lump-sum
payment referenced in clause (i) above or one-half of such payment if Mr. Eatman
is terminated for cause or voluntarily terminates his employment.
On the Effective Date and subject to the agreements described above, all
employees of Fort Brooke (including its executive officers) shall, at
BancGroup's option, either become employees of BancGroup or its subsidiaries or
be entitled to severance benefits in accordance with the severance policy of
Colonial Bank, as of the date of the Agreement. All employees of Fort Brooke who
become employees of BancGroup or its subsidiaries on the Effective Date shall 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.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of Fort Brooke against certain claims and liabilities arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Date, to the extent that Fort Brooke would have been permitted under
Florida law, or under its Articles of Incorporation or Bylaws, to indemnify such
persons (and also to advance expenses as incurred to the fullest extent
permitted under applicable law).
Except as described above, none of the directors or executive officers of
Fort Brooke, 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 Fort Brooke Common Stock.
CONVERSION OF FORT BROOKE COMMON STOCK
On the Effective Date, each share of Fort Brooke Common Stock outstanding
and held by Fort Brooke's shareholders shall be converted by operation of law
and without any action by any holder thereof into BancGroup Common Stock with a
market value of $31.50 as determined below. The number of shares, or fractions
of a share of BancGroup Common Stock into which each outstanding share of Fort
Brooke Common Stock on the Effective Date shall be converted, shall be equal to
$31.50 divided by the Market Value. 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 10 trading days ending
on the trading day immediately preceding the Effective Date, provided that the
Market Value shall not be less than $32.00 nor more than $39.00, regardless of
the actual market value as calculated. Accordingly, the maximum number of shares
of BancGroup Common Stock to be issued in the Merger shall be 975,076 (based
upon a minimum Market Value of $32.00) and the minimum number of shares of
BancGroup Common Stock to be issued in the Merger shall be 800,062 (based upon a
maximum Market Value of $39.00), assuming 990,553 shares of Fort Brooke Common
Stock outstanding as of January 20, 1997. To the extent that as of the Effective
Date the number of shares of Fort Brooke Common Stock outstanding has increased
based upon the exercise of employee stock options for Fort Brooke Common Stock
after January 20, 1997, the number of shares of BancGroup Common Stock to be
issued in the Merger shall increase with each share of Fort Brooke Common Stock
outstanding at the Effective Date exchanged for a number of shares of BancGroup
Common Stock equal to $31.50 divided by the Market Value, and the minimum and
maximum number of shares of BancGroup Common Stock shall also be adjusted to
take into account increases in the number of shares of Fort Brooke Common Stock
outstanding in excess of 990,553 shares as a result of such exercises.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of Fort Brooke having a fractional interest arising
upon the conversion of Fort Brooke Common Stock into BancGroup Common Stock
will, at the time of surrender of the certificates representing Fort Brooke
Common Stock, be paid by BancGroup an amount of cash equal to the value of such
fractional interest based on the fair market value of such fractional share.
Fair market value for this purpose shall be the Market Value.
As an example, a shareholder of Fort Brooke who owns 500 shares of Fort
Brooke Common Stock will receive BancGroup Common Stock in the Merger. Assuming
a Market Value of BancGroup Common Stock at the Merger of $38.8125 (calculated
as of January 10, 1997), then such shareholder would receive 405.80
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shares of BancGroup Common Stock ($31.50 / $38.8125 multiplied by 500) with the
.80 of a share paid in cash equal to $31.05 (.80 X $38.8125).
As the Market Value of the BancGroup Common Stock rises, the number of
shares of BancGroup Common Stock to be issued in the Merger will decrease, and
as the Market Value falls, the number of such shares will increase, subject to
the minimum and maximum amounts to be issued, as described above.
The Agreement provides that if, 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 Fort Brooke Common
Stock shall be converted in the Merger.
On January 15, 1997, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend. Stockholders of record of BancGroup Common Stock
will receive one share of BancGroup Common Stock for each share they hold as of
February 4, 1997. The additional shares will be distributed pursuant to the
stock split on February 11, 1997.
Accordingly, the Market Value as defined in the Agreement will be adjusted
so that, following the stock split, the Market Value will not be less than
$16.00 and not more the $19.50. Based upon such adjusted Market Values, the
maximum number of shares of BancGroup Common Stock to be issued in the Merger
will be 1,950,151 and the minimum number of shares to be issued will be
1,600,124 assuming 990,553 shares of Fort Brooke Common Stock outstanding at the
Merger.
For a description of the assumption of Fort Brooke Options, see "Treatment
of Fort Brooke Options."
SURRENDER OF FORT BROOKE COMMON STOCK CERTIFICATES
Upon the Effective Date and subject to the conditions described at
"Conditions to Consummation of the Merger," Fort Brooke's shareholders will
automatically, and without further action by such shareholders or by BancGroup,
become owners of BancGroup Common Stock as described herein. Outstanding
certificates representing shares of the Fort Brooke Common Stock shall represent
shares of BancGroup Common Stock. Thereafter, upon surrender of the certificates
formerly representing shares of Fort Brooke 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 Fort Brooke unless and until
such shareholder surrenders for cancellation his certificate for Fort Brooke
Common Stock. SunTrust Bank, Atlanta, Georgia, transfer agent for BancGroup
Common Stock, will act as the Exchange Agent with respect to the shares of Fort
Brooke Common Stock surrendered in connection with the Merger.
A detailed explanation of these arrangements will be mailed to Fort Brooke
shareholders promptly following the Effective Date. STOCK CERTIFICATES SHOULD
NOT BE SENT TO THE EXCHANGE AGENT UNTIL SUCH NOTICE IS RECEIVED.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for federal income
tax purposes under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"). The obligation of Fort Brooke to consummate the Merger is
conditioned on the receipt by Fort Brooke of an opinion from Coopers & Lybrand,
LLP, which serves as BancGroup's independent public accountant, to the effect
that the Merger will constitute such a reorganization. The opinion has been
delivered to Fort Brooke. In delivering its opinion, Coopers & Lybrand, LLP, has
received and relied upon certain representations contained in certificates of
officers of BancGroup and Fort Brooke 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 Fort Brooke has no knowledge of any plan or intention on the part of the
Fort Brooke shareholders to sell or dispose of BancGroup Common Stock that would
reduce their holdings
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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 Fort Brooke Common Stock outstanding
immediately upon the Merger.
Neither Fort Brooke nor BancGroup intends to seek a ruling from the
Internal Revenue Service as to the federal income tax consequences of the
Merger. Fort Brooke's shareholders should be aware that the opinion will not be
binding on the Internal Revenue Service or the courts. Fort Brooke's
shareholders also should be aware that some of the tax consequences of the
Merger are governed by provisions of the Code as to which there are no final
regulations and little or no judicial or administrative guidance. There can be
no assurance that future legislation, administrative rulings, or court decisions
will not adversely affect the accuracy of the statements contained herein.
The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code and the following federal income tax consequences will result
to Fort Brooke's shareholders who exchange their shares of Fort Brooke Common
Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by Fort Brooke's shareholders
on the exchange of shares of Fort Brooke Common Stock for shares of
BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
Fort Brooke 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 Fort Brooke Common Stock
surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each Fort Brooke shareholder will include the period during
which the shares of Fort Brooke Common Stock exchanged therefor were held,
provided that the shares of Fort Brooke Common Stock were a capital asset
in the holder's hands as of the Effective Date;
(iv) Cash payments received by each Fort Brooke 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 Fort Brooke Common Stock is a capital asset in the hands of
the holder;
(vi) No gain or loss will be recognized by Fort Brooke upon the
transfer of its assets and liabilities to BancGroup. No gain or loss will
be recognized by BancGroup upon the receipt of the assets and liabilities
of Fort Brooke;
(vii) The basis of the assets of Fort Brooke acquired by BancGroup
will be the same as the basis of the assets in the hands of Fort Brooke
immediately prior to the Merger;
(viii) The holding period of the assets of Fort Brooke in the hands of
BancGroup will include the period during which such assets were held by
Fort Brooke; and
(ix) A Fort Brooke 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 Fort Brooke Common Stock converted, if the shares of Fort Brooke
Common Stock were held as capital assets. However, a Fort Brooke
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 Fort Brooke shareholder will be required to report on such
shareholder's federal income tax return for the fiscal year of such shareholder
in which the Merger occurs that such shareholder has received BancGroup Common
Stock in a reorganization.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF ALL MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF FORT
BROOKE, TO FORT BROOKE AND TO BANCGROUP AND DOES NOT PURPORT
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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 FORT BROOKE COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF
SECTION 1221 OF THE CODE, AND SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF FORT
BROOKE 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 FORT
BROOKE 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. FORT BROOKE
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 Fort Brooke, a Florida
corporation, 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 Fort Brooke Common Stock as compared with BancGroup
Common Stock, see "COMPARATIVE RIGHTS OF STOCKHOLDERS."
CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The obligations of Fort Brooke 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 Fort Brooke Common
Stock; (ii) the approval of the Merger by the Florida Department of Banking and
by the Federal Reserve; (iii) the absence of pending or threatened litigation
with a view to restraining or prohibiting consummation of the Merger or in which
it is sought to obtain divestiture, rescission or damages in connection with the
Merger; (iv) the absence of any investigation by any governmental agency which
might result in any such proceeding; (v) consummation of the Merger no later
than June 30, 1997; and (vi) receipt of opinions of counsel regarding certain
matters.
The obligation of Fort Brooke to consummate the Merger is further subject
to several other conditions, including: (i) the absence of any material adverse
change in the financial condition or affairs of BancGroup; (ii) the shares of
BancGroup Common Stock to be issued under the Agreement shall have been approved
for listing on the NYSE; and (iii) the accuracy in all material respects of the
representations and warranties of BancGroup contained in the Agreement and the
performance by BancGroup of all of its covenants and agreements under the
Agreement.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of Fort Brooke; (ii) the holders of not more
than 10% of the outstanding shares of Fort Brooke Common Stock shall have
exercised dissenters' rights with respect to their shares; (iii) the receipt of
a letter from Coopers & Lybrand L.L.P. concurring with the conclusions of
BancGroup's and Fort Brooke'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 receipt of a letter from Coopers & Lybrand L.L.P. that the
Merger constitutes a reorganization for federal
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income tax purposes; (v) the accuracy in all material respects of the
representations and warranties of Fort Brooke contained in the Agreement, and
the performance by Fort Brooke of all of its covenants and agreements under the
Agreement; and (vi) the receipt by BancGroup of certain undertakings from
holders of Fort Brooke Common Stock who may be deemed to be "affiliates" of Fort
Brooke 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 Fort Brooke and BancGroup may waive all conditions
to their obligations to consummate the Merger, other than the receipt of the
requisite approvals of regulatory authorities and Fort Brooke 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 Fort Brooke and BancGroup would be subject to the
fiduciary duty standards imposed upon such boards by relevant law that would
require such boards to act in the best interests of their respective
shareholders.
AMENDMENT OR TERMINATION
The Boards of Directors of BancGroup and Fort Brooke may agree to amend or
terminate the Agreement before or after approval by the shareholders of Fort
Brooke. However, the Board of Directors of Fort Brooke shall not agree to any
amendments to the Agreement which would alter the Merger Consideration or which,
in the opinion of the Board of Directors of Fort Brooke, would adversely affect
the rights of the shareholders of Fort Brooke, unless such amendments are
approved by a majority of the outstanding shares of Fort Brooke Common Stock.
Such amendments may require the filing of an amendment of the Registration
Statement, of which this Prospectus forms a part, with the Commission. See
"Conditions to Consummation of the Merger."
REGULATORY APPROVALS
The Merger is subject to prior approval of the Federal Reserve under the
BHCA. It is contemplated that immediately subsequent to the Merger, Fort Brooke
Bank will be merged with and into BancGroup's wholly-owned subsidiary, Colonial
Bank, Orlando, Florida (the "Bank Merger"). The approval of the FDIC and the
Florida Department must be obtained prior to the Bank Merger. It is anticipated
that applications will be filed with the Federal Reserve, the FDIC and the
Florida Department on or about January 15, 1997. The regulartory approval
process is expected to take approximately three months from this date.
Federal Reserve Approval. Under Section 3 of the BHCA, the Federal Reserve
must withhold approval of the Merger if it finds that the transaction will
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any geographic
area. In addition, the Federal Reserve may not approve the Merger if it finds
that the effect thereof may be substantially to lessen competition or tend to
create a monopoly or would in any other manner be in restraint of trade, unless
it finds that the anti-competitive effects of the Merger are clearly outweighed
by the probable effect of the Merger in meeting the convenience and needs of the
communities to be served. The Federal Reserve will also take into consideration
the financial and managerial resources and future prospects of BancGroup's
banking subsidiaries following the consummation of the Merger, as well as the
compliance records of such banking subsidiaries under the Community Reinvestment
Act. The Federal Reserve has indicated that it will not approve a significant
acquisition unless the resulting institution has adequate capitalization, taking
into account, among other things, asset quality.
In addition, the Federal Reserve is expressly permitted to approve
applications under Section 3 of the BHCA for a bank holding company that is
adequately capitalized and adequately managed to acquire control of a bank
located in a state other than the home state of such bank holding company (an
"Interstate Acquisition"), without regard to whether such transaction is
prohibited under the law of any state. However, if the law of the state in which
the target bank is located requires the target bank to have been in existence
for some minimum period of time, the Federal Reserve is prohibited from
approving an application by a bank
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holding company to acquire such target bank if such target bank does not satisfy
this state law requirement, so long as the state law specifying such minimum
period of time does not specify a period of more than five years.
Also, the Federal Reserve is prohibited from approving an Interstate
Acquisition if the acquiring bank holding company controls, or upon consummation
of the acquisition, would control, more than 10% of the total amount of deposits
of insured depository institutions in the United States. Finally, subject to
certain exceptions, the Federal Reserve may not approve an application
pertaining to an Interstate Acquisition if, among other things, the bank holding
company, upon consummation of the acquisition, would control 30% or more of the
total amount of deposits of insured depository institutions in the state where
the target bank is located.
The BHCA provides for the publication of notice and public comment on the
application and authorizes the Federal Reserve to permit interested parties to
intervene in the proceedings. If an interested party is permitted to intervene,
such intervention could delay the regulatory approvals required for consummation
of the Merger. Section 11 of the BHCA imposes a waiting period which prohibits
the consummation of the Merger, in ordinary circumstances, for a period ranging
from 15-30 days following the Federal Reserve's approval of the Merger. During
such period, the United States Department of Justice, should it object to the
Merger for antitrust reasons, may challenge the consummation of the Merger.
Florida Department of Banking. The Bank Merger must be approved by the
Florida Department pursuant to applicable provisions of the Florida Banking
Code. The Florida Department must approve the Bank Merger if it appears that the
resulting state bank meets all the requirements of state law as to the formation
of a new state bank, the agreement of merger provides an adequate capital
structure, including surplus, of the resulting state bank in relation to its
activities which are to continue or are to be undertaken, and also in relation
to its deposit liabilities, the valuation is fair, and the Bank Merger is not
contrary to the public interest.
Federal Deposit Insurance Corporation. Pursuant to the requirements of the
Federal Deposit Insurance Act, the FDIC's approval of the Bank Merger must be
obtained. The FDIC is prohibited from approving the Bank 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 FDIC is prohibited from approving the Bank
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 Bank Merger are clearly out-weighed in the public interest by the
probable effect of the Bank Merger in meeting the convenience and needs of the
community to be served. The FDIC 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.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15-30
days following the FDIC's approval of the Bank Merger. During such period, the
United States Department of Justice, should it object to the Merger for
antitrust reasons, may challenge the consummation of the Merger.
The Agreement provides that the obligation of each of BancGroup and Fort
Brooke to consummate the Merger is conditioned upon the receipt of all necessary
regulatory approvals, including the approval of the Federal Reserve and the
Florida Department. There can be no assurance that the Federal Reserve or the
Florida Department will approve BancGroup's applications to acquire Fort Brooke,
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.
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CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the business
of Fort Brooke pending consummation of the Merger. The Agreement prohibits Fort
Brooke from taking any of the following actions, prior to the Effective Date,
subject to certain limited exceptions previously agreed to by the parties,
without the prior written approval of BancGroup:
(i) Issuing, delivering or agreeing to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued or
held in the treasury), except shares of Fort Brooke Common Stock issued
upon the exercise of Fort Brooke 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;
(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, except that Fort Brooke may pay a cash
dividend to its shareholders for the fourth quarter of 1996 and the first
quarter of 1997. Each of those dividends shall be equal to $Dividend X
.88732 where "$Dividend" equals the per share cash dividend paid by
BancGroup for the quarter in question;
(v) Except in the ordinary course of business, selling or transferring
or agreeing to sell or transfer, any of its assets, property or rights or
canceling, or agreeing to cancel, any debts or claims;
(vi) Except in the ordinary course of business, entering or agreeing
to enter into any agreement or arrangement granting any preferential rights
to purchase any of its assets, property or rights or requiring the consent
of any party to the transfer and assignment of any of its assets, property
or rights;
(vii) Waiving any rights of value which in the aggregate are material;
(viii) Except in the ordinary course of business, making or permitting
any amendment or termination of any contract, agreement or license to which
it is a party if such amendment or termination is material considering its
business as a whole;
(ix) Except in accordance with past practice, making any accrual or
arrangement for or payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or former officer or
employee;
(x) Except in accordance with past practice, increasing the rate of
compensation payable to or to become payable to any of its officers or
employees or making any material increase in any profit-sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(xi) Failing to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations; and
(xii) Entering into any other material transaction other than in the
ordinary course of business.
The Agreement provides that prior to the Effective Date, no director or
officer of Fort Brooke 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 Fort Brooke or its subsidiaries.
The Agreement also provides that (i) Fort Brooke will consult with
BancGroup respecting loan requests in excess of $2,000,000 that are not
single-family residential loan requests and respecting other loan requests
outside the normal course of business, and (ii) Fort Brooke will consult with
BancGroup respecting business issues that Fort Brooke believes should be brought
to the attention of BancGroup.
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COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, neither Fort Brooke 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, Fort Brooke or any
business combination involving Fort Brooke other than as contemplated by the
Agreement. Fort Brooke will notify BancGroup immediately if any such inquiries
or proposals are received by Fort Brooke, if any such information is requested
from Fort Brooke, or if any such negotiations or discussions are sought to be
initiated with Fort Brooke. Fort Brooke shall instruct its officers, directors,
agents or affiliates or their subsidiaries to refrain from doing any of the
above.
INDEMNIFICATION
BancGroup has agreed to indemnify present and former directors and officers
of Fort Brooke and the Bank against liabilities arising out of actions or
omissions occurring at or prior to the Effective Date to the extent provided in
the Florida Business Corporation Act and Fort Brooke's Articles of Incorporation
and Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Fort Brooke Common Stock as of the Record Date are entitled to
dissenters' rights of appraisal under Florida law. Pursuant to Section 607.1320
of the FBCA, a Fort Brooke shareholder who does not wish to accept the shares of
BancGroup Common Stock to be received pursuant to the terms of the Agreement may
dissent from the Merger and elect to receive the fair value of his shares as of
the day prior to the date the Merger is approved by Fort Brooke shareholders.
In order to exercise appraisal rights, a dissenting shareholder of Fort
Brooke (a "Dissenting Shareholder") must fully comply with the statutory
procedures of Sections 607.1320, 607.1301 and 607.1302 of the FBCA, which are
summarized below. Such Sections are attached hereto as Appendix C. Shareholders
of Fort Brooke are urged to read such Sections in their entirety and to consult
with their legal advisors. Each shareholder of Fort Brooke who desires to assert
his or her appraisal rights is cautioned that failure on his or her part to
adhere strictly to the requirements of Florida law in any regard may cause a
forfeiture of any appraisal rights.
To exercise appraisal rights,
1. A Dissenting Shareholder must file with Fort Brooke, prior to the taking
of the vote on the Merger, a written notice of intent to demand payment
for his or her shares if the Merger is effectuated. A vote against the
Merger will not alone be deemed to be the written notice of intent to
demand payment. A Dissenting Shareholder need not vote against the
Merger, but cannot vote for the Merger.
2. Within ten days after the vote on the Merger is taken, Fort Brooke must
give written notice of the authorization of the Merger, if obtained, to
each Fort Brooke shareholder who filed notice of intent to demand payment
for his shares. WITHIN TWENTY DAYS AFTER THE GIVING OF THE FOREGOING
NOTICE BY FORT BROOKE, EACH DISSENTING SHAREHOLDER MUST FILE WITH FORT
BROOKE A NOTICE OF ELECTION TO DISSENT, STATING HIS OR HER NAME AND
ADDRESS, THE NUMBER OF CLASSES AND SERIES OF SHARES AS TO WHICH HE OR SHE
DISSENTS AND A DEMAND FOR PAYMENT OF THE FAIR VALUE OF HIS OR HER SHARES.
ANY DISSENTING SHAREHOLDER FAILING TO FILE SUCH ELECTION WITHIN THE
PERIOD WILL LOSE HIS OR HER APPRAISAL RIGHTS AND BE BOUND BY THE TERMS OF
THE MERGER. A Dissenting Shareholder filing an election to dissent must
also deposit the certificate(s) representing his or her shares with Fort
Brooke simultaneously with the filing of the election.
3. Upon filing a notice of election to dissent, a Dissenting Shareholder
shall thereafter be entitled only to payment pursuant to the procedure
set forth in the applicable sections of FBCA and shall not be entitled to
vote or to exercise any other rights of a shareholder. A notice of
election may be withdrawn in writing by the Dissenting Shareholder at any
time before an offer is made by Fort Brooke to pay for
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shares. Upon such withdrawal, the right of the Dissenting Shareholder to
be paid the fair value of his or her shares will cease, and he or she
will be reinstated as a shareholder.
4. Within ten days after the expiration of the period in which a Dissenting
Shareholder may file notice of election to dissent, or within ten days
after the Effective Date of the Merger, whichever is later (but in no
event later than ninety days after the Merger is approved), Fort Brooke
(or BancGroup after the Effective Date) must make a written offer to each
Dissenting Shareholder who has made demand for appraisal for his or her
shares at a price deemed by Fort Brooke to be the fair value thereof.
5. If, within thirty days after the making of such offer, the Dissenting
Shareholder accepts the offer, payment for the shares of the Dissenting
Shareholder is to be made within ninety days after the making of such
offer or the effective date of the Merger, whichever is later. Upon
payment of the agreed value, the Dissenting Shareholder will cease to
have any interest in such shares.
6. If Fort Brooke (or BancGroup, if appropriate) fails to make such offer
within the period specified above or if it makes an offer and a
Dissenting Shareholder fails to accept the same within a period of 30
days thereafter, then Fort Brooke, within 30 days after receipt of
written demand from any Dissenting Shareholder given within 60 days after
the date on which the Merger was effected, shall, or at its election at
any time within such period of 60 days may, file an action in any court
of competent jurisdiction in Dade County requesting that the fair value
of such shares be determined by the Court.
7. If Fort Brooke fails to institute such proceeding within the
above-prescribed period, any Dissenting Shareholder may do so in the name
of Fort Brooke. A copy of the initial pleading will be served on each
Dissenting Shareholder. Fort Brooke is required to pay each Dissenting
Shareholder the amount found to be due within ten days after final
determination of the proceedings. The judgment of the court is payable
only upon and concurrently with the surrender to Fort Brooke of the
certificate(s) representing the shares. Upon payment of the judgment, the
Dissenting Shareholder ceases to have any interest in such shares.
8. The costs and expenses of the court proceeding are determined by the
court and will be assessed against Fort Brooke (or BancGroup, if
appropriate) except that all or any part of such costs and expenses may
be apportioned and assessed against any Dissenting Shareholders who are
parties to the proceeding and to whom Fort Brooke has made an offer to
pay for their shares, if the court finds their refusal to accept such
offer to have been arbitrary, vexatious or not in good faith. Expenses
include reasonable compensation for, and expenses of, appraisers, but
shall exclude the fees and expenses of counsel for, and experts employed
by, any party. If the value of the shares, as determined by the court,
materially exceeds the amount that Fort Brooke offered to pay for the
shares then the court may, in its discretion, award to any Dissenting
Shareholder who is a party to the proceedings, such sum as the court may
determine to be reasonable compensation to any expert(s) employed by the
Dissenting Shareholder in the proceeding.
Successful assertion by Fort Brooke shareholders of their dissenters'
appraisal rights is dependent upon compliance with the requirements described
above. Non-compliance with any provision may result in a failure to perfect
those rights and the loss of any opportunity to receive payment for shares
pursuant to an appraisal.
BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE FLORIDA LAW RELATING TO
DISSENTER'S 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 Fort Brooke Options) has been
registered under the Securities Act of 1933 (the "Securities Act"). As a result,
shareholders of Fort Brooke who are not "affiliates" of Fort Brooke (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, affiliates of Fort Brooke are subject to
restrictions on the resale of the BancGroup Common Stock which they receive in
the Merger.
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<PAGE> 37
The BancGroup Common Stock received by affiliates of Fort Brooke who do not
also become affiliates of BancGroup after the consummation of the Merger may not
be sold except pursuant to an effective Registration Statement under the
Securities Act covering such shares or in compliance with Rule 145 promulgated
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such shareholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers 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 Fort Brooke
affiliate has held the BancGroup Common Stock for at least two years. BancGroup
Common Stock held by affiliates of Fort Brooke who become affiliates of
BancGroup, if any, will be subject to additional restrictions on the ability of
such persons to resell such shares.
Fort Brooke 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 Fort Brooke. Fort Brooke will also obtain from each such person a
written undertaking to the effect that no sale or transfer will be made of any
shares of BancGroup Common Stock by such person except pursuant to Rule 145 or
pursuant to an effective registration statement or an exemption from
registration under the Securities Act. Receipt of such an undertaking is a
condition to BancGroup's obligation to close the Merger. If such undertakings
are not received and BancGroup waives receipt of such condition, the
certificates for the shares of BancGroup Common Stock to be issued to such
person will contain an appropriate restrictive legend and appropriate stock
transfer orders will be given to BancGroup's stock transfer agent.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a pooling-of-interests transaction
in accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of Fort Brooke 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 Fort Brooke Common Stock.
Under this accounting treatment, assets and liabilities of Fort Brooke 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 will be restated to reflect the consolidated operations of
BancGroup and Fort Brooke 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
Fort Brooke Common Stock will be reported on the NYSE.
TREATMENT OF FORT BROOKE OPTIONS
ASSUMPTION OF OPTIONS. As of the date of this Prospectus, the Bank had
granted options, subsequently assumed by Fort Brooke, Fort Brooke Options which
entitle the holders thereof to acquire up to 59,875 shares of Fort Brooke Common
Stock. On the Effective Date, BancGroup shall assume all Fort Brooke Options
outstanding, and each such option shall represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the Fort Brooke
Options except as specified below. The registration statement registering the
shares of BancGroup Common Stock issued pursuant to the Merger also registers
the shares of BancGroup Common Stock to be issued upon the exercise of the Fort
Brooke Options assumed by BancGroup. The number of shares of BancGroup Common
Stock to be issued pursuant to such options shall equal the number of shares of
Fort Brooke Common Stock subject to such Fort Brooke Options multiplied by the
Exchange Ratio, provided that no fraction of shares of BancGroup Common Stock
shall be issued and the number of shares of BancGroup Common Stock to be issued
upon the exercise of Fort Brooke Options, if a fractional share exists, shall
equal the number of whole shares obtained by rounding to the nearest
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<PAGE> 38
whole number, giving account to such fraction. The exercise price for the
acquisition of BancGroup Common Stock shall be the exercise price for each share
of Fort Brooke 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" shall mean the result obtained by
dividing $31.50 by the Market Value.
The Fort Brooke Options are issuable pursuant to the Fort Brooke Bank
Nonqualified Stock Option Plan, subsequently assumed by Fort Brooke, (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. Fort Brooke Options are not transferrable except
under the laws of descent and distribution.
PURPOSE OF THE OPTION PLAN. The purpose of the Option Plan is to assist
Fort Brooke in retaining the employment of valued employees and directors by
offering them a greater stake in Fort Brooke's and the Bank's success and a
closer identity with them, and to aid in obtaining the services of individuals
whose employment would be helpful to the Bank and would contribute to its
success. BancGroup believes that its assumption of the Fort Brooke Options will
be consistent with this purpose. No further options will be granted under the
Option Plan after the Merger. A total of 24 persons currently hold Fort Brooke
Options.
TAX CONSEQUENCES -- NONQUALIFIED OPTIONS. The Fort Brooke Options are not
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended. Thus, upon the exercise of such an option, ordinary income
will result to the grantee equal to the difference between the price of the
option and the fair market value of the stock subject to the option at the date
of exercise. BancGroup, however, will be entitled to a tax deduction equal to
the amount of ordinary income accruing to the optionee.
The foregoing statements concerning federal income tax treatment are
necessarily general and may not apply in a particular instance. Option holders
should contact their own professional tax advisors for advice concerning their
particular tax situation and any changes in the tax law since the date of this
Prospectus.
ADMINISTRATION. The shares of stock to be delivered upon the exercise of
Fort Brooke Options granted under the Option Plan shall be made available, after
the Merger, from the authorized but unissued shares of BancGroup's Common Stock.
The Option Plan is to be administered, after the Merger, by the Personnel
and Compensation Committee (the "Committee") of the Board of Directors of
BancGroup. All members of the Committee are directors of BancGroup. The Chairman
of the Committee, John C. H. Miller, Jr., receives employee-related compensation
from BancGroup and holds options under BancGroup's stock option plans. Mr.
Miller is a member of a law firm that performs legal services for BancGroup. See
"LEGAL OPINIONS." Another member of the Committee, Jack H. Rainer, is Chairman
of Bankers Credit Life Insurance Company, which provides credit life insurance
on certain loans made by Colonial Bank, BancGroup's Alabama bank subsidiary. The
members of the Committee serve at the pleasure of the Board of Directors of
BancGroup. The Committee shall interpret the Option Plan and resolve questions
presented by holders of options under the Option Plan. Requests for information
or questions about the Option Plan should be directed to BancGroup's Corporate
Secretary, at the offices of BancGroup, Post Office Box 1108, One Commerce
Street, Montgomery, Alabama 36102, telephone: (334) 240-5000.
EXERCISE OF OPTIONS. After a Fort Brooke 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,
if the Committee agrees in a particular instance, by delivering BancGroup stock
already owned by the option holder.
AMENDMENT AND OTHER MATTERS. BancGroup's Board of Directors may at any
time amend the Option Plan, except that no amendment may make any change in any
option already granted which would adversely affect the rights of any
participant.
It is not anticipated that BancGroup will make any reports to option
holders regarding the amount or status of Fort Brooke Options held. Option
holders may obtain such information from BancGroup at the address given above.
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The shares subject to options will be obtained by BancGroup from authorized
but unissued shares. BancGroup has reserved sufficient authorized but unissued
shares for issuance pursuant to options under the Option Plan and does not
anticipate acquiring any shares in the open market for such purposes.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The Common Stock
was first listed on the NYSE on February 24, 1995. Prior to February 21, 1995,
BancGroup had two classes of common stock outstanding, Class A and Class B. The
Class B was not publicly traded. The Class A Common Stock was traded in the
over-the-counter market and quoted on the NASDAQ National Market System. The
BancGroup Class A Common Stock had more limited voting rights than the BancGroup
Class B Common Stock. The Class A and Class B Common Stock were reclassified
into one class of Common Stock on February 21, 1995, and the Class A Common
Stock ceased to be quoted on NASDAQ on February 24, 1995.
The following table shows the dividends paid per share and indicates the
high and low closing prices for the BancGroup Class A Common Stock as reported
by the NASDAQ National Market System up to February 24, 1995, and the same
information reported by the NYSE for the BancGroup Common Stock commencing
February 24, 1995.
<TABLE>
<CAPTION>
PRICE AND
DIVIDENDS
PAID
------------ DIVIDENDS
HIGH LOW (PER SHARE)
---- --- -----------
<S> <C> <C> <C>
1995
1st Quarter...................................................... 23 5/8 19 1/2 0.225
2nd Quarter...................................................... 27 1/2 23 1/8 0.225
3rd Quarter...................................................... 29 7/8 27 1/2 0.225
4th Quarter...................................................... 32 7/8 28 1/2 0.225
1996
1st Quarter...................................................... 36 1/2 30 0.27
2nd Quarter...................................................... 36 1/8 31 1/4 0.27
3rd Quarter...................................................... 35 7/8 31 1/4 0.27
4th Quarter...................................................... 40 1/4 34 3/4 0.27
1997
1st Quarter (through January 20, 1997)........................... 40 1/8 37 3/8 0.30
</TABLE>
On September 23, 1996, 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 $34 3/4 per share.
At September 30, 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.
FORT BROOKE
None of the shares of Fort Brooke Common Stock, nor shares of the Bank's
common stock prior to the formation of the Bank's holding company, have been
listed for trading on any exchange or quoted on any NASDAQ system, nor has any
licensed securities broker in the past made, or indicated an expectation in the
future to make, a market in Fort Brooke's outstanding securities. Prior trading
transactions have therefore been infrequent and negotiated privately between the
purchaser and seller. During the past two years, management is aware that shares
have traded at prices ranging from $15.00 to $20.00 and the most recent sale
occurred in August, 1996 when 200 shares were sold at $19.50 per share. Fort
Brooke paid cash dividends in
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<PAGE> 40
the amounts of $.25 per share for the first quarter of 1996 and $.2396 per share
for the fourth quarter of 1996. The Bank did not pay cash dividends in 1995 or
1996 prior to the formation of Fort Brooke.
At December 31, 1996, the Bank accounted for approximately 100% of Fort
Brooke's consolidated assets and income, the latter by way of dividends declared
and paid with respect to the Bank's capital stock owned by Fort Brooke.
The Agreement limits Fort Brooke's ability to pay dividends prior to the
Effective Date to two dividend payments that are comparable to dividends paid by
BancGroup. See "THE MERGER -- Conduct of Business Pending the Merger."
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 44,000,000 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 January 10, 1997, there were
issued and outstanding a total of 18,797,859 shares of BancGroup Common Stock.
No shares of Preference Stock are issued and outstanding. BancGroup issued in
1986 $28,750,000 in principal amount of its 7 1/2% Convertible Subordinated
Debentures due 2011 (the "1986 Debentures") of which $7,179,200 were outstanding
as of December 31, 1996 and convertible at any time into 256,400 shares of
BancGroup Common Stock, subject to adjustment. There are 979,088 shares of
BancGroup Common Stock subject to issue upon exercise of options under
BancGroup's stock option plans. In addition to BancGroup Common Stock to be
issued in the Merger, BancGroup will issue additional shares of its Common Stock
in pending acquisitions. See "BUSINESS OF BANCGROUP -- Proposed Affiliate
Banks."
On January 15, 1997, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend. Stockholders of record of BancGroup Common Stock
will receive one share of BancGroup Common Stock for each share they hold as of
February 4, 1997. The additional shares will be distributed pursuant to the
stock split on February 11, 1997.
The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
Restated Certificate of Incorporation (the "Certificate"), as amended, and
bylaws of BancGroup, do not purport to be complete and are qualified in their
entirety by reference to the foregoing.
BANCGROUP COMMON STOCK
Dividends. Subject to the rights of holders of BancGroup's Preference
Stock, if any, to receive certain dividends prior to the declaration of
dividends on shares of BancGroup Common Stock, when and as dividends, payable in
cash, stock or other property, are declared by the BancGroup Board of Directors,
the holders of BancGroup Common Stock are entitled to share ratably in such
dividends.
Voting Rights. Each holder of BancGroup Common Stock has one vote for each
share held on matters presented for consideration by the stockholders.
Preemptive Rights. The holders of BancGroup Common Stock have no
preemptive rights to acquire any additional shares of BancGroup.
Issuance of Stock. The BancGroup Certificate authorizes the BancGroup
Board to issue authorized shares of BancGroup Common Stock without stockholder
approval. However, BancGroup's Common Stock is listed on the NYSE, which
requires stockholder approval of the issuance of additional shares of BancGroup
Common Stock under certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-up
of BancGroup, whether voluntary or involuntary, the holders of BancGroup Common
Stock will be entitled to share ratably in any of its assets or funds that are
available for distribution to its stockholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after preferences
of any outstanding Preference Stock.
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<PAGE> 41
PREFERENCE STOCK
BancGroup's Preference Stock may be issued from time to time as a class
without series, or if so determined by the BancGroup Board of Directors, either
in whole or in part in one or more series. The voting rights, and such
designations, preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, including, but not limited to, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of BancGroup Preference Stock (or of the entire class of BancGroup
Preference Stock if none of such shares has been issued), the number of shares
constituting any such series and the terms and conditions of the issue thereof
may be fixed by resolution of the BancGroup Board of Directors. BancGroup
Preference Stock may have a preference over the BancGroup Common Stock with
respect to the payment of dividends and the distribution of assets in the event
of the liquidation or winding-up of BancGroup and such other preferences as may
be fixed by the BancGroup Board.
1986 DEBENTURES
BancGroup issued in 1986 its 7 1/2% Convertible Subordinated Debentures due
2011 (the "1986 Debentures") in the total principal amount of $28,750,000. The
1986 Debentures were issued under a trust indenture (the "1986 Indenture")
between BancGroup and SunTrust Bank, Atlanta, 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 $28 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 256,400 shares of such BancGroup Common Stock will be
issued. The 1986 Debentures are redeemable, in whole or in part, at the option
of BancGroup at certain premiums until 1996, when the redemption price shall be
equal to 100% of the face amount of the 1986 Debentures plus accrued interest.
The payment of principal and interest on the 1986 Debentures is subordinate, to
the extent provided in the 1986 Indenture, to the prior payment when due of all
Senior Indebtedness of BancGroup. "Senior Indebtedness" is defined as any
indebtedness of BancGroup for money borrowed, or any indebtedness incurred in
connection with an acquisition or with a merger or consolidation, outstanding on
the date of execution of the 1986 Indenture as originally executed, or
thereafter created, incurred or assumed, and any renewal, extension,
modification or refunding thereof, for the payment of which BancGroup (which
term does not include BancGroup's consolidated or unconsolidated subsidiaries)
is at the time of determination responsible or liable as obligor, guarantor or
otherwise. Senior Indebtedness does not include (i) indebtedness as to which, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness is subordinate in right of
payment to any other indebtedness of BancGroup, and (ii) indebtedness which by
its terms states that such indebtedness is subordinate to or equally subordinate
with the 1986 Debentures.
At September 30, 1996, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $708 million. Such debt includes all
short-term debt consisting of federal funds purchased, securities purchased
under repurchase agreements and borrowings 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.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and bylaws may have the
effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup Board of Directors to issue BancGroup
Preference Stock with such rights and privileges, including voting rights, as it
may deem appropriate may enable the BancGroup Board to prevent a change in
control despite a shift in
31
<PAGE> 42
ownership of the BancGroup Common Stock. See "General" and "Preference Stock."
In addition, the power of BancGroup's Board to issue additional shares of
BancGroup Common Stock may help delay or deter a change in control by increasing
the number of shares needed to gain control. See "BancGroup Common Stock." The
following provisions also may deter any change in control of BancGroup.
Classified Board. BancGroup's Board of Directors is classified into three
classes, as nearly equal in number as possible, with the members of each class
elected to three-year terms. Thus, one-third of BancGroup's Board of Directors
is elected by stockholders each year. With this provision, two annual elections
are required in order to change a majority of the Board of Directors. There are
currently 19 directors of BancGroup. This provision of BancGroup's Certificate
also stipulates that (i) directors can be removed only for cause upon a vote of
80% of the voting power of the outstanding shares entitled to vote in the
election of directors, voting as a class, (ii) vacancies in the Board may only
be filled by a majority vote of the directors remaining in office, (iii) the
maximum number of directors shall be fixed by resolution of the Board of
Directors, and (iv) the provisions relating to the classified Board can only be
amended by the affirmative vote of the holders of at least 80% of the voting
power of the outstanding shares entitled to vote in the election of directors,
voting as a class.
Business Combinations. Certain "Business Combinations" of BancGroup with a
"Related Person" may only be undertaken with the affirmative vote of at least
75% of the outstanding shares of "Voting Stock," plus the affirmative vote of at
least 67% of the outstanding shares of Voting Stock, not counting shares owned
by the Related Person, unless the Continuing Directors of BancGroup approve such
Business Combination. A "Related Person" is a person, or group, who owns or
acquires 10% or more of the outstanding shares of BancGroup Common Stock,
provided that no person shall be a Related Person if such person would have been
a Related Person on the date of approval of this provision by BancGroup's Board
of Directors, i.e., April 20, 1994. An effect of this provision may be to
exclude Robert E. Lowder, the current Chairman and President of BancGroup, and
certain members of his family from the definition of Related Person. A
"Continuing Director" is a director who was a member of the Board of Directors
immediately prior to the time a person became a Related Person. This provision
may not be amended without the affirmative vote of the holders of at least 75%
of the outstanding shares of Voting Stock, plus the affirmative vote of the
outstanding shares of at least 67% of the outstanding Voting Stock, excluding
shares held by a Related Person. This provision may have the effect of giving
the incumbent Board of Directors a veto over a merger or other Business
Combination that could be desired by a majority of BancGroup's stockholders. The
current Board of Directors of BancGroup owns approximately 13% of the
outstanding shares of BancGroup Common Stock.
Board Evaluation of Mergers. BancGroup's Certificate permits the Board of
Directors to consider certain factors such as the character and financial
stability of the other party, the projected social, legal, and economic effects
of a proposed transaction upon the employees, suppliers, regulatory agencies and
customers and communities of BancGroup, and other factors when considering
whether BancGroup should undertake a merger, sale of assets, or other similar
transaction with another party. This provision may not be amended except by the
affirmative vote of at least 80% of the outstanding shares of BancGroup Common
Stock. This provision may give greater latitude to the Board of Directors in
terms of the factors which the board may consider in recommending or rejecting a
merger or other Business Combination of BancGroup.
Director Authority. BancGroup's Certificate prohibits stockholders from
calling special stockholders' meetings and acting by written consent. It also
provides that only BancGroup's Board of Directors has the authority to undertake
certain actions with respect to governing BancGroup such as appointing
committees, electing officers, and establishing compensation of officers, and it
allows the Board to act by majority vote.
Bylaw Provisions. BancGroup's bylaws provide that stockholders wishing to
propose nominees for the Board of Directors or other business to be taken up at
an annual meeting of BancGroup stockholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of stockholder meetings but could make it more
difficult for stockholders to nominate directors or introduce business at
stockholder meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning
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<PAGE> 43
15% or more of the outstanding BancGroup Common Stock (or who is an affiliate of
BancGroup and has over the past three years beneficially owned 15% or more of
such stock) (either, for the purpose of this paragraph, an "Interested
Stockholder"), unless the BancGroup Board has approved either (i) the business
combination or (ii) prior to the stock acquisition by which such person's
beneficial ownership interest reached 15% (a "Stock Acquisition"), the Stock
Acquisition. The prohibition lasts for three years from the date of the Stock
Acquisition. Notwithstanding the preceding, Delaware law allows BancGroup to
enter into a business combination with an Interested Stockholder if (i) the
business combination is approved by the BancGroup Board of Directors and
authorized by an affirmative vote of at least 66 2/3% of the outstanding voting
stock of BancGroup which is not owned by the Interested Stockholder or (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
Interested Stockholder, such stockholder owned at least 85% of the outstanding
stock of BancGroup (excluding BancGroup stock held by officers and directors of
BancGroup or by certain BancGroup stock plans). These provisions of Delaware law
apply simultaneously with the provisions of BancGroup's Certificate relating to
business combinations with a related person, described above at "Business
Combinations," but they are generally less restrictive than BancGroup's
Certificate.
Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve has been given 60
days' prior written notice of such proposed acquisition and within that time
period the Federal Reserve has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve, the acquisition of more than 10% of a class of voting
stock of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as BancGroup, would, under the
circumstances set forth in the presumption, constitute the acquisition of
control. The receipt of revocable proxies, provided the proxies terminate within
a reasonable time after the meeting to which they relate, is not included in
determining percentages for change in control purposes.
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<PAGE> 44
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger is consummated, all shareholders of Fort Brooke will become
holders of BancGroup Common Stock. The rights of the holders of the Fort Brooke
Common Stock who become holders of the BancGroup Common Stock following the
Merger will be governed by BancGroup's Certificate and bylaws, as well as the
laws of Delaware, the state in which BancGroup is incorporated.
The following summary compares the rights of the shareholders of Fort
Brooke Common Stock with the rights of the holders of the BancGroup Common
Stock. For a more complete description of the rights of the holders of BancGroup
Common Stock, see "BANCGROUP CAPITAL STOCK AND DEBENTURES."
The following information is qualified in its entirety by BancGroup's
Certificate and bylaws, and Fort Brooke's Articles of Incorporation and bylaws,
the Delaware General Corporation Law (the "Delaware GCL") and the Florida
Business Corporation Act ("FBCA").
DIRECTOR ELECTIONS
Fort Brooke. Fort Brooke's directors are elected annually. Shareholders
may not cumulate votes in connection with such election (nor for any other
purpose).
BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the Board to be elected annually. There is no
cumulative voting in the election of directors. See "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control -- Classified Board."
REMOVAL OF DIRECTORS
Fort Brooke. Fort Brooke's bylaws provide for the removal of a director,
with or without cause, upon the affirmative vote of holders of not less than a
majority of the total voting power of all outstanding shares of voting stock.
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
Fort Brooke. Each holder of Fort Brooke Common Stock is entitled to cast
one vote for each share held on 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.
BancGroup. Each stockholder of BancGroup is entitled to one vote for each
share of BancGroup Common Stock held, and such holders are not entitled to
cumulative voting rights in the election of directors.
PREEMPTIVE RIGHTS
Fort Brooke. Holders of Fort Brooke Common Stock have no preemptive rights
to subscribe for additional shares on a pro rata or other basis when and if
shares are offered for sale by Fort Brooke.
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
Fort Brooke. Section 607.0831 of the FBCA provides that a director of Fort
Brooke will not be personally liable for monetary damages to Fort Brooke 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
34
<PAGE> 45
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 Fort
Brooke to procure judgment in its favor or by or in the right of a shareholder,
conscious disregard for the best interests of Fort Brooke, or willful
misconduct, or (5) in a proceeding by or in the right of someone other than Fort
Brooke 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. This provision would
absolve directors of Fort Brooke 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 Fort
Brooke and its shareholders, and it would not affect the availability of
injunctive and other equitable relief as a remedy.
BancGroup. The BancGroup Certificate provides that a director of BancGroup
will have no personal liability to BancGroup or its stockholders for monetary
damages for breach of fiduciary duty as a director except (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for the payment of certain unlawful dividends
and the making of certain stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for negligence in the
performance of duties, including gross negligence. It would not permit a
director to be exculpated, however, for liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to
BancGroup and its stockholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
Fort Brooke. Under Section 607.0850 of the FBCA, the directors and
officers of Fort Brooke may be indemnified against certain liabilities which
they may incur in their capacity as officers and directors. Such indemnification
is generally available if the executive acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interest of
Fort Brooke, and with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Indemnification may also be
available unless a court of competent jurisdiction establishes by final
adjudication that the actions or omissions of the executive are material to the
cause of action so adjudicated and constituted: (a) a violation of the criminal
law, unless the executive had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(b) a transaction from which the executive derived an improper personal benefit;
or (c) willful misconduct or conscious disregard for the best interest of Fort
Brooke in a proceeding by or in the right of Fort Brooke to procure a judgment
in its favor or in a proceeding by or in the right of a shareholder. Fort
Brooke's Articles of Incorporation require Fort Brooke to indemnify its officers
and directors to the full extent permitted by the statute. Further, to the
extent that the proposed indemnitee is successful on the merits or otherwise in
the defense of any action, suit or proceeding (or any claim, issue or matter
therein) he or she must be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him or her in connection with such
proceeding.
Fort Brooke maintains a directors' and officers' insurance policy pursuant
to which officers and directors of Fort Brooke would be entitled to
indemnification against certain liabilities, including reimbursement of certain
expenses. The Merger Agreement requires BancGroup, subject to certain
conditions, to maintain such policy in effect for four years after the Effective
Date with respect to claims arising from facts or events which occurred before
the Effective Date.
BancGroup. Section 145 of the Delaware GCL contains detailed and
comprehensive provisions providing for indemnification of directors and officers
of Delaware corporations against expenses, judgments, fines and settlements in
connection with litigation. Under the Delaware GCL, other than an action brought
by or in the right of BancGroup, such indemnification is available if it is
determined that the proposed indemnitee acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
BancGroup and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In actions brought by or
in the right of BancGroup, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred in the defense or
settlement of such
35
<PAGE> 46
action if the indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of BancGroup
and except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person has been adjudged to be liable to BancGroup
unless and only to the extent that the Delaware Court of Chancery or the court
in which the action was brought determines upon application that in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the Delaware GCL.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING
Fort Brooke. Fort Brooke's bylaws authorize a special shareholder meeting
to be called by the board of directors, the chairman of the board or Fort
Brooke's chief executive officer. Section 607.0702 of the FBCA separately
authorizes such a call by the holders of not less than ten percent of the total
voting power of all outstanding shares of voting stock.
Section 607.0704 of the FBCA permits any action required or permitted by
the FBCA to be taken at an annual or special meeting of stockholders to be taken
instead without meeting by written consent of stockholders having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's stockholders may only be called by a majority of the BancGroup Board
of Directors or by the chairman of the Board of Directors of BancGroup. Holders
of BancGroup Common Stock may not call special meetings or act by written
consent.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
Fort Brooke. The FBCA provides that mergers and sales of substantially all
of the property of a Florida corporation must be approved by a majority of the
outstanding shares of the corporation entitled to vote thereon. The FBCA also
provides, however, that the shareholders of a corporation surviving a merger
need not approve the transaction if: (a) the articles of incorporation of the
surviving corporation will not differ from its articles before the merger, and
(b) each shareholder of the surviving corporation whose shares were outstanding
immediately prior to the effective date of the merger will hold the same number
of shares with identical designations, preferences, limitations and relative
rights, immediately after the merger.
BancGroup. The Delaware GCL provides that mergers and sales of
substantially all of the assets of Delaware corporations must be approved by a
majority of the outstanding stock of the corporation entitled to vote thereon.
The Delaware GCL also provides, however, that the stockholders of the
corporation surviving a merger need not approve the transaction if: (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of such corporation; (ii) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding immediately prior to the
effective date of the merger. See also "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control" for a description of the statutory provisions
and the provisions of the BancGroup Certificate relating to changes
36
<PAGE> 47
of control of BancGroup. See "Antitakeover Statutes" for a description of
additional restrictions on business combination transactions.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Fort Brooke. Section 607.1002 of the FBCA permits the Board of Directors
to amend the Articles of Incorporation in certain minor respects without
stockholder action, but Section 607.1003 requires most amendments to be adopted
by the stockholders upon recommendation of the Board of Directors. Unless the
FBCA requires a greater vote, amendments may be adopted by a majority of the
votes cast, a quorum being present.
Section 607.1020 of the FBCA permits the Board of Directors to amend or
repeal the bylaws unless the FBCA or the stockholders provide otherwise. The
stockholders entitled to vote have concurrent power to amend or repeal the
bylaws.
BancGroup. Under the Delaware GCL, a Delaware corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "supermajority" stockholder approval to amend or repeal any
provision of, or adopt any provision inconsistent with, certain provisions in
the BancGroup Certificate governing (i) the election or removal of directors,
(ii) business combinations between BancGroup and a Related Person, and (iii)
board of directors evaluation of business combination procedures. See "BANCGROUP
CAPITAL STOCK AND DEBENTURES -- Changes in Control."
As is permitted by the Delaware GCL, the Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The stockholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
bylaws.
RIGHTS OF DISSENTING STOCKHOLDERS
Fort Brooke. Holders of Fort Brooke Common Stock as of the Record Date are
entitled to dissenters' rights of appraisal under Florida law. For a description
of such appraisal rights, see "THE MERGER -- Rights of Dissenting Stockholders."
BancGroup. Under the Delaware GCL, a stockholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
otherwise would have received in the transaction. For this purpose, "fair value"
may be determined by all generally accepted techniques of valuation used in the
financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. Such fair value is
determined by the Delaware Court of Chancery if a petition for appraisal is
timely filed. Appraisal rights are not available, however, to stockholders of a
corporation (i) if the shares are listed on a national securities exchange (as
is BancGroup Common Stock) or quoted on the NASDAQ National Market System, or
held of record by more than 2,000 stockholders (as is BancGroup Common Stock),
and (ii) stockholders are permitted by the terms of the merger or consolidation
to accept in exchange for their shares (a) shares of stock of the surviving or
resulting corporation, (b) shares of stock of another corporation listed on a
national securities exchange or held of record by more than 2,000 stockholders,
(c) cash in lieu of fractional shares of such stock, or (d) any combination
thereof. Stockholders are not permitted appraisal rights in a merger if such
corporation is the surviving corporation and no vote of its stockholders is
required.
PREFERRED STOCK
Fort Brooke. Fort Brooke's Articles of Incorporation do not authorize the
issuance of shares 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
37
<PAGE> 48
Preference Stock are issued and outstanding. See "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Preference Stock."
EFFECT OF THE MERGER ON FORT BROOKE SHAREHOLDERS
As of December 31, 1996, Fort Brooke had 642 registered shareholders of
record and 990,553 outstanding shares of Fort Brooke Common Stock. As of January
10, 1997, BancGroup had 18,797,859 shares of BancGroup Common Stock outstanding
with 5,747 stockholders of record.
Assuming no exercises of Fort Brooke Options at the Effective Date, a
Market Value of BancGroup Common Stock of $38.8125, calculated as of January 10,
1997, and prior to giving effect to the stock split for BancGroup Common Stock,
an aggregate amount of 803,927 shares of BancGroup Common Stock would be issued
to the shareholders of Fort Brooke pursuant to the Merger. These shares would
represent approximately 4.1% of the total shares of BancGroup Common Stock
outstanding after the Merger, not counting any shares of BancGroup Common Stock
to be issued in other pending acquisitions.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal stockholder and each director and officer of BancGroup. As a
group, the directors and officers of BancGroup who own approximately 10.95% of
BancGroup's outstanding shares would own approximately 10.52% after the Merger.
See "BUSINESS OF BANCGROUP -- Voting Securities and Principal Stockholders."
38
<PAGE> 49
THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of September 30, 1996, (ii) the
combined presentation of the condensed consolidated statements of condition of
completed combinations: Tomoka Bancorp, Inc. ("Tomoka"), Jefferson Bancorp, Inc.
("Jefferson") and First Family Financial Corporation ("First Family"),
("completed business combinations") as of September 30, 1996, (iii) the
condensed consolidated statement of condition of Fort Brooke Bancorporation and
subsidiary ("Fort Brooke"), as of September 30, 1996, (iv) the combined
presentation of the condensed consolidated statements of condition of other
probable combinations with BancGroup: D/W Bankshares, Inc. ("Bankshares") and
Shamrock Holding, Inc. ("Shamrock"), ("other probable business combinations") as
of September 30, 1996, (v) adjustments to give effect to the proposed and
completed purchase method combinations with Shamrock and First Family,
respectively and the proposed and completed pooling-of-interests method business
combinations with Fort Brooke and Bankshares, and Tomoka and Jefferson,
respectively, (vi) the pro forma combined condensed statement of condition of
BancGroup and subsidiaries as if such combinations had occurred on September 30,
1996.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein and Fort Brooke,
included elsewhere herein. The pro forma information provided below may not be
indicative of future results.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/
BANCGROUP, INC. COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS) SUBTOTAL
--------------- ------------ ------------ -------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks.... $ 150,320 $ 13,676 $ (6,404)(3) $ 8,091 $ 165,683
Interest-bearing
deposits.................. 4,977 5,677 3,209 13,863
Federal funds sold......... 3,625 3,625
Securities available for
sale...................... 289,378 117,512 21,228 428,927
Investment securities...... 297,397 56,368 (1,600)(3) 18,387 370,552
Mortgage loans held for
sale...................... 161,864 1,411 163,275
Loans, net of unearned
income.................... 3,570,490 472,437 133,641 4,176,568
Less: Allowance for
possible loan loss........ (45,098) (3,706) (1,877) (50,681)
---------- -------- ------- ---------- -------- ----------
Loans, net................. 3,525,392 468,731 131,764 4,125,887
Premises and equipment,
net....................... 76,620 9,408 900(3) 5,201 92,129
Excess of cost over
tangible and intangible
assets acquired, net...... 30,624 6,014(3) 36,638
Purchased mortgage service
rights.................... 95,076 95,076
Other real estate owned.... 9,246 642 1,398 11,286
Accrued interest and other
assets.................... 72,630 23,682 742(3) 3,318 101,376
(150)(3)
1,963(2)
---------- -------- ------- ---------- -------- ----------
Total Assets............... $ 4,713,524 $700,732 $ 1,465 $192,596 $5,608,317
========== ======== ======= ========== ======== ==========
Liabilities and
Shareholders' Equity:
Deposits................... $ 3,561,923 $607,358 $173,097 $4,342,378
FHLB short-term
borrowings................ 580,000 29,069 609,069
Other short-term
borrowings................ 134,918 707 135,625
Subordinated debt.......... 7,760 7,760
Other long-term debt....... 24,605 24,605
Other liabilities.......... 74,401 12,003 $ 1,269(3) 2,677 95,515
5,165(2)
---------- -------- ------- ---------- -------- ----------
Total liabilities.......... 4,383,607 648,430 6,434 176,481 5,214,952
Common Stock............... 40,742 6,048 (6,043)(1) 7,924 (7,924)(4) 48,641
(5)(3) 2,010(4)
5,481(1)
408(3)
Additional paid in
capital................... 172,413 33,599 (30,726)(1) 4,501 (4,501)(4) 218,346
(2,873)(3) 10,415(4)
28,989(1)
5,996(3)
533(3)
Retained earnings.......... 118,465 18,342 (5,826)(3) 4,041 131,820
(3,202)(2)
Treasury Stock............. (2,299) 2,299(1)
Unearned compensation...... (699) (659) (1,358)
Unrealized gain (loss) on
securities................ (1,004) (2,729) (351) (4,084)
---------- -------- ------- ---------- -------- ----------
Total equity............... 329,917 52,302 (4,969) 16,115 393,365
Total liabilities and
equity.................... $ 4,713,524 $700,732 $ 1,465 $192,596 $ $5,608,317
========== ======== ======= ========== ======== ==========
Capital Ratios:
Capital Ratio............. 8.04% 9.25%
Tangible Leverage Ratio... 6.44% 8.59%
Tier One Capital Ratio*... 9.06% 11.80%
Total Capital Ratio*...... 10.54% 13.05%
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------------
OTHER PROBABLE PROFORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Cash and due from banks.... $ 9,436 $(11,482)(5) $ 163,637
Interest-bearing
deposits.................. 13,863
Federal funds sold......... 7,328 10,953
Securities available for
sale...................... 57,369 486,296
Investment securities...... 6,959 377,511
Mortgage loans held for
sale...................... 163,275
Loans, net of unearned
income.................... 95,678 4,272,246
Less: Allowance for
possible loan loss........ (1,524) (52,205)
-------- ---------- ----------
Loans, net................. 94,154 4,220,041
Premises and equipment,
net....................... 5,129 (90)(5) 97,168
Excess of cost over
tangible and intangible
assets acquired, net...... 116 3,319(5) 40,073
Purchased mortgage service
rights.................... 95,076
Other real estate owned.... 29 11,315
Accrued interest and other
assets.................... 2,665 61(5) 104,102
-------- ---------- ----------
Total Assets............... $183,185 $ (8,192) $5,783,310
======== ========== ==========
Liabilities and
Shareholders' Equity:
Deposits................... $160,350 $4,502,728
FHLB short-term
borrowings................ 609,069
Other short-term
borrowings................ 135,625
Subordinated debt.......... 1,425 9,185
Other long-term debt....... 24,605
Other liabilities.......... 2,206 85(5) 97,806
-------- ---------- ----------
Total liabilities.......... 163,981 85 5,379,018
Common Stock............... 747 (46)(5) 49,912
(701)(6)
1,271(6)
Additional paid in
capital................... 6,249 (599)(5) 223,426
(5,650)(6)
5,080(6)
Retained earnings.......... 12,628 (7,989)(5) 136,459
Treasury Stock.............
Unearned compensation...... (1,358)
Unrealized gain (loss) on
securities................ (420) 357(5) (4,147)
-------- ---------- ----------
Total equity............... 19,204 (8,277) 404,292
Total liabilities and
equity.................... $183,185 $ (8,192) $5,783,310
======== ========== ==========
Capital Ratios:
Capital Ratio............. 7.95%
Tangible Leverage Ratio... 6.52%
Tier One Capital Ratio*... 8.98%
Total Capital Ratio*...... 10.45%
</TABLE>
- ---------------
* Based on risk weighted assets
39
<PAGE> 50
COMPLETED COMBINATIONS
(pooling of interests)
(1) To record the issuance of 2,192,323 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Tomoka and Jefferson:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Tomoka outstanding shares................................. 410,913
Conversion ratio, determined as follows:
$32/$39.6938 per share, the 20-day average market value
of BancGroup Common Stock on the fifth day prior to
January 2, 1997...................................... 0.8062
---------
BancGroup shares to be issued............................. 331,267
Jefferson outstanding shares.............................. 3,791,040
Conversion ratio, determined as follows:
$18.90/$38.50 per share, the maximum market value per
the merger agreement, as compared to the 10-day
average market value of BancGroup Common Stock on
January 2, 1997...................................... 0.4909
---------
BancGroup shares to be issued............................. 1,861,056
Par value of 2,192,323 shares issued at $2.50 per share... $ 5,481
Shares issued at par value................................ $ 5,481
Total capital stock of Tomoka and Jefferson............... 34,470
Excess recorded as an increase to contributed capital..... 28,989
----------
34,470
To eliminate Tomoka and Jefferson capital stock:
Common stock, at par value................................ (6,043)
Contributed capital....................................... (30,726)
Treasury stock............................................ 2,299
----------
(34,470)
Net change in equity.............................. $ 0
==========
</TABLE>
(2) To record nonrecurring charges expected to result from the proposed pooling
of interests combination with Jefferson:
<TABLE>
<S> <C>
Accrual of severance pay................................................. $ 4,325
Accrual of discretionary bonus........................................... 840
-------
Total accrual adjustments.............................................. 5,165
Deferred tax............................................................. (1,963)
-------
Net charge to retained earnings.......................................... $ 3,202
=======
</TABLE>
40
<PAGE> 51
(purchase method)
(3) To assign the amount by which the estimated value of BancGroup's investment
in First Family is in excess of the historical carrying amount of the net
assets acquired, based on the estimated fair value of such net assets and
to record the investment in First Family by the issuance of 163,309 shares
of BancGroup Common Stock and $6,403,750 in cash for all of the outstanding
545,000 shares of First Family as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of First Family................... $ 8,704
Adjustments to state assets at fair value:
Write-up of fixed assets............................................... 900
Write-down securities held to maturity................................. (1,600)
Other.................................................................. (150)
Acquisition accruals:
Severance pay.......................................................... (1,013)
Other legal, accounting, and professional.............................. (256)
Tax effect of purchase adjustments....................................... 742
Goodwill................................................................. 6,014
-------
Total adjustments........................................................ 4,637
Adjusted equity in carrying value of net assets.......................... $13,341
=======
Allocated as follows:
Par Value of 163,309 shares issued for all outstanding shares of First
Family................................................................. $ 408
Estimated amount in excess of par value of 163,309 shares of BancGroup
Common Stock issued for First Family outstanding shares at an assumed
market value of $39.2125 per share (10 day average at January 8, 1997
(date of closing))..................................................... 5,996
Stock options to be assumed by BancGroup................................. 533
Cash of $11.75 per share paid to First Family shareholders............... 6,404
-------
Total purchase price..................................................... $13,341
=======
</TABLE>
FORT BROOKE BANCORPORATION
(pooling of interests)
(4) To record the issuance of 803,927 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Fort Brooke:
<TABLE>
<S> <C> <C>
Fort Brooke outstanding shares............................... 990,553
Conversion ratio, determined as follows:
$31.50/$38.8125 per share, 10-day average market value of
BancGroup Common Stock on January 10, 1997.............. 0.8116
-------
BancGroup shares to be issued................................ 803,927
Par value of 803,927 shares issued at $2.50 per share.......... $ 2,010
Shares issued at par value..................................... $ 2,010
Total capital stock of Fort Brooke............................. 12,425
Excess recorded as an increase in contributed capital........ 10,415
-------
12,425
To eliminate Fort Brooke capital stock:
Common stock, at par value................................... (7,924)
Contributed capital.......................................... (4,501)
-------
(12,425)
-------
Net change in equity.................................... $ 0
=======
</TABLE>
41
<PAGE> 52
OTHER PROBABLE COMBINATIONS
(purchase method)
(5) To assign the amount by which the estimated value of BancGroup's investment
in Shamrock is in excess of the historical carrying amount of the net
assets acquired, based on the estimated fair value of such net assets and
to record the investment in Shamrock by the payment of approximately
$11,482,000 for all of the outstanding shares of Shamrock as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of Shamrock......................... $ 8,277
Adjustments to state at fair market value:
Write-down software...................................................... (90)
Acquisition Accruals
Main-frame computer software............................................. (36)
Bankpro host software.................................................... (9)
Other legal & professional............................................... (40)
Tax effect of purchase adjustments......................................... 61
Goodwill................................................................... 3,319
-------
3,205
Adjusted equity in carrying value of net assets............................ $11,482
=======
Total adjustments
Allocated as follows:
Cash of $376.79 per share paid to Shamrock shareholders.................... 11,482
-------
Total purchase price....................................................... $11,482
=======
</TABLE>
(pooling of interests)
(6) To record the issuance of 508,500 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Bankshares:
<TABLE>
<S> <C> <C>
Bankshares outstanding shares................................ 700,836
Conversion ratio, determined as follows:
$27.39/$37.75 per share, the maximum market value per the
merger agreement, as compared to the 10-day average
market value of BancGroup Common Stock on January 10,
1997.................................................... 0.7256
--------
BancGroup shares to be issued................................ 508,500
--------
Par value of 508,500 shares issued at $2.50 per share........ $ 1,271
Shares issued at par value................................... $ 1,271
Total capital stock of Bankshares............................ 6,351
Excess recorded as an increase in contributed capital..... 5,080
--------
6,351
To eliminate Bankshares capital stock:
Common stock, at par value................................... (701)
Contributed capital.......................................... (5,650)
--------
(6,351)
--------
Net change in equity................................. $ 0
========
</TABLE>
42
<PAGE> 53
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
The following summaries include (i) the condensed consolidated statements
of income of BancGroup on a historical basis for the nine months ended September
30, 1996 and 1995 and the years ended December 31, 1995, 1994 and 1993, (ii) the
combined presentation of condensed consolidated statements of income of the
completed business combinations for the nine months ended September 30, 1996 and
1995 and the years ended December 31, 1995, 1994 and 1993, (iii) the condensed
consolidated statements of income of Fort Brooke for the nine months ended
September 30, 1996 and 1995 and the years ended December 31, 1995, 1994 and
1993, (iv) the combined presentation of condensed consolidated statements of
income of the other probable business combinations, for the nine months ended
September 30, 1996 and 1995 and the years ended December 31, 1995, 1994 and
1993, (v) adjustments to give effect to the proposed and completed purchase
method combinations with Shamrock and First Family, respectively and the
proposed and completed pooling-of-interests method business combinations with
Fort Brooke and Bankshares and Tomoka and Jefferson, respectively, and (vi) the
pro forma combined condensed consolidated statements of income of BancGroup and
subsidiaries as if such business combinations had occurred on January 1, 1993.
Note that for the purchase method combinations, Article 11 of Regulation S-X
requires pro forma statements of income to be presented for only the most recent
fiscal year and interim period. Accordingly, only the condensed consolidated
statements of income for the nine months ended September 30, 1996 and the year
ended December 31, 1995 are included in (ii), (iv) and (v) above for First
Family and Shamrock.
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 Fort Brooke, included elsewhere herein. These pro forma statements
exclude the effect of two nonrecurring charges related to Jefferson in the
amount of $3.2 million net of tax. The pro forma information provided may not
necessarily be indicative of future results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS)
------------ ------------ ------------ -------------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income....................... $257,063 $37,868 $(2)(1) $10,997
Interest expense...................... 132,035 18,363 4,324
---------- --------- ---------- --------- ----------
Net interest income before provision
for loan losses...................... 125,028 19,505 (2) 6,673
Provision for loan losses............. 6,023 384 (30)
---------- --------- ---------- --------- ----------
Net interest income after provision
for loan losses...................... 119,005 19,121 (2) 6,703
---------- --------- ---------- --------- ----------
Noninterest income.................... 49,854 4,717 1,131
Noninterest expense................... 107,859 19,272 267(1) 6,009
---------- --------- ---------- --------- ----------
Income before income taxes............ 61,000 4,566 (269) 1,825
Income taxes.......................... 21,650 1,648 (13)(1) 624
---------- --------- ---------- --------- ----------
Net Income............................ $ 39,350 $ 2,918 $(256) $ 1,201 $0
========== ========= ========== ========= ==========
Average primary shares outstanding.... 16,465,000 4,865,056 (4,865,056) 1,001,305 (1,001,305)
2,460,710 830,999
Average fully-diluted shares
outstanding.......................... 16,754,000 4,871,462 (4,871,462) 1,001,305 (1,001,305)
2,465,043 831,898
Earnings per share:
Net Income:
Primary............................ $2.39
Fully diluted...................... $2.37
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------
OTHER
PROBABLE PROFORMA
BUSINESS ADJUSTMENTS/ COMBINED
SUBTOTAL COMBINATIONS (DEDUCTIONS) TOTAL
---------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income....................... $305,926 $10,826 $(472)(2) $316,280
Interest expense...................... 154,722 4,975 159,697
---------- --------- ---------- ----------
Net interest income before provision
for loan losses...................... 151,204 5,851 (472) 156,583
Provision for loan losses............. 6,377 313 6,690
---------- --------- ---------- ----------
Net interest income after provision
for loan losses...................... 144,827 5,538 (472) 149,893
---------- --------- ---------- ----------
Noninterest income.................... 55,702 1,175 56,877
Noninterest expense................... 133,407 4,013 125(2) 137,545
---------- --------- ---------- ----------
Income before income taxes............ 67,122 2,700 (597) 69,225
Income taxes.......................... 23,909 817 (165)(2) 24,561
---------- --------- ---------- ----------
Net Income............................ $43,213 $1,883 $(432) $ 44,664
========== ========= ========== ==========
Average primary shares outstanding.... 19,756,709 700,836 (700,836) 20,286,426
529,717
Average fully-diluted shares
outstanding.......................... 20,050,941 700,836 (700,836) 20,628,175
577,234
Earnings per share:
Net Income:
Primary............................ $2.19 $2.20
Fully diluted...................... $2.17 $2.18
</TABLE>
43
<PAGE> 54
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------------------------------------------------------------------
OTHER
CONSOLIDATED COMPLETED PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ -------------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.... $206,883 $26,229 $10,379 $243,491 $ 7,041
Interest expense... 104,575 11,236 4,105 119,916 3,269
----------- --------- ---------- ----------- ----------- ---------- --------
Net interest income
before provision
for loan
losses........... 102,308 14,993 6,274 123,575 3,772
Provision for loan
losses........... 4,155 265 478 4,898 399
----------- --------- ---------- ----------- ----------- ---------- --------
Net interest income
after provision
for loan
losses........... 98,153 14,728 5,796 118,677 3,373
----------- --------- ---------- ----------- ----------- ---------- --------
Noninterest
income........... 39,291 3,165 928 43,384 1,007
Noninterest
expense.......... 87,049 14,981 4,756 106,786 2,649
----------- --------- ---------- ----------- ----------- ---------- --------
Income before
income taxes..... 50,395 2,912 1,968 55,275 1,731
Income taxes....... 17,963 960 787 19,710 628
----------- --------- ---------- ----------- ----------- ---------- --------
Net Income......... $ 32,432 $ 1,952 $ 0 $ 1,181 $ 0 $ 35,565 $ 1,103
=========== ========= ========== =========== =========== ========== ========
Average primary
shares
outstanding...... 14,826,000 4,205,941 (4,205,941) 1,005,920 (1,005,920) 17,902,963 700,149
2,252,833 824,130
Average
fully-diluted
shares
outstanding...... 15,597,000 4,205,941 (4,205,941) 1,005,920 (1,005,920) 18,691,165 700,149
2,266,762 827,403
Earnings per share:
Net Income:
Primary........ $2.19 $1.99
Fully
diluted...... $2.13 $1.97
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1995
---------------------------
PROFORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Interest income.... $250,532
Interest expense... 123,185
----------- ----------
Net interest income
before provision
for loan
losses........... 127,347
Provision for loan
losses........... 5,297
----------- ----------
Net interest income
after provision
for loan
losses........... 122,050
----------- ----------
Noninterest
income........... 44,391
Noninterest
expense.......... 109,435
----------- ----------
Income before
income taxes..... 57,006
Income taxes....... 20,338
----------- ----------
Net Income......... $ 0 $ 36,668
=========== ==========
Average primary
shares
outstanding...... (700,149) 18,428,713
525,750
Average
fully-diluted
shares
outstanding...... (700,149) 19,265,803
574,638
Earnings per share:
Net Income:
Primary........ $1.99
Fully
diluted...... $1.95
</TABLE>
44
<PAGE> 55
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------------------
OTHER
CONSOLIDATED COMPLETED PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ -------------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income..... $287,141 $47,421 $(3)(1) $13,929 $348,488 $13,642
Interest expense.... 146,981 22,501 5,588 175,070 6,128
---------- --------- ---------- --------- ---------- ---------- ---------
Net interest income
before provision
for loan losses... 140,160 24,920 (3) 8,341 173,418 7,514
Provision for loan
losses............ 7,350 460 705 8,515 880
---------- --------- ---------- --------- ---------- ---------- ---------
Net interest income
after provision
for loan losses... 132,810 24,460 (3) 7,636 164,903 6,634
---------- --------- ---------- --------- ---------- ---------- ---------
Noninterest
income............ 54,391 6,338 1,266 61,995 1,508
Noninterest
expense........... 122,406 24,838 356(1) 6,129 153,729 5,278
---------- --------- ---------- --------- ---------- ---------- ---------
Income before income
taxes............. 64,795 5,960 (359) 2,773 73,169 2,864
Income taxes........ 23,242 1,957 (17)(1) 1,109 26,291 917
---------- --------- ---------- --------- ---------- ---------- ---------
Net Income.......... $ 41,553 $4,003 $(342) $ 1,664 $ 0 $46,878 $ 1,947
========== ========= ========== ========= ========== ========== =========
Average primary
shares
outstanding....... 15,797,000 4,766,071 (4,766,071) 1,005,920 (1,005,920) 19,055,693 745,194
2,433,370 825,323 526,439
Average fully-
diluted shares
outstanding....... 16,667,000 4,766,071 (4,766,071) 1,005,920 (1,005,920) 19,953,952 797,947
2,456,771 830,181 576,242
Earnings per share:
Net Income:
Primary........... $2.63 $2.46
Fully diluted..... $2.56 $2.40
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------
PROFORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Interest income..... $(630)(2) $361,500
Interest expense.... 181,198
---------- ----------
Net interest income
before provision
for loan losses... (630) 180,302
Provision for loan
losses............ 9,395
---------- ----------
Net interest income
after provision
for loan losses... (630) 170,907
---------- ----------
Noninterest
income............ 63,503
Noninterest
expense........... 166(2) 159,173
---------- ----------
Income before income
taxes............. (796) 75,237
Income taxes........ (221)(2) 26,987
---------- ----------
Net Income.......... $ (575) $ 48,250
========== ==========
Average primary
shares
outstanding....... (745,194) 19,582,132
Average fully-
diluted shares
outstanding....... (797,947) 20,530,194
Earnings per share:
Net Income:
Primary........... $2.46
Fully diluted..... $2.40
</TABLE>
45
<PAGE> 56
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------------------------------------------
OTHER
CONSOLIDATED COMPLETED PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/ BUSINESS
BANCGROUP** COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ -------------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income..... $211,903 $28,811 $11,613 $252,327 $7,136
Interest expense.... 90,902 8,981 4,504 104,387 2,958
----------- --------- ----------- -------- -------- ----------- ---------
Net interest income
before provision
for loan losses... 121,001 19,830 7,109 147,940 4,178
Provision for loan
losses............ 7,506 412 184 8,102 234
----------- --------- ----------- -------- -------- ----------- ---------
Net interest income
after provision
for loan losses... 113,495 19,418 6,925 139,838 3,944
----------- --------- ----------- -------- -------- ----------- ---------
Noninterest
income............ 47,752 4,823 1,319 53,894 732
Noninterest
expense........... 115,677 20,050 7,213 142,940 3,077
----------- --------- ----------- -------- -------- ----------- ---------
Income before income
taxes............. 45,570 4,191 1,031 50,792 1,599
Income taxes........ 15,829 736 412 16,977 482
----------- --------- ----------- -------- -------- ----------- ---------
Net Income.......... $ 29,741 $ 3,455 $ 0 $ 619 $ 0 $ 33,815 $1,117
=========== ========= =========== ======== ======== =========== =========
Average primary
shares
outstanding....... 14,898,000 4,042,576 (4,042,576) 984,711 (984,711) 17,941,116 696,719
2,225,344 817,772
Average
fully-diluted
shares
outstanding....... 15,665,000 4,042,576 (4,042,576) 984,711 (984,711) 18,708,116 696,719
2,225,344 817,772
Earnings per share:
Net Income:
Primary......... $2.00 $1.88
Fully diluted... $1.97 $1.87
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------
PROFORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Interest income..... $259,463
Interest expense.... 107,345
---------- -----------
Net interest income
before provision
for loan losses... 152,118
Provision for loan
losses............ 8,336
---------- -----------
Net interest income
after provision
for loan losses... 143,782
---------- -----------
Noninterest
income............ 54,626
Noninterest
expense........... 146,017
---------- -----------
Income before income
taxes............. 52,391
Income taxes........ 17,459
---------- -----------
Net Income.......... $ 0 $ 34,932
========== ===========
Average primary
shares
outstanding....... (696,719) 18,466,162
525,046
Average
fully-diluted
shares
outstanding....... (696,719) 19,233,162
525,046
Earnings per share:
Net Income:
Primary......... $1.89
Fully diluted... $1.87
</TABLE>
46
<PAGE> 57
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------------------------------------------
OTHER
CONSOLIDATED COMPLETED PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ FORT BROOKE ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATIONS (DEDUCTIONS) BANCORPORATION (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ -------------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......... $160,829 $29,437 $11,296 $201,562 $5,735
Interest expense......... 66,357 8,886 4,630 79,873 2,639
---------- --------- ---------- ------- -------- ---------- ---------
Net interest income
before provision for
loan losses............. 94,472 20,551 6,666 121,689 3,096
Provision for loan
losses.................. 8,850 2,397 344 11,591 238
---------- --------- ---------- ------- -------- ---------- ---------
Net interest income after
provision for loan
losses.................. 85,622 18,154 6,322 110,098 2,858
---------- --------- ---------- ------- -------- ---------- ---------
Noninterest income....... 43,445 6,094 1,435 50,974 760
Noninterest expense...... 98,501 20,775 6,312 125,588 2,338
---------- --------- ---------- ------- -------- ---------- ---------
Income before income
taxes................... 30,566 3,473 1,445 35,484 1,280
Income taxes............. 9,780 563 522 10,865 419
---------- --------- ---------- ------- -------- ---------- ---------
Income before
extraordinary items and
the cumulative change in
accounting for income
taxes................... 20,786 2,910 923 24,619 861
---------- --------- ---------- ------- -------- ---------- ---------
Extraordinary Items, net
of tax.................. (463) (463)
Cumulative effect of a
change in accounting for
income taxes............ 3,650 36 3,686 67
---------- --------- ---------- ------- -------- ---------- ---------
Net Income............... $ 23,973 $ 2,946 $ 923 $ 0 $ 27,842 $ 928
========== ========= ========== ======= ======== ========== =========
Average primary shares
outstanding............. 12,613,000 3,902,878 (3,902,878) 966,864 (966,864) 15,641,654 696,726
2,208,165 820,489
Average fully-diluted
shares outstanding...... 13,706,000 3,902,878 (3,902,878) 966,864 (966,864) 16,734,654 696,726
2,208,165 820,489
Earnings per share:
Income before
extraordinary items
and cumulative effect
of a change in
accounting principle:
Primary............... $1.65 $1.57
Fully diluted......... $1.64 $1.57
Net Income:
Primary............... $1.90 $1.78
Fully diluted......... $1.87 $1.76
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
----------------------------
PROFORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Interest income.......... $207,297
Interest expense......... 82,512
-------- ----------
Net interest income
before provision for
loan losses............. 124,785
Provision for loan
losses.................. 11,829
-------- ----------
Net interest income after
provision for loan
losses.................. 112,956
-------- ----------
Noninterest income....... 51,734
Noninterest expense...... 127,926
-------- ----------
Income before income
taxes................... 36,764
Income taxes............. 11,284
-------- ----------
Income before
extraordinary items and
the cumulative change in
accounting for income
taxes................... 25,480
-------- ----------
Extraordinary Items, net
of tax.................. (463)
Cumulative effect of a
change in accounting for
income taxes............ 3,753
-------- ----------
Net Income............... $ 0 $ 28,770
======== ==========
Average primary shares
outstanding............. (696,726) 16,164,435
522,781
Average fully-diluted
shares outstanding...... (696,726) 17,257,435
522,781
Earnings per share:
Income before
extraordinary items
and cumulative effect
of a change in
accounting principle:
Primary............... $1.58
Fully diluted......... $1.57
Net Income:
Primary............... $1.78
Fully diluted......... $1.76
</TABLE>
47
<PAGE> 58
PRO FORMA ADJUSTMENTS:
(In thousands)
Adjustments Applicable to the purchase method business combinations with
First Family(1) and Shamrock(2):
(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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Increases in income:
Amortization of other write downs (2-5 year period)........ $ 34 $ 45
Amortization of write-down on securities portfolio (5 year
period)................................................. 240 320
Decreases in income:
Earnings forgone on $6,403,750 cash at an average interest
rate 5.75%.............................................. (276) (368)
----- -----
Total.............................................. (2) (3)
----- -----
Increase in expense:
Additional depreciation due to write-up in building and
premises (20 year period)............................... (34) (45)
Amortization of goodwill (20 year period).................. (233) (311)
----- -----
Total.............................................. (267) (356)
----- -----
Net decrease in income before tax............................ (269) (359)
----- -----
Tax effect of the pro forma adjustments (other than goodwill
amortization).............................................. 13 17
----- -----
Net decrease in income....................................... $(256) $ (342)
----- -----
</TABLE>
(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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Increases in income:
Amortization of write down on software (3 year period)..... $ 23 $ 30
Decreases in income:
Earnings forgone on $11,482,000 cash at an average interest
rate 5.75%.............................................. (495) (660)
----- -----
Total.............................................. (472) (630)
Increase in expense:
Amortization of goodwill (20 year period).................. (125) (166)
----- -----
Total.............................................. (125) (166)
Net decrease in income before tax............................ (597) (796)
Tax effect of the pro forma adjustments (other than goodwill
amortization).............................................. 165 221
----- -----
Net decrease in income....................................... $(432) $ (575)
----- -----
</TABLE>
48
<PAGE> 59
RECENT DEVELOPMENTS -- BANCGROUP
BancGroup -- Recent Unaudited Results
The following table presents certain unaudited data for BancGroup for the
period ended December 31, 1996. Unaudited historical data reflect, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to a fair presentation of such data. The unaudited
financial information is presented for informational purposes only and is not
necessarily indicative of the financial position or results of operations which
would have actually occurred if the transactions had been consummated in the
past or which may be obtained in the future.
THE COLONIAL BANCGROUP, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
% CHANGE
DEC. 31, DEC. 31, DEC. 31,
1996 1995 1996 TO 1995
---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets............................................... $4,870,332 $4,202,194 16%
Loans, net of unearned income.............................. 3,680,415 3,175,506 16
Total earning assets....................................... 4,428,086 3,823,233 16
Deposits................................................... 3,583,669 3,204,260 12
Shareholders' equity....................................... 343,182 289,463 19
Book value per share....................................... $ 20.96 $ 18.65 12
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
------------------------------
% CHANGE
1996 1995 96 TO 95
-------- -------- --------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent)........................ $171,969 $142,706 21%
Provision for loan losses....................................... 9,121 7,350 24
Noninterest income.............................................. 65,982 53,993 22
Noninterest expense (excl SAIF special assessment).............. 139,651 122,204 14
SAIF special assessment*........................................ 3,817
Income (excl SAIF special assessment)........................... 56,074 41,553 35
Net income...................................................... $ 53,608 $ 41,553 29
Average primary shares outstanding.............................. 16,531 15,797
Average fully diluted shares outstanding........................ 16,896 16,667
Earnings per share excluding SAIF special assessment*:
Primary....................................................... $ 3.39 $ 2.63 29
Fully diluted................................................. 3.35 2.56 31
Earnings per common share:
Primary....................................................... $ 3.24 2.63 23
Fully-diluted................................................. 3.20 $ 2.56 25
</TABLE>
49
<PAGE> 60
<TABLE>
<CAPTION>
YEAR ENDED DEC.
31,
---------------
1996 1995
----- -----
<S> <C> <C>
SELECTED RATIOS:
Return on average assets..................................................... 1.19% 1.14%
Return on average assets (excl SAIF assessment)*............................. 1.24 1.14
Return on average equity..................................................... 16.80 16.57
Return on average equity (excl SAIF assessment)*............................. 17.57 16.57
Efficiency ratio (excl SAIF assessment)*..................................... 58.69 62.13
Equity to assets............................................................. 7.05 6.89
Total capital................................................................ 8.05 8.20
Tier one leverage............................................................ 6.65 6.40
</TABLE>
- ---------------
* Legislation approving a one-time special assessment on SAIF deposits resulted
in $3,817,000 in expense before income taxes and $2,466,000 net of applicable
income taxes in the third quarter.
Net income for year ended December 31, 1996 was $53,608,000 compared to
$41,553,000 for the previous period, a 29% increase. Earnings per share for the
year were $3.20 on a fully diluted basis, a 25% increase over 1995. The
company's return on average equity was 16.8% compared to 16.57% in 1995. Return
on average assets was 1.19% compared to 1.14% in 1995.
50
<PAGE> 61
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain selected financial information for
BancGroup on a historical basis as of September 30, 1996 and 1995 and December
31, 1995, 1994, 1993, 1992 and 1991 and on a pro forma basis as of September 30,
1996 and December 31, 1995, and on a historical and pro forma basis for the nine
months ended September 30, 1996 and 1995 and for the years ended December 31,
1995, 1994, 1993, 1992 and 1991.
The pro forma information includes consolidated BancGroup and subsidiaries
and consolidated Fort Brooke, Bankshares, Tomoka, First Family, Shamrock and
Jefferson. The pro forma balance sheet data gives effect to the combinations as
if they had occurred on September 30, 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.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus or incorporated by reference.
In the opinion of BancGroup, all adjustments necessary for a fair presentation
of the results of the interim periods have been included, and all adjustments
are of a normal and recurring nature. The results of operations for the interim
period ended September 30, 1996 are not necessarily indicative of future
results.
SELECTED FINANCIAL DATA
COLONIAL BANCGROUP (PRO FORMA) AND COLONIAL BANCGROUP (HISTORICAL -- AS
RESTATED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1996 1996 1995 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Statement of Income:
Interest income...................................... $316,280 $257,063 $250,532 $206,883
Interest expense..................................... 159,697 132,035 123,185 104,575
-------- -------- -------- --------
Net interest income.................................. 156,583 125,028 127,347 102,308
Provision for possible loan losses................... 6,690 6,023 5,297 4,155
-------- -------- -------- --------
Net interest income after provision for possible loan
losses............................................. 149,893 119,005 122,050 98,153
Noninterest income................................... 56,877 49,854 44,391 39,291
Noninterest expense.................................. 137,545 107,859 109,435 87,049
-------- -------- -------- --------
Income before income taxes........................... 69,225 61,000 57,006 50,395
Applicable income taxes.............................. 24,561 21,650 20,338 17,963
-------- -------- -------- --------
Net Income........................................... $ 44,664 $ 39,350 $ 36,668 $ 32,432
======== ======== ======== ========
Earnings Per Common Share
Net Income:
Primary............................................ $ 2.20 $ 2.39 $ 1.99 $ 2.19
Fully-diluted...................................... $ 2.18 $ 2.37 $ 1.95 $ 2.13
Average shares outstanding:
Primary............................................ 20,286 16,465 18,429 14,826
Fully-diluted...................................... 20,639 16,754 19,266 15,597
Cash dividends per common share:(1)
Common............................................. $ 0.81 $ 0.81 $ 0.675 $ 0.675
</TABLE>
- ---------------
(1) On February 21, 1995, the Class A and Class B Common Stock were reclassified
into one class of Common Stock.
51
<PAGE> 62
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------------------ -----------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Income:
Interest income... $361,500 $259,463 $207,297 $176,211 $183,245 $287,141 $211,903 $160,829 $146,486 $150,462
Interest
expense......... 181,198 107,345 82,512 77,682 104,487 146,981 90,902 66,357 67,389 87,717
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net interest
income.......... 180,302 152,118 124,785 98,529 78,758 140,160 121,001 94,472 79,097 62,745
Provision for
possible loan
losses.......... 9,395 8,336 11,829 12,701 10,083 7,350 7,506 8,850 8,956 7,097
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net interest
income after
provision for
possible loan
losses.......... 170,907 143,782 112,956 85,828 68,675 132,810 113,495 85,622 70,141 55,648
Noninterest
income.......... 63,503 54,626 51,734 43,885 36,349 54,391 47,752 43,445 37,027 32,668
Noninterest
expense......... 159,173 146,017 127,926 104,098 87,319 122,406 115,677 98,501 85,636 72,377
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before
income taxes.... 75,237 52,391 36,764 25,615 17,705 64,795 45,570 30,566 21,532 15,939
Applicable income
taxes........... 26,987 17,459 11,284 7,605 5,052 23,242 15,829 9,780 5,742 4,197
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before
extraordinary
items and the
cumulative
effect of a
change in
accounting for
income taxes.... 48,250 34,932 25,480 18,010 12,653 41,553 29,741 20,786 15,790 11,742
Extraordinary
items, net of
income taxes.... (463) 831 (463) 831
Cumulative effect
of change in
accounting for
income taxes.... 3,753 3,650
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Income........ $ 48,250 $ 34,932 $ 28,770 $ 18,010 $ 13,484 $ 41,553 $ 29,741 $ 23,973 $ 15,790 $ 12,573
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings Per
Common Share
Income before
extraordinary
items and the
cumulative
effect of a
change in
accounting for
income taxes:
Primary......... $ 2.46 $ 1.89 $ 1.58 $ 1.38 $ 1.03 $ 2.63 $ 2.00 $ 1.65 $ 1.44 $ 1.15
Fully-diluted... $ 2.40 $ 1.87 $ 1.57 $ 1.38 $ 1.03 $ 2.56 $ 1.97 $ 1.64 $ 1.44 $ 1.15
Net Income:
Primary......... $ 2.46 $ 1.89 $ 1.78 $ 1.38 $ 1.10 $ 2.63 $ 2.00 $ 1.90 $ 1.44 $ 1.23
Fully-diluted... $ 2.40 $ 1.87 $ 1.76 $ 1.38 $ 1.10 $ 2.56 $ 1.97 $ 1.87 $ 1.44 $ 1.23
Average shares
outstanding:
Primary......... 19,582 18,466 16,164 13,007 12,230 15,797 14,898 12,613 10,996 10,219
Fully-diluted... 20,530 19,233 17,257 14,318 13,572 16,667 15,665 13.706 12,307 11,561
Cash dividends per
common share:(1)
Common.......... $ 0.675 $ 0.675
Class A......... $ 0.225 $ 0.80 $ 0.71 $ 0.67 $ 0.63 $ 0.225 $ 0.80 $ 0.71 $ 0.67 $ 0.63
Class B......... $ 0.125 $ 0.40 $ 0.31 $ 0.27 $ 0.23 $ 0.125 $ 0.40 $ 0.31 $ 0.27 $ 0.23
</TABLE>
- ---------------
(1) On February 21, 1995, the Class A and Class B Common Stock were reclassified
into one class of Common Stock.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------- -----------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1996 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Condition
At period end:
Total assets............................... $5,783,310 $4,713,524 $4,202,194 $3,219,082 $3,104,410 $2,027,455 $1,861,980
Loans, net of unearned income.............. 4,272,246 3,570,490 3,175,506 2,352,870 1,963,052 1,330,928 1,200,443
Mortgage loans held for sale............... 163,275 161,864 110,486 60,726 361,496 144,215 105,219
Deposits................................... 4,502,728 3,561,923 3,204,260 2,504,461 2,444,418 1,697,648 1,601,973
Long-term debt............................. 33,790 32,365 29,142 69,203 57,397 22,979 27,225
Shareholders' equity....................... 404,292 329,917 289,463 224,018 198,389 123,952 111,437
Average daily balances:
Total assets............................... $5,488,245 $4,447,621 $3,659,140 $3,074,619 $2,379,628 $1,978,313 $1,779,767
Interest-earning assets.................... 5,027,881 4,059,163 3,333,887 2,768,705 2,100,674 1,730,373 1,583,046
Loans, net of unearned income.............. 4,037,594 3,370,975 2,708,633 2,138,371 1,494,053 1,273,486 1,187,081
Mortgage loans held for sale............... 139,035 139,035 97,511 131,121 241,683 118,510 65,373
Deposits................................... 4,147,649 3,333,913 2,828,864 2,471,657 1,876,026 1,665,417 1,531,672
Shareholders' equity....................... 397,774 313,218 250,826 214,543 144,216 117,822 103,330
Book value per share at period end........... $ 20.25 $ 20.24 $ 18.65 $ 15.62 $ 14.40 $ 11.04 $ 11.08
Tangible book value per share at period
end........................................ $ 17.92 $ 17.86 $ 16.82 $ 14.33 $ 13.21 $ 10.45 $ 10.39
Selected Ratios
Income before extraordinary items and the
cumulative effect of a change in
accounting for income taxes to:
Average assets........................... .81 1.20 1.14 0.97 0.87 0.80 0.66
Average shareholders' equity............. 11.23 17.05 16.57 13.86 14.41 13.40 11.36
Net Income to:
Average assets........................... .81 1.20 1.14 0.97 1.01 0.80 0.71
Average shareholders' equity............. 11.23 17.05 16.57 13.86 16.62 13.40 12.17
Efficiency ratio............................. 64.44 58.91 62.13 67.65 70.40 72.41 74.11
Dividend payout ratio........................ 29.14 29.91 25.32 24.99 20.22 26.44 30.71
Average equity to average total assets....... 7.25 7.04 6.89 6.98 6.06 5.96 5.81
Allowance for possible loan losses to total
loans (net of unearned income)............. 1.22 1.26 1.31 1.57 1.58 1.55 1.44
</TABLE>
52
<PAGE> 63
FORT BROOKE BANCORPORATION
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected historical financial data for Fort
Brooke and the Bank. With respect to the information for the nine-month periods
ended September 30, 1995 and 1996, which is unaudited, such interim results are
not necessarily indicative of results for the entire year but include all
adjustments (none of which were other than normal recurring accruals) which, in
the opinion of management, are necessary for a fair presentation of such
results. These tables should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Joint Proxy
Statement and Prospectus.
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE
-----------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
At Period End:
Cash and cash equivalents................... $ 11,300 $ 10,587 $ 11,997 $ 8,436 $ 17,650 $ 12,344 $ 11,866
Investment securities....................... 39,615 45,726 43,719 45,041 44,095 37,621 35,086
Loans, net.................................. 131,764 115,757 122,511 112,370 102,052 107,143 118,251
All other assets............................ 9,917 9,069 8,889 9,463 8,997 7,901 8,703
--------- --------- --------- ------- ------- ------- -------
Total assets.......................... 192,596 181,139 $ 187,116 175,310 172,794 165,009 173,906
========= ========= ========= ======= ======= ======= =======
Deposit accounts.............................. 173,097 163,427 168,297 157,877 158,212 148,724 156,836
All other liabilities......................... 3,384 2,376 3,019 3,676 1,111 3,745 5,976
Stockholders' equity.......................... 16,115 15,336 15,800 13,757 13,471 12,540 11,094
--------- --------- --------- ------- ------- ------- -------
Total liabilities and stockholders'
equity.............................. $ 192,596 $ 181,139 $ 187,116 $175,310 $172,794 $165,009 $173,906
========= ========= ========= ======= ======= ======= =======
For the Period:
Total interest income....................... 10,997 10,379 13,929 11,613 11,296 12,654 15,338
Total interest expense...................... 4,324 4,105 5,588 4,504 4,630 6,071 9,620
--------- --------- --------- ------- ------- ------- -------
Net interest income........................... 6,673 6,274 8,341 7,109 6,666 6,583 5,718
Provision (credit) for credit losses.......... (30) 478 705 184 344 1,726 1,216
--------- --------- --------- ------- ------- ------- -------
Net interest income after provision for credit
losses...................................... 6,703 5,796 7,636 6,925 6,322 4,857 4,502
Other income.................................. 1,131 928 1,266 1,319 1,435 1,708 1,559
Other expenses................................ 6,009 4,756 6,129 7,213 6,312 6,487 5,908
--------- --------- --------- ------- ------- ------- -------
Earnings before income tax provision and
cumulative effect of change in accounting
principle................................... 1,825 1,968 2,773 1,031 1,445 78 153
Income tax provision.......................... 624 787 1,109 412 522 34 175
--------- --------- --------- ------- ------- ------- -------
Net earnings (loss) before cumulative effect
of change in accounting principle........... 1,201 1,181 1,664 619 923 44 (22)
Cumulative benefit for effect of change in
accounting principle........................ -- -- -- -- -- -- 173
--------- --------- --------- ------- ------- ------- -------
Net earnings.................................. $ 1,201 $ 1,181 $ 1,664 $ 619 $ 923 $ 44 $ 151
========= ========= ========= ======= ======= ======= =======
Earnings (loss) per share before cumulative
effect of accounting change................. $ 1.20 $ 1.17 $ 1.65 $ .63 $ .95 $ .05 $ (.03)
========= ========= ========= ======= ======= ======= =======
Net earnings per share (1).................... $ 1.20 $ 1.17 $ 1.65 $ .63 $ .95 $ .05 $ .20
========= ========= ========= ======= ======= ======= =======
Weighted average number of shares
outstanding(1).............................. 1,001,305 1,005,920 1,005,920 984,711 966,864 867,243 762,560
========= ========= ========= ======= ======= ======= =======
Ratios and Other Data:
Return on average assets.................... 0.84% 0.89% .93% .36% .56% .03% .09%
Return on average equity.................... 9.84 10.76 11.18 4.59 7.16 .37 1.39
Average equity to average assets............ 8.53 8.23 8.27 7.79 7.81 7.09 6.09
Interest-rate spread during the period...... 4.05 3.93 4.16 3.99 3.92 3.73 2.85
Net yield on average interest-earning
assets.................................... 8.09 8.33 5.03 4.55 4.41 4.30 3.45
Noninterest expenses to average assets...... 4.20 3.57 3.41 4.17 3.82 3.90 3.53
</TABLE>
53
<PAGE> 64
<TABLE>
<CAPTION>
AT OR FOR THE
----------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of average interest-earning assets to
average interest-bearing liabilities....... 1.33% 1.27% 1.26% 1.19% 1.16% 1.14% 1.10%
Nonperforming loans, in-substance foreclosed
loans and real estate owned as a percentage
of total assets at end of period........... 1.02% 1.30% 1.10% 1.47% 1.39% 2.00% 3.71%
Allowance for credit losses as a percentage
of total loans at end of period............ 1.40% 1.30% 1.37% 1.37% 1.37% 1.05% 1.11%
Total number of banking offices.............. 8 7 7 7 8 7 7
Total shares outstanding at end of
period(1).................................. 990,553 1,005,920 1,005,920 1,005,920 966,864 966,864 819,290
Book value per share at end of period(1)..... 16.27% 15.25% $ 15.71 $ 13.68 $ 13.93 $ 12.97 $ 13.54
</TABLE>
- ---------------
(1) Presented to reflect 10% stock dividend declared in 1995.
54
<PAGE> 65
FORT BROOKE BANCORPORATION
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 the 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 Joint Proxy Statement and Prospectus.
GENERAL
Fort Brooke is a one-bank holding company and its only current business is
the ownership and operation of the Bank. On July 10, 1996 the common
stockholders of the Bank exchanged their common shares for common shares of Fort
Brooke, and at that time the Bank became a wholly-owned subsidiary of Fort
Brooke. The formation of Fort Brooke and exchange of shares has been accounted
for as a pooling of interests. Shares held by dissenting shareholders were
retired prior to the exchange and that liability will be settled for cash.
The Bank is a SAIF-insured state-chartered commercial bank headquartered in
Brandon, Florida. The Bank was founded on March 20, 1981 as a state savings and
loan association. On December 31, 1991, the Bank converted from a savings and
loan association to a commercial bank. On July 14, 1994, the Bank merged with
The Merchant Bancorporation of Florida ("Merchant"). Merchant was a one-bank
holding company operating The Merchant Bank of Florida. The merger has been
accounted for as a pooling of interests. Fort Brooke operates eight retail
banking offices in Hillsborough County, Florida and its main business is to
attract deposits and to invest those funds in loans including both secured and
unsecured commercial loans, construction and permanent residential mortgage
loans, and to a lesser extent, the origination of loans secured by commercial
and multi-family residential real estate properties and consumer loans.
At September 30, 1996, Fort Brooke had total assets of $192.6 million (an
increase of 2.9% over the $187.1 million recorded at December 31, 1995) and
total stockholders' equity of $16.1 million (up 1.9% over the $15.8 million at
December 31, 1995). For the nine months ended September 30, 1996 it had
consolidated net earnings of $1,201,000 an increase of 1.2% from the nine months
ending September 30, 1995 of $1,181,000.
During the nine months ended September 30, 1996 net loans receivable
increased to $131.8 million from $122.5 million or 7.6% as of December 31, 1995.
The Bank's portfolio of investment securities decreased to $39.6 million as of
September 30, 1996 from $43.8 million at December 31, 1995. The Bank's deposits
increased to $173.0 million as of September 30, 1996 from $168.3 million as of
December 31, 1995. The 6.4% increase in deposits reflected the Bank's strategy
of continuing to accept and retain deposit accounts for which funds can be
prudently invested.
At December 31, 1995, the Bank had total assets of $187.1 million (an
increase of 6.77% over the $175.3 million recorded at December 31, 1994) and
total stockholders' equity of $15.8 million (up 14.5% over the $13.8 million at
December 31, 1994). For the year ended December 31, 1995, it had consolidated
net earnings of $1,664,000, an increase of 169% from the previous year's total
of $619,000.
During the year ended December 31, 1995 net loans receivable increased
$10.1 million or 9.0%. The Bank's portfolio of investment securities decreased
to $43.7 million as of December 31, 1995 from $45.0 million as of December 31,
1994. The Bank's deposits increased to $168.3 million as of December 31, 1995
from $157.9 million as of December 31, 1994.
PENDING ACQUISITION OF FORT BROOKE
On November 18, 1996, management entered into an agreement to merge Fort
Brooke into Colonial Bancgroup ("Colonial"). Colonial will exchange sufficient
common stock to equal $31.50 per share for 990,553 shares of Fort Brooke. This
transaction is subject to the approval of stockholders and various regulatory
authorities.
55
<PAGE> 66
REGULATION AND LEGISLATION
As a state-chartered commercial bank, the Bank is subject to extensive
regulation by the Department and the FDIC. The Bank files reports with the
Department and the FDIC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the Department and the FDIC
to monitor the Bank's compliance with the various regulatory requirements. The
Bank is also subject to regulation by the Board of Governors with respect to
reserves required to be maintained against deposits and certain other matters.
As a Florida corporation, it is subject to that state's banking laws and to
certain regulation by the Florida Department of State.
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.
The following table sets forth certain information regarding non-accrual
loans and real estate owned, the ratio 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,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate loans:
Residential......................... $ 184 $ 184 $ 247 $ 297 $ 338
Commercial.......................... 542 528 18 703 1,914
Consumer and other loans............... 186 108 61 50 404
------- ------- ------- ------- -------
Total nonperforming loans...... 912 820 326 1,050 2,656
Other real estate owned:
Real estate acquired by foreclosure or
deed in lieu of foreclosure......... 1,147 1,847 2,076 2,246 3,802
------- ------- ------- ------- -------
Total nonperforming loans, and
other real estate owned...... 2,059 2,667 2,402 3,296 6,458
Allowance for loan losses................ (1,702) (1,562) (1,426) (1,145) (1,346)
------- ------- ------- ------- -------
Total nonperforming loans and
other real estate owned,
net.......................... $ 357 $ 1,105 $ 976 $ 2,151 $ 5,112
======= ======= ======= ======= =======
Total nonperforming loans to
total assets................. .49% .43% .09% .12% 1.53%
======= ======= ======= ======= =======
Total nonperforming loans and
other real estate owned to
total assets................. 1.10% 1.47% 1.39% 2.00% 3.71%
======= ======= ======= ======= =======
Total nonperforming loans and
other real estate owned, net
to total assets.............. .19% .63% .56% 1.30% 2.94%
======= ======= ======= ======= =======
</TABLE>
56
<PAGE> 67
The following table sets forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net...... $114,502 $100,905 $102,772 $110,599 $126,640
======== ======== ======== ======== ========
Allowance at beginning of period.... $ 1,562 $ 1,426 $ 1,145 $ 1,346 $ 903
-------- -------- -------- -------- --------
Charge-offs:
Residential real estate
loans........................ 39 -- 2 45 158
Commercial real estate loans... 17 32 -- 121 476
Commercial loans............... 410 23 60 1,823 95
Consumer loans................. 189 96 121 46 70
-------- -------- -------- -------- --------
Total loans charge-off.... 655 151 183 2,035 799
Recoveries........................ 90 103 120 108 26
-------- -------- -------- -------- --------
Net charge-offs (recoveries)... 565 48 63 1,927 773
Provision for loan losses
charged to operating
expenses..................... 705 184 344 1,726 1,216
-------- -------- -------- -------- --------
Allowance at end of year....... $ 1,702 $ 1,562 $ 1,426 $ 1,145 $ 1,346
======== ======== ======== ======== ========
Ratio of net charge-offs to
average loans outstanding.... .0049 .0005 .0006 .0174 .0061
======== ======== ======== ======== ========
Ratio allowance to period-end
loans........................ .0137 .0137 .0137 .0105 .0111
======== ======== ======== ======== ========
Period end total loans.............. $124,164 $114,135 $103,760 $108,896 $120,871
======== ======== ======== ======== ========
</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,
consisting 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 ("interest-rate spread"), and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Bank's interest-rate 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 bearing income and non-interest paying expenses, such as salaries
and employee benefits, occupancy and equipment costs and provisions for losses
on real estate owned and income taxes.
The following table sets forth for the periods indicated information
regarding (i) the total dollar amount of interest and dividend income of the
Bank from interest-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/dividend income; (iv) interest-rate
spread; and (v) interest margin. Average balances are based upon daily balances.
57
<PAGE> 68
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------------------------------------------- ------------------------------
1996 1995 1995
------------------------------ ------------------------------ ------------------------------
INTEREST INTEREST INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
-------- --------- ------- -------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1).................... $127,310 $ 8,859 9.28% $113,267 $ 8,152 9.60% $114,502 $10,883 9.50%
Investment securities....... 41,851 1,897 6.04 42,280 1,870 5.90 42,985 2,567 5.97
Other interest-earning
assets(2)................. 12,005 241 2.68 10,618 357 4.48 8,315 479 5.76
-------- ------- -------- ------- -------- -------
Total................. 181,166 10,997 8.09 166,165 10,379 8.33 165,802 13,929 8.40
------- ------- -------
Noninterest-earning assets.... 9,549 11,641 14,178
-------- -------- --------
Total................. $190,715 $177,806 $179,980
======== ======== ========
Interest-bearing liabilities:
Savings and NOW accounts.... 32,594 524 2.16 31,076 553 2.37 31,331 662 2.11
Money market deposits....... 20,620 424 2.74 23,138 516 2.97 23,296 690 2.96
Certificates of deposit..... 80,615 3,305 5.47 73,616 2,947 5.34 74,911 4,135 5.52
Borrowings.................. 2,580 71 3.67 2,538 89 4.67 2,223 101 4.54
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities......... 136,409 4,324 4.23 130,368 4,105 4.20 131,761 5,588 4.24
------- ------- -------
Noninterest-bearing
liabilities................. 38,038 32,802 33,337
Stockholders' equity.......... 16,268 14,636 14,882
-------- -------- --------
Total liabilities and
stockholders'
equity.............. $190,715 $177,806 $179,980
======== ======== ========
Net interest/dividend
income...................... $ 6,673 $ 6,274 $ 8,341
======= ======= =======
Interest-rate spread(3)....... 3.86% 4.13% 4.16%
==== ==== ====
Net yield on average interest-
earning assets(4)........... 4.91% 5.03% 5.03%
==== ==== ====
Ratio of average
interest-earning assets to
average interest-bearing
liabilities................. 1.33 1.27 1.26
======== ======== ========
<CAPTION>
1994 1993
------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
-------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1).................... $100,905 $ 8,824 8.74% $102,772 $ 8,790 8.55%
Investment securities....... 47,305 2,397 5.07 39,941 2,209 5.53
Other interest-earning
assets(2)................. 8,039 392 4.88 8,415 297 3.53
-------- ------ -------- ------
Total................. 156,249 11,613 7.43 151,128 11,296 7.47
------ ------
Noninterest-earning assets.... 16,896 13,979
-------- --------
Total................. $173,145 $165,107
======== ========
Interest-bearing liabilities:
Savings and NOW accounts.... 32,086 653 2.03 28,579 594 2.08
Money market deposits....... 27,518 654 2.38 22,576 530 2.35
Certificates of deposit..... 70,157 3,141 4.48 78,395 3,482 4.44
Borrowings.................. 1,322 56 4.24 781 24 3.07
-------- ------ -------- ------
Total interest-bearing
liabilities......... 131,083 4,504 3.44 130,331 4,630 3.55
------ ------
Noninterest-bearing
liabilities................. 28,570 21,881
Stockholders' equity.......... 13,492 12,895
-------- --------
Total liabilities and
stockholders'
equity.............. $173,145 $165,107
======== ========
Net interest/dividend
income...................... $ 7,109 $ 6,666
====== ======
Interest-rate spread(3)....... 3.99% 3.92%
==== ====
Net yield on average interest-
earning assets(4)........... 4.55% 4.41%
==== ====
Ratio of average
interest-earning assets to
average interest-bearing
liabilities................. 1.19 1.16
======== ========
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
58
<PAGE> 69
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 VS. 1994
---------------------------------
INCREASE (DECREASE) DUE TO
---------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans....................................................... $ 767 $1,188 $104 $2,059
Investment securities....................................... 426 (219) (37) 170
Other interest-earning assets............................... 71 13 3 87
------ ------ ---- ------
Total............................................... $1,264 $ 982 $ 70 $2,316
------ ------ ---- ------
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts................................. $ 26 $ (15) $ (2) $ 9
Money market accounts.................................... 160 (100) (24) 36
Certificate accounts..................................... 729 213 52 994
Borrowings.................................................. 4 38 3 45
------ ------ ---- ------
Total............................................... 919 136 29 1,084
------ ------ ---- ------
Net change in net interest income............................. $ 345 $ 846 $ 41 $1,232
====== ====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
1994 VS. 1993
---------------------------------
INCREASE (DECREASE) DUE TO
---------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans....................................................... $ 196 $ (159) $ (3) $ 34
Investment securities....................................... (184) 407 (35) 188
Other interest-earning assets............................... 114 (13) (6) 95
------ ------ ---- ------
Total............................................... 126 235 (44) 317
------ ------ ---- ------
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts................................. (14) 74 (1) 59
Money market accounts.................................... 7 116 1 124
Certificate accounts..................................... 30 (367) (4) (341)
Borrowings.................................................. 9 17 6 32
------ ------ ---- ------
Total............................................... 32 (160) 2 (126)
------ ------ ---- ------
Net change in net interest income............................. $ 94 $ 395 $(46) $ 443
====== ====== ==== ======
</TABLE>
59
<PAGE> 70
The rates and yields are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
YIELD OR RATE AT
------------------------------
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Yields and Rates:
Loans.................................................... 8.94% 9.23%
Securities............................................... 6.30 6.30
All interest-bearing assets.............................. 8.33 8.44
Savings and NOW accounts................................. 1.97 2.08
Money market accounts.................................... 2.72 2.78
Certificates of deposit.................................. 5.48 5.64
All interest-bearing liabilities......................... 4.28 4.30
Interest-rate spread..................................... 4.05 4.14
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
A Florida-chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less those deposits of certain public funds. The
liquidity reserve may consist of cash on hand, cash on demand with other
correspondent banks and other investments and short-term marketable securities
as determined by the rules of the Department, such as federal funds sold and
United States securities or securities guaranteed by the United States. As of
December 31, 1995 and September 30, 1996, the Bank's liquidity totaled,
respectively, $54.0 million and $49.7 million, or approximately 32.1% and 29.0%
of its total deposits.
The following table sets forth the carrying value of the Bank's investment
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Investment securities available-for-sale:
U.S. Government and agency obligations.............. $11,856 $ 3,268 $ 7,803
Municipal bonds..................................... 252 2,006 3,639
Mortgage-backed securities.......................... 11,969 10,889 19,034
------- ------- -------
Total available-for-sale.................... 24,077 16,163 30,476
------- ------- -------
Investment securities held-to-maturity:
U.S. Government and agency obligations.............. 9,942 18,010 12,130
Municipal bonds..................................... 2,228 2,229 1,489
Mortgage-backed securities.......................... 7,472 8,639 --
------- ------- -------
Total held-to-maturity...................... 19,642 28,878 13,619
------- ------- -------
Total....................................... $43,719 $45,041 $44,095
======= ======= =======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the Bank's investment securities portfolio ($ in
thousands):
<TABLE>
<CAPTION>
ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS DUE AFTER
OR LESS TO FIVE YEARS TO TEN YEARS TEN YEARS TOTAL
------------------ ------------------ ------------------ ------------------ ------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995
U.S. Government and
agency
obligations......... $1,999 4.47% $18,292 6.52% $1,507 6.49% $ -- --% $21,798 6.33%
Municipal
securities.......... -- -- 252 4.35 2,228 5.29 -- -- 2,480 5.19
Mortgage-backed
securities.......... 136 8.22 1,178 6.86 -- -- 18,127 6.52 19,441 6.55
------ ---- ------- ---- ------ ---- ------- ---- ------- ----
Total........... $2,135 4.71% $19,722 6.51% $3,735 5.77% $18,127 6.52% $43,719 6.36%
====== ==== ======= ==== ====== ==== ======= ==== ======= ====
</TABLE>
60
<PAGE> 71
During the year ended December 31, 1995 and the nine-month period ended
September 30, 1996, the Bank's primary sources of funds consisted of principal
payments on loans and investment securities, proceeds from sales and maturities
of investment securities and net increases in deposits. The Bank used its
capital resources principally to purchase investment securities and fund
existing and continuing loan commitments. At December 31, 1995 and September 30,
1996, the Bank had commitments to originate loans totalling, respectively, $5.3
million and $8.7 million. Scheduled maturities of certificates of deposit during
the 12 months following December 31, 1995 and September 30, 1996 totalled $49.9
million and $50.3 million as of those stated dates.
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating what should constitute the minimum capital
adequacy of a financial institution Federal banking regulators have adopted
regulations which make reference to the institution's "Tier 1 leverage" capital
and also to its "total" capital. In most instances, "Tier 1 leverage" capital
will consist solely of funds permanently committed to the institution (i.e.
stockholders' equity), less net intangible assets. Conversely, "total" capital
(comprised of the sum of Tier 1 and supplementary, or Tier 2, capital) includes
not only stockholders' equity, but an 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 stockholders' equity. The following chart compares the minimum capital ratios
required by the FDIC to the ratios maintained by the Bank:
<TABLE>
<CAPTION>
REGULATORY RATIOS OF
REQUIREMENT THE BANK
----------- ---------
<S> <C> <C>
At December 31, 1995:
Total capital to risk weighted assets.......................... 8.00% 13.64%
Tier I capital to risk weighted assets......................... 4.00 12.39
Tier I capital to risk weighted assets -- leverage ratio....... 4.00 8.55
At September 30, 1996:
Total capital to risk weighted assets.......................... 8.00% 13.05%
Tier I capital to risk weighted assets......................... 4.00 11.80
Tier I capital to risk weighted assets -- leverage ratio....... 4.00 8.59
</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 tighter
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 amount of interest-rate sensitive assets exceeds
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds 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.
61
<PAGE> 72
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, 1995
and September 30, 1996, 28.9% and 25.8%, respectively, of the Bank's total
assets consisted of cash and short-term U.S. Government securities, and its
overall liquidity ratio was approximately 32.1% and 29.0% of total deposits.
The Bank seeks to maintain a large stable core deposit base by providing
quality service to its customers without significantly increasing its cost of
funds or operating expenses. The success of the Bank's core deposit strategy is
demonstrated by the stability of its money-market deposit accounts, savings
accounts and NOW accounts, which, in the aggregate, totaled $52.9 million,
representing 31.4% of total deposits at December 31, 1995, and $51.5 million or
29.8% of such deposits at September 30, 1996. These accounts bore a weighted-
average nominal rate of 2.37% at December 31, 1995 and 2.24% at September 30,
1996. Management anticipates that these accounts will continue to increase and
in the future comprise a significant portion of its deposit base.
As of December 31, 1995, the Bank's cumulative one-year interest-rate
sensitivity gap was a positive 18.85%, and at September 30, 1996 it was a
positive 18.75%. 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 quarterly basis, using First Tennessee Bank to provide both
a practical and a theoretical gap report. The practical gap report is based on
the Federal Reserve Board's March 26, 1993 draft for incorporating Interest-Rate
Risk into Risk-Based Capital Standards. Management believes that its present gap
position is appropriate for the current interest-rate environment.
The Bank's management goals are ahead of expectations in all areas,
including liquidity, volatile dependency and rate sensitivity. 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 that while a negative gap
will continue in the one year time period, it should decline in line with
management goals.
[The balance of this page is intentionally left blank]
62
<PAGE> 73
The following table sets forth certain information relating to the Bank's
interest-earning assets and interest-bearing liabilities at December 31, 1995
that are estimated to mature or are scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
MORE THAN MORE THAN
ONE YEAR TO FIVE
ONE YEAR FIVE YEARS YEARS TOTAL
--------- ----------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage and commercial loans(1)(2):
Adjustable rate (all property
types)............................ $ 56,666 $ 4,097 $ 69 $ 60,832
Fixed rate........................... 7,416 25,687 18,120 51,223
-------- ------- ------- --------
Total mortgage loans......... 64,082 29,784 18,189 112,055
Consumer and other loans............... 5,300 4,120 2,689 12,109
Interest-bearing deposits.............. 1,092 -- -- 1,092
Investments(3)(4)...................... 14,894 19,723 9,912 44,529
-------- ------- ------- --------
Total rate-sensitive
assets..................... 85,368 53,627 30,790 169,785
-------- ------- ------- --------
Deposit accounts(5):
Certificates of deposit.............. 49,904 29,555 772 80,231
Savings and NOW accounts............. 31,334 -- -- 31,334
Money-market accounts................ 21,551 -- -- 21,551
Other borrowings..................... 1,965 -- -- 1,965
-------- ------- ------- --------
Total rate-sensitive
liabilities................ 104,754 29,555 772 135,081
-------- ------- ------- --------
GAP (repricing differences)............ $ (19,386) $24,072 $30,018 $ 34,704
======== ======= ======= ========
Cumulative GAP......................... $ (19,386) $ 4,686 $34,704
======== ======= =======
Cumulative GAP/total assets............ (10.36)% 2.50% 18.54%
======== ======= =======
</TABLE>
- ---------------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather than
in the period in which the loans mature. Fixed-rate loans are scheduled,
including repayment, according to their maturities.
(2) Excludes nonaccrual loans.
(3) Investments are scheduled through repricing and maturity dates.
(4) Includes Federal Homes Loan Bank stock.
(5) Checking accounts, NOW accounts, and savings accounts are regarded as ready
accessible withdrawable accounts. All other time accounts are scheduled
through the maturity dates.
Loan Maturities. The table below sets forth the contractual maturity of
the Bank's total loan portfolio at December 31, 1995. 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>
YEARS ENDING RESIDENTIAL REAL COMMERCIAL REAL CONSUMER AND
DECEMBER 31, ESTATE LOANS ESTATE LOANS OTHER LOANS TOTAL
- ----------------------------------- ---------------- --------------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1996............................... $ 3,127 $12,484 $ 24,753 $ 40,364
1997............................... 1,394 13,220 4,500 19,114
1998............................... 1,464 12,765 3,147 17,376
1999-2000.......................... 1,907 8,384 2,465 12,756
2001-2011.......................... 9,957 2,711 2,491 15,159
2012-2031.......................... 9,867 2,691 -- 12,558
2031 and thereafter................ 6,823 14 -- 6,837
------- ------- ------- --------
Total.................... $ 34,539 $52,269 $ 37,356 $124,164
======= ======= ======= ========
</TABLE>
63
<PAGE> 74
The following table shows the distribution of, and certain other
information relating to, Fort Brooke Bank deposit accounts by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------
1995 1994 1993
------------------ ------------------ ------------------
% OF % OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT AMOUNT DEPOSIT
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits............... $ 35,181 20.9% $ 28,892 18.3% $ 22,532 14.3%
Savings and NOW deposits...... 31,334 18.6 32,170 20.3 31,562 19.9
Money market deposits......... 21,551 12.8 28,508 18.1 26,611 16.8
-------- ----- -------- ----- -------- -----
Subtotal............ 88,066 52.3 89,570 56.7 80,705 51.0
-------- ----- -------- ----- -------- -----
Certificate of deposits:
2.00% - 3.99%............... -- -- 15,405 9.8 30,613 19.4
4.00% - 5.99%............... 54,201 32.2 50,135 31.7 27,204 17.2
6.00% - 7.99%............... 26,030 15.5 2,767 1.8 16,356 10.3
8.00% - 9.99%............... -- -- -- -- 3,331 2.1
10.00% - 11.99%............. -- -- -- -- 3 --
-------- ----- -------- ----- -------- -----
Total certificates of
deposit (1).............. 80,231 47.7 68,307 43.3 77,507 49.0
-------- ----- -------- ----- -------- -----
Total deposits.............. $168,297 100.0% $157,877 100.0% $158,212 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Includes individual retirement accounts ("IRAs") totalling $12,496,000 and
$11,394,000 at December 31, 1995, 1994 and 1993, respectively, all of which
are in the form of certificates of deposits.
The following table shows the average amount of and the average rate paid
on each of the following deposit account categories during the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD BALANCE YIELD
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing checking
accounts...................... $ 30,867 0% $ 26,166 0% $ 20,078 0%
NOW and savings accounts........ 31,331 2.11 32,086 2.03 28,579 2.08
Money market accounts........... 23,296 2.96 27,158 2.38 22,576 2.35
Certificates of deposit......... 74,911 5.52 70,157 4.48 78,395 4.44
-------- ---- -------- ---- -------- ----
Total deposits........ $160,405 3.42% $155,567 2.86% $149,628 3.08%
======== ==== ======== ==== ======== ====
</TABLE>
The following table presents for various interest rate categories the
amounts of outstanding certificates of deposit at December 31, 1995 which mature
during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------------------------------------------
2000
AND
1996 1997 1998 1999 THEREAFTER TOTAL
------- ------- ------- ------ ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1995:
4.00% - 4.99%................... $ 7,727 $ -- $ -- $ -- $ -- $ 7,727
5.00% - 5.99%................... 41,636 2,974 1,093 772 46,475
6.00% - 6.99%................... 542 12,336 9,726 -- 3,425 26,029
------- ------- ------- ------ ------ -------
Total certificates of
deposit............... $49,905 $12,336 $12,700 $1,093 $4,197 $80,231
======= ======= ======= ====== ====== =======
</TABLE>
64
<PAGE> 75
Jumbo certificates ($100,000 and over) outstanding as of December 31, 1995
mature as follows:
<TABLE>
<S> <C>
Due within three months or less............................................ $ 4,762
Due over three months to six months........................................ 4,108
Due over six months to one year............................................ 1,861
Due over one year.......................................................... 5,105
------
$15,836
======
</TABLE>
The following table sets forth the net deposit flows of the Bank during the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------- ----- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net increase (decrease) before interest credited............. $10,255 $(286) $9,527
Net interest credited........................................ 165 (49) (39)
------- ----- ------
Net deposit increase (decrease).............................. $10,420 $(335) $9,488
======= ===== ======
</TABLE>
COMPARISON OF NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
General. Net earnings for the nine months ended September 30, 1996 were
$1,201,000 or $1.20 per share compared to $1,181,000 or $1.17 per share for
1995. The increase in earnings was primarily due to increased net interest
income partially offset by the increase in noninterest expense during 1996. The
increase in noninterest expense primarily resulted from the one-time SAIF
recapitalization assessment.
Interest Income and Expense. Interest income increased by $618,000 to
$11.0 million for the nine month period ended September 30, 1996 compared to
$10.4 million for the nine months ended September 30, 1995. Interest on loans
increased $707,000 to $8.9 million due to an increase in the average loan
portfolio balance for the nine months ended September 30, 1996 to $127.3 million
compared to $113.3 million during the 1995 period. This increase was partially
offset by a decrease in the weighted-average yield from 9.60% in 1995 to 9.28%
in 1996. Interest on investment securities increased $27,000 to $1.9 million for
the nine months ended September 30, 1996 due to an increase in the average yield
investment securities portfolio from 5.90% in 1995 to 6.04% in 1996. Interest on
other interest-earning assets decreased from $357,000 for the nine months ended
September 30, 1995 to $241,000 for the nine months ended September 30, 1996 due
to a decrease in the weighted average yield partially offset by an increase in
the average balance of other interest-earning assets from 1995 to 1996.
Interest expense on deposit accounts increased $219,000 to $4.3 million for
the nine months ended September 30, 1996 from $4.0 million in 1995. The increase
is due to an increase in the average rate paid on deposits and an increase in
average interest-bearing deposits from 1995 to 1996.
(Credit) Provision for Credit Losses. The (credit) provision for credit
losses is (credited) 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 $508,000 for
the nine-month period ended September 30, 1996 compared to the same period for
1995. The allowance for credit losses is $1.9 million at September 30, 1996.
While management believes the allowance for credit losses is adequate as of
September 30, 1996, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the initial
determination.
Noninterest Expense. Total noninterest expense increased $1.3 million to
$6.0 million for the nine months ended September 30, 1996 from $4.8 million in
1995. The increase was primarily due to a one-time SAIF assessment on September
30, 1996. There were also increases in employee compensation, occupancy expense,
real estate expense and professional fees. These were due to the opening of a
new branch, merit salary raises and the formation of a bank holding company.
65
<PAGE> 76
Income Tax Provision. The income tax provision for the nine months ended
September 30, 1996 and September 30, 1995 was $624,000 and $787,000,
respectively. Comparison of Years Ended December 1995 and 1994
COMPARISON OF YEARS ENDED DECEMBER 1995 AND 1994
General. Net earnings for the year ended December 31, 1995 were $1.7
million or $1.65 per share compared to $619,000 or $.63 per share for 1994. The
increase in earnings was due primarily to an increase in net interest income as
well as a decrease in noninterest expense.
Interest Income and Expense. Interest income increased $2.3 million or
19.9% to $13.9 million during the year ended December 31, 1995. Interest on
loans increased $2.1 million to $10.9 million due to an increase in the
weighted-average yield from 8.74% during the year ended December 31, 1994 to
9.50% during the year ended December 31, 1995. The increase was also due to an
increase in the average loan portfolio from $100.9 million during 1994 to $114.5
million during 1995. Interest on investment securities increased $170,000 to
$2.6 million due to an increase in the average yield from 5.07% during 1994 to
5.97% during 1995. This increase was partially offset by a decrease in the
average amount invested in securities during 1995 compared with 1994.
Interest expense on deposit accounts increased from $4.4 million for the
year ended December 31, 1994 to $5.5 million for the year ended December 31,
1995. This increase was primarily the result of an increase in rates paid on
deposits.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for loan losses increased from $184,000 for the year
ended December 31, 1994 to $705,000 during 1995. The allowance for loan losses
increased from $1.6 million at December 31, 1994 to $1.7 million at December 31,
1995. Nonperforming assets to total assets decreased to 1.10% at December 31,
1995 from 1.47% at December 31, 1994. While management believes that its
allowance for loan losses is adequate as of December 31, 1995, future
adjustments to the Bank's allowance for loan losses may be necessary if economic
conditions differ substantially from the assumptions used in making the
determination.
Noninterest Expense. Total noninterest expense decreased $1.1 million for
the year ended December 31, 1995 from the year ended December 31, 1994.
Compensation decreased $389,000 primarily as a result of a severance package
with an officer of Merchant during 1994 with no corresponding amount in 1995.
Occupancy expense decreased $336,000 primarily due to a decrease in rent expense
resulting from the purchase of the Bank's headquarters as well as a general
decrease in operating expenses. Other expenses decreased $334,000 due in part to
the acquisition costs of Merchant incurred during 1994 with no corresponding
amounts in 1995.
Income Tax Provision. The income tax provision increased from $412,000 for
the year ended December 31, 1994 to $1.1 million for 1995, due to increased
earnings before income taxes.
COMPARISON OF YEARS ENDED DECEMBER 1994 AND 1993
General. Net earnings for the year ended December 31, 1994 were $619,000
or $.63 per share compared to $923,000 or $.95 per share for 1993. The decrease
in earnings was primarily due to increased noninterest expenses resulting from
acquisition costs and a severance payment to a former officer of Merchant.
Interest Income and Expense. Interest income increased $317,000 or 2.8% to
$11.6 million during the year ended December 31, 1994. Interest on loans
increased $34,000 to $8.8 million due to an increase in the weighted average
yield from 8.55% during the year ended December 31, 1993 to 8.74% during the
year ended December 31, 1994. The increase in yield was partially offset by a
decrease in the average loan portfolio balance. Interest on investment
securities increased $188,000 to $2.4 million due to an increase in the average
66
<PAGE> 77
amounts invested in securities during 1994 compared to 1993. This increase was
partially offset by a decrease in the average yield earned during 1994.
Interest expense on deposit accounts decreased from $4.6 million for the
year ended December 31, 1993 to $4.4 million for the year ended December 31,
1994. This decrease was primarily the result of a decrease in rates paid on
deposits.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for credit losses decreased from $344,000 for the year
ended December 31, 1993 to $184,000 during 1994. The allowance for loan losses
increased from $1.4 million at December 31, 1993 to $1.6 million at December 31,
1994.
Noninterest Expense. Total noninterest expense increased $901,000 for the
year ended December 31, 1994 from the year ended December 31, 1993. Compensation
increased $398,000 primarily as a result of a severance package with an officer
of Merchant and regular merit salary increases. Occupancy expense increased
$310,000 primarily due to an increase in depreciation expense for building,
furniture, fixtures and equipment and an increase in real estate taxes. Other
expenses increased $252,000 primarily due to the acquisition costs of Merchant.
Income Tax Provision. The income tax provision decreased from $522,000 for
the year ended December 31, 1993 to $412,000 for 1994, primarily because of a
decrease in earnings before income taxes.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, substantially all of the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a more significant impact on the Bank's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
SELECTED QUARTERLY FINANCIAL DATA
The following tables present summarized quarterly data (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD
QUARTER QUARTER QUARTER TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nine Months Ended September 30, 1996
Interest income.................................... $ 3,568 $ 3,701 $ 3,728 $10,997
Interest expense................................... 1,455 1,411 1,458 4,324
------ ------ ------ -------
Net interest income................................ 2,113 2,290 2,270 6,673
Provision for credit losses........................ 22 (61) 9 (30)
------ ------ ------ -------
Net interest income after provision for credit
losses.......................................... 2,091 2,351 2,261 6,703
Other income....................................... 389 351 391 1,131
Other expense...................................... 1,721 1,896 2,392 6,009
------ ------ ------ -------
Earnings before income tax provision............... 759 806 260 1,825
Income tax provision............................... 258 274 92 624
------ ------ ------ -------
Net earnings....................................... $ 501 $ 532 $ 168 $ 1,201
====== ====== ====== =======
Earnings per share................................. $ 0.50 $ 0.53 $ 0.17 $ 1.20
====== ====== ====== =======
</TABLE>
67
<PAGE> 78
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Interest income............................ $ 3,301 $ 3,502 $ 3,528 $ 3,598 $13,929
Interest expense........................... 1,236 1,383 1,486 1,483 5,588
------ ------ ------ ------ -------
Net interest income........................ 2,065 2,119 2,042 2,115 8,341
Provision for credit losses................ 19 155 304 227 705
------ ------ ------ ------ -------
Net interest income after provision for
credit losses........................... 2,046 1,964 1,738 1,888 7,636
Other income............................... 318 315 343 290 1,266
Other expense.............................. 1,641 1,545 1,570 1,373 6,129
------ ------ ------ ------ -------
Earnings before income tax provision....... 723 734 511 805 2,773
Income tax provision....................... 289 294 204 322 1,109
------ ------ ------ ------ -------
Net earnings............................... $ 434 $ 440 $ 307 $ 483 $ 1,664
====== ====== ====== ====== =======
Earnings per share......................... $ .43 $ .44 $ .31 $ .48 $ 1.65
====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Interest income............................ $ 2,675 $ 2,876 $ 2,938 $ 3,124 $11,613
Interest expense........................... 1,104 1,115 1,133 1,152 4,504
------ ------ ------ ------ -------
Net interest income........................ 1,571 1,761 1,805 1,972 7,109
Provision for credit losses................ 3 -- 15 166 184
------ ------ ------ ------ -------
Net interest income after provision for
credit losses........................... 1,568 1,761 1,790 1,806 6,925
Other income............................... 328 318 336 337 1,319
Other expense.............................. 1,760 1,931 1,707 1,815 7,213
------ ------ ------ ------ -------
Earnings before income tax provision....... 136 148 419 328 1,031
Income tax provision....................... 54 59 166 133 412
------ ------ ------ ------ -------
Net earnings............................... $ 82 $ 89 $ 253 $ 195 $ 619
====== ====== ====== ====== =======
Earnings per share......................... $ .08 $ .09 $ .25 $ .20 $ .63
====== ====== ====== ====== =======
</TABLE>
68
<PAGE> 79
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware. BancGroup operates wholly owned
commercial banking subsidiaries in the states of Alabama, Florida, Georgia and
Tennessee, each under the name "Colonial Bank," a second banking subsidiary in
Florida, Colonial Bank of South Florida, and a federal savings bank in Florida,
Colonial Bank, FSB. Colonial Bank conducts a full service commercial banking
business in the state of Alabama through 110 branches. In Tennessee, Colonial
Bank conducts a general commercial banking business through three branches. In
Georgia, Colonial Bank operates eleven branches in the Atlanta area. In Florida,
Colonial Bank operates seventeen branches in the Orlando and Ormond Beach areas.
Colonial Bank of South Florida operates nine branches in Dade, Broward and Palm
Beach Counties, and Colonial Bank, FSB, operates six branches in Eustis and Lake
County. Colonial Mortgage Company, a subsidiary of Colonial Bank in Alabama, is
a mortgage banking company which services approximately $10 billion in
residential loans which originates mortgages in 29 states through 6 regional
offices. BancGroup's commercial banking loan portfolio is comprised primarily of
commercial real estate loans (44%) and residential real estate loans (35%), a
significant portion of which is located within the State of Alabama. BancGroup's
growth in loans over the past several years has been concentrated in commercial
and residential real estate loans.
PROPOSED AFFILIATE BANKS
BancGroup has entered into a definitive agreement dated as of September 12,
1996, to merge D/W Bankshares, Inc. ("Bankshares") into BancGroup. Bankshares is
a Georgia corporation and is a holding company for Dalton/Whitfield Bank & Trust
located in Dalton, Georgia. Bankshares will merge with BancGroup and following
such merger Bankshares' subsidiary bank will merge with BancGroup's existing
bank subsidiary in Georgia, Colonial Bank. Based on the market price of
BancGroup Common Stock as of January 10, 1997, a total of 508,500 shares of
BancGroup Common Stock would be issued to the stockholders of Bankshares. The
actual number of shares of BancGroup Common Stock to be issued in this
transaction will depend upon the market value of such Common Stock at the time
of the merger. This transaction is subject to, among other things, approval by
the stockholders of Bankshares, and approval by appropriate regulatory
authorities. At September 30, 1996, Bankshares has assets of approximately
$130.1 million, deposits of approximately $116.1 million and stockholders'
equity of approximately $10.9 million.
Since September 30, 1996, BancGroup has merged three banking institutions
in Florida into BancGroup, First Family Financial Corporation, Tomoka Bancorp,
Inc. and Jefferson Bancorp, Inc., with aggregate assets and stockholders' equity
acquired of $700.7 and $52.3 million, respectively into BancGroup. These mergers
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 also entered into a definitive agreement to acquire Shamrock
Holding, Inc. (which operates The Union Bank in Evergreen, Alabama) into
BancGroup. Pursuant to that agreement, BancGroup will make a cash offer to
purchase all of the outstanding shares of that bank's holding company for an
aggregate cash price of approximately $11,482,000, subject to regulatory
approval and other conditions. The Union Bank has total assets of approximately
$53 million and stockholders' equity of $7.8 million.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of January 10, 1997, BancGroup had issued and outstanding 18,797,859
shares of BancGroup Common Stock with 5,747 stockholders of record. Each such
share is entitled to one vote. In addition, as of that date, 979,088 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 256,400 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 44,000,000 shares of BancGroup Common Stock authorized.
69
<PAGE> 80
On February 21, 1995, BancGroup concluded a reclassification of its Class A
and Class B Common Stock into one class of Common Stock. The reclassification
was approved by BancGroup's stockholders on December 8, 1994. On February 24,
1995, the Common Stock of BancGroup was listed for trading on the NYSE.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of January 10, 1997, of more than five percent of
BancGroup's outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ------------------------------------------------------------------ ---------- --------------
<S> <C> <C>
Robert E. Lowder(2)............................................... 1,437,409(3) 7.27%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder................................................... 1,099,649 5.56%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder.................................................. 1,073,053 5.43%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated assuming the issuance of 979,088 shares of Common
Stock pursuant to BancGroup's stock option plans.
(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. Robert E. Lowder's mother, Catherine K. Lowder, owns 85,442
shares of Common Stock. Mr. Lowder disclaims any beneficial interest in
such shares.
(3) Includes 90,510 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
70
<PAGE> 81
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 January 10, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ----------------------------------------------------------------- --------- --------------
<S> <C> <C>
DIRECTORS
Young J. Boozer.................................................. 7,146(2) *
William Britton.................................................. 6,808 *
Jerry J. Chesser................................................. 73,295 *
Augustus K. Clements, III........................................ 9,476 *
Robert S. Craft.................................................. 5,997 *
Patrick F. Dye................................................... 18,980(3) *
Clinton O. Holdbrooks............................................ 145,932(4) *
D. B. Jones...................................................... 10,064(5) *
Harold D. King**................................................. 77,729 *
Robert E. Lowder**............................................... 1,437,409(6) 7.27%
John Ed Mathison................................................. 14,227 *
Milton E. McGregor............................................... 0 *
John C. H. Miller, Jr............................................ 15,243(7) *
Joe D. Mussafer.................................................. 10,000 *
William E. Powell, III........................................... 6,959 *
J. Donald Prewitt***............................................. 88,544(8) *
Jack H. Rainer................................................... 1,345 *
Frances E. Roper................................................. 182,034 *
Ed V. Welch...................................................... 14,825 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III............................................. 22,914(2)(9) *
W. Flake Oakley, IV.............................................. 16,808(9) *
All Executive Officers and Directors as a Group.................. 2,165,671 10.95%
</TABLE>
- ---------------
* Represents less than one percent.
** Executive Officer.
*** Mr. Prewitt was added as a director by resolution of the BancGroup Board on
July 17, 1996. Mr. Prewitt was the Chairman of the Board of Southern
Banking Corporation, Orlando, Florida, which was merged into BancGroup on
July 3, 1996. Mr. Prewitt is a real estate developer and is president of
his own company, Land Sales of Central Florida, Inc., located in Orlando.
Mr. Prewitt is also a director of Colonial Bank, Orlando.
(1) Percentages are calculated assuming the issuance of 979,088 shares of
Common Stock pursuant to BancGroup's stock option plans.
(2) Includes 500 shares of Common Stock out of 1,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 17,980 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 12,262 shares of Common Stock subject to options under BancGroup's
stock option plans, and 39,499 shares over which Mr. Holdbrooks serves as
trustee.
(5) Mr. Jones holds power to vote these shares as trustee.
(6) These shares include 90,510 shares of Common Stock subject to options under
BancGroup's stock option plans. See the table at "Voting Securities and
Principal Stockholders."
(7) Includes 5,000 shares subject to options.
(8) Includes 35,802 shares subject to stock options.
71
<PAGE> 82
(9) Young J. Boozer, III and W. Flake Oakley, IV, hold options respecting
12,500 and 9,000 shares of Common Stock, respectively, pursuant to
BancGroup's stock option plans.
(10) Includes shares subject to options.
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1995, at items 10, 11, and 13 and is
incorporated herein by reference.
CERTAIN REGULATORY CONSIDERATIONS
BancGroup is a registered bank holding company subject to supervision and
regulation by the Federal Reserve. As such, it is subject to the BHCA and many
of the Federal Reserve's regulations promulgated thereunder. It is also subject
to regulation by the OTS, as a savings and loan holding company, and by the
Georgia Department of Banking and Finance.
BancGroup's subsidiary banks (the "Subsidiary Banks") are subject to
supervision and examination by applicable federal and state banking agencies.
The deposits of the Subsidiary Banks are insured by the FDIC to the extent
provided by law. The FDIC assesses deposit insurance premiums the amount of
which may, in the future, depend in part on the condition of the Subsidiary
Banks. Moreover, the FDIC may terminate deposit insurance of the Subsidiary
Banks under certain circumstances. Both the FDIC and the respective state
regulatory authorities have jurisdiction over a number of the same matters,
including lending decisions, branching and mergers.
One limitation under the BHCA and the Federal Reserve's regulations
requires that BancGroup obtain prior approval of the Federal Reserve before
BancGroup acquires, directly or indirectly, more than five percent of any class
of voting securities of another bank. Prior approval also must be obtained
before BancGroup acquires all or substantially all of the assets of another
bank, or before it merges or consolidates with another bank holding company.
BancGroup may not engage in "non-banking" activities unless it demonstrates to
the Federal Reserve's satisfaction that the activity in question is closely
related to banking and a proper incident thereto. Because BancGroup is a
registered bank holding company, persons seeking to acquire 25 percent or more
of any class of its voting securities must receive the approval of the Federal
Reserve. Similarly, under certain circumstances, persons seeking to acquire
between 10 percent and 25 percent also may be required to obtain prior Federal
Reserve approval.
In 1989 Congress expressly authorized the acquisition of savings
associations by bank holding companies. BancGroup must obtain the prior approval
of the Federal Reserve and the OTS (among other agencies) before making such an
acquisition and must demonstrate that the likely benefits to the public of the
proposed transaction (such as greater convenience, increased competition, or
gains in efficiency) outweigh potential burdens (such as an undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices).
Following enactment in 1991 of the FDIC Improvement Act, banks now are
subject to increased reporting requirements and more frequent examinations by
the bank regulators. The agencies also now have the authority to dictate certain
key decisions that formerly were left to management, including compensation
standards, loan underwriting standards, asset growth, and payment of dividends.
Failure to comply with these new standards, or failure to maintain capital above
specified levels set by the regulators, could lead to the imposition of
penalties or the forced resignation of management. If a bank becomes critically
undercapitalized, the bank agencies have the authority to place an institution
into receivership or require that the bank be sold to, or merged with, another
financial institution.
In September 1994 Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. This legislation, among other things, amended
the BHCA to permit bank holding companies, subject to certain limitations, to
acquire either control or substantial assets of a bank located in states other
than that
72
<PAGE> 83
bank holding company's home state regardless of state law prohibitions. This
legislation became effective on September 29, 1995. In addition, this
legislation also amended the Federal Deposit Insurance Act to permit, beginning
on June 1, 1997 (or earlier where state legislatures provide express
authorization), the merger of insured banks with banks in other states.
The officers and directors of BancGroup and the Subsidiary Banks are
subject to numerous insider transactions restrictions, including limits on the
amount and terms of transactions involving the Subsidiary Banks, on the one
hand, and their principal stockholders, officers, directors, and affiliates on
the other. There are a number of other laws that govern the relationship between
the Subsidiary Banks and their customers. For instance, the Community
Reinvestment Act is designed to encourage lending by banks to persons in low and
moderate income areas. The Home Mortgage Disclosure Act and the Equal Credit
Opportunity Act attempt to minimize lending decisions based on impermissible
criteria, such as race or gender. The Truth-in-Lending Act and the
Truth-in-Savings Act require banks to provide full disclosure of relevant terms
related to loans and savings accounts, respectively. Anti-tying restrictions
(which prohibit, for instance, conditioning the availability or terms of credit
on the purchase of another banking product) further restrict the Subsidiary
Banks' relationships with their customers.
On September 30, 1996, Congress passed and the President signed a
continuing resolution which directed the FDIC to set a one-time special
assessment on SAIF-insured deposits in an amount sufficient to capitalize the
Savings Association Insurance Fund ("SAIF") at the reserve level previously
mandated by statute. The FDIC Board met on October 8, 1996, and set this special
assessment at $0.657 per $100 of SAIF-insured deposits. Though the special
assessment applies to SAIF-insured deposits, the special assessment, under the
legislation enacted into law on September 30, 1996, will not be applied to 20%
of those SAIF-insured deposits held by certain so-called Oakar and Sasser
institutions. Thus, the special assessment's effective rate with respect to the
SAIF-insured deposits in such institutions will be $0.525 per $100 of their
SAIF-insured deposits. In addition, the legislation enacted by Congress provides
that the annual $800-million FICO bond service will be shared by both
BIF-insured institutions and SAIF-insured institutions. Prior to this
legislation, this bond service was the obligation of SAIF members only. This
sharing of the FICO bond service obligation, coupled with the capitalization of
SAIF to the mandatory reserve level, will cause the regular SAIF deposit
insurance premium rate to fall from $0.23 per $100 of SAIF-insured deposits to
under $0.07, assuming the SAIF does not incur any large losses which would
necessitate recapitalization of the Fund. The regular BIF deposit insurance
premium rate will be under $0.02 per $100 of BIF-insured deposits. The
differential between BIF and SAIF caused by the FICO bond service will terminate
on December 31, 1999, after which time the FICO bond service will be divided on
a strictly pro rata basis and SAIF and BIF rates will be equal unless one of the
deposit insurance funds requires recapitalization. BIF and SAIF premium rates
will be approximately $0.024 per $100 of deposits after December 31, 1999. In
the event of a merger of the thrift and bank charters, the differential could be
eliminated prior to December 31, 1999. The legislation also provides for a
merger of SAIF and BIF if charter merger occurs. Such a merger of the funds,
assuming a merger of the charters has taken place, would occur on January 1,
1999. BancGroup's subsidiary banks hold deposits which are insured by both SAIF
and BIF. The SAIF-insured deposits in all of BancGroup's subsidiary institutions
total approximately $850 million, before adjusting for certain allowances such
as the 20 percent discount referenced above, which would be subject to the
special assessment.
It should be noted that supervision, regulation, and examination of
BancGroup and the Subsidiary Banks are intended primarily for the protection of
depositors, not stockholders.
73
<PAGE> 84
BUSINESS OF FORT BROOKE BANCORPORATION
GENERAL
Fort Brooke was incorporated on March 14, 1996, and on July 10, by way of a
triangular merger transaction undertaken with all requisite regulatory
approvals, acquired a 100% equity ownership interest in the Bank. Aside from
organizational activities and those associated with the referenced filing and
the negotiation and approval of such acquisition, Fort Brooke has engaged in no
business activities other than by way of its ownership of the Bank's shares and
resulting oversight of its operations.
The Bank was chartered by the State of Florida as a capital stock savings
and loan association in December 1980 and commenced operations in March 1981.
During its period of activity in that capacity, the Bank operated as a
traditional savings institution, attracting checking and savings deposits from
the general public and using such deposits, together with funds from other
sources, to originate loans secured by mortgages on residential and commercial
real estate located primarily in Florida. To a lesser extent, the Bank also
originated construction loans, lines of credit and installment loans. Its income
was primarily derived from interest and fees received in connection with real
estate and other loans and interest earned on mortgage-backed securities.
Interest on savings deposits and general and administrative expenses were the
Bank's major expense items. On December 31, 1991, the Bank was converted to a
Florida chartered commercial bank having no membership in the Federal Reserve
System.
The Bank currently engages in the general business of personal and
commercial banking in the Brandon, Plant City, Seffner, Apollo Beach, downtown
Tampa, Carrollwood and Westshore areas of Hillsborough County, Florida, relying
for its primary sources of deposits upon personal and business checking, savings
and specialized deposit accounts. The Bank's primary sources of loans include
residential mortgage loans, secured and unsecured commercial and consumer loans,
including construction and permanent mortgage loans, revolving credit lines,
automobile and home improvement loans and education loans. Fort Brooke's
directors expect the Bank to contribute to the development of those areas of
Hillsborough County within which it operates by assisting in the growth of the
businesses therein located.
In mid-1994, the Bank effected a statutory merger with The Merchant
Bancorporation of Florida, Inc., a one bank holding company incorporated in 1983
("MBF"), and its wholly owned subsidiary, The Merchant Bank of Florida, a
Florida commercial bank ("Merchant"). Under the terms of the merger agreement,
each of MBF and Merchant was merged into the Bank and MBF's shareholders
received shares of the Bank's common stock in exchange for the relinquishment
and cancellation of their MBF shares. The merger increased the Bank's
shareholders and the number of shares of its single class of common stock then
issued and outstanding, of which 52.5% were held by former Bank shareholders and
47.5% by former holders of MBF shares. It also resulted in an expansion of the
Bank's board of directors, from ten to 15 (currently 14), and in the election of
five former MBC directors to fill the newly established seats.
MARKET AREA
All of the Bank's eight existing offices are located in Hillsborough
County, Florida which is a part of the Tampa Bay Metropolitan Statistical Area.
A Standard Metropolitan Statistical Area (an "SMSA"), as defined by the U.S.
Census Bureau, is a geographic area with a significant population nucleus, along
with any adjacent communities that have a high degree of economic and social
integration with that nucleus. As of January 1, 1996, the latest estimate
available, the Tampa Bay SMSA had a population of more than 2.2 million, ranking
it 23rd in the nation, and was designated as one of the fastest growing regions
in the country. Hillsborough County accounted for close to half of that figure.
While changing conditions involving the infrastructure requirements of
various geographic locations around the country have limited economic growth and
population expansion, the Bank's market area has continued to grow because of
the area's ability to attract new residents to its favorable year round climate
and its relatively stable economic environment. Although the major economic base
in the market area is service, retail, real estate development and manufacturing
businesses, there also has been a growth in tourism. The
74
<PAGE> 85
Bank believes that its office locations are situated so as to take advantage of
the existing and expected economic and demographic growth in the market area.
COMPETITION
All phases of the Bank's business are highly competitive and it has been
subject to severe competitive pressures in its operations as a commercial bank.
The Bank competes with local commercial banks as well as numerous regionally
based commercial banks, credit unions and savings and loan associations, many of
which have assets, capital and lending limits larger than the Bank. It is one of
approximately 25 commercial banks that have some 190 offices located within
Hillsborough County. The Bank, along with other commercial banks, also competes
with respect to its lending activities, as well as in attracting demand
deposits, with savings banks, savings and loan associations, insurance
companies, regulated small loan companies, credit unions and with the issuers of
commercial paper and other securities, such as shares in money market funds.
Among the advantages larger institutions have over the Bank are their ability to
finance wide ranging advertising campaigns and to allocate their investment
assets to products of highest yields and demand. By virtue of their greater
total capital, such institutions have substantially higher lending limits than
the Bank (legal lending limits to an individual customer being limited to a
percentage of a bank's total capital accounts). Fort Brooke expects that if the
Merger is consummated these advantages will render the Bank more competitive and
benefit its continued growth and profitability. It will, in that event, continue
to focus on the smaller commercial customer because this segment appears to
offer the greatest concentration of potential business and historically has
tended to demonstrate a higher degree of loyalty in its banking relationships.
PRINCIPAL HOLDERS OF COMMON STOCK
Fort Brooke's authorized capital stock consists of 10,000,000 shares of
common stock, par value $.001, of which 990,553 shares are currently issued and
outstanding. There are reserved for issuance upon exercise of stock options
granted under the terms of the Bank's Non-Qualified Stock Option Plan, which was
assumed by Fort Brooke an additional 59,875 of such shares.
The following table enumerates, as of December 31, 1996, the name, position
with Fort Brooke or the Bank, if any, and ownership, both by numerical holding
and percentage interest, of each person known to own more than five percent of
Fort Brooke's outstanding common stock, each of the directors of Fort Brooke,
individually, and all of the directors and executive officers of Fort Brooke and
the Bank as a group:
<TABLE>
<CAPTION>
NAME AND POSITION # OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP(2)
-------------------------------------------------------------------------- ------------
<S> <C> <C>
John D. Adams, Secretary and Director................ 43,580 4.40%
Melvin R. Belisle, Director.......................... 28,142 2.84
Tommy W. Brown, Director............................. 10,367 1.05
Richard H. Eatman, President, Chief Executive Officer
and Director(3).................................... 41,528 4.08
H. Rex Etheredge, Director........................... 1,391 .14
Joseph Garcia, Director.............................. 10,999 1.11
Riley L. Hogan, Jr., Director........................ 17,492 1.77
A. D. "Sandy" MacKinnon, Director.................... 9,100 .92
Thomas H. Miller, Chairman of the Board.............. 75,070 7.58
Charles W. Poe, Director............................. 32,153 3.25
William F. Poe, Director............................. 19,730 1.99
Reese T. Poppell, Director........................... 3,300 .33
Sam Rampello, Director............................... 4,630 .47
David C. Worthington, Director....................... 12,874 1.30
</TABLE>
75
<PAGE> 86
<TABLE>
<CAPTION>
NAME AND POSITION # OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP(2)
-------------------------------------------------------------------------- ------------
<S> <C> <C>
All directors and executive officers as a group (37
persons, including those above named).............. 343,346 33.70%
</TABLE>
- ---------------
(1) In accordance with applicable regulations, a person will be deemed to be the
beneficial owner of a security if he or she has or shares voting or
investment power with respect to such security or has the right to acquire
such ownership within the succeeding 60 day period.
(2) In calculating the percentage ownership for a given individual or group, the
number of shares of Common Stock deemed outstanding will include unissued
shares subject to options which are exercisable within the succeeding 60
day period.
(3) Includes 28,250 shares which are subject to purchase by Mr. Eatman upon
exercise of option grants, and an additional 435 shares held by Mr.
Eatman's wife, as to which he disclaims beneficial ownership.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Merger by Fort Brooke'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 Fort Brooke Common Stock present in person or by proxy at the Special Meeting
to approve the Merger, Fort Brooke'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 Merger 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 Fort Brooke to
solicit additional proxies for approval of the Merger. While such an adjournment
would not invalidate any proxies previously filed as long as the record date for
the adjourned meeting remained the same, including proxies filed by shareholders
voting against the Merger, an adjournment would afford Fort Brooke the
opportunity to solicit additional proxies in favor of the Merger.
OTHER MATTERS
The Board of Directors of Fort Brooke 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 Fort Brooke.
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1997 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 36192, no later
than 120 calendar days in advance of the date of March 18, 1997.
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 and of Colonial Bank, is a partner. Such firm
received
76
<PAGE> 87
fees for legal services performed in 1995 of $1,305,633. John C. H. Miller, Jr.
owns 10,243 shares of Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1995 of $58,070.
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup as of December 31,
1995 and 1994 and for each of the three years ended December 31, 1995 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.
Hacker, Johnson, Cohen & Grieb serves as the independent auditors for Fort
Brooke. The bank's consolidated financial statements as of December 31, 1995 and
1994 and for the three years ended December 31, 1995, 1994 and 1993 that are in
this Prospectus in reliance upon the report of such firm, are given on the
authority of that firm as experts in accounting and auditing. It is not expected
that a representative of such firm will be present at the Special Meeting.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF FORT BROOKE PRIOR TO THE
SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF FORT BROOKE PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING VOTING IN PERSON.
77
<PAGE> 88
FORT BROOKE BANCORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED YEAR END FINANCIAL STATEMENTS -- FORT BROOKE BANK
Independent Auditors' Report.......................................................... F-
Consolidated Balance Sheets
December 31, 1995 and 1994.......................................................... F-
Consolidated Statements of Earnings for each of the years in the Three Year Period
Ended December 31, 1995............................................................. F-
Consolidated Statements of Stockholders' Equity for each of the Years in the Three
Year Period Ended December 31, 1995................................................. F-
Consolidated Statements of Cash Flows for each of the Years in the Three Year Period
Ended December 31, 1995............................................................. F-
Notes to Consolidated Financial Statements for each of the Years in the Three Year
Period Ended December 31, 1995...................................................... F-
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS -- FORT BROOKE BANCORPORATION
Condensed Consolidated Balance Sheet -- September 30, 1996 (unaudited)................ F-
Condensed Consolidated Statements of Earnings for the Nine months ended September 30,
1996 and 1995 (unaudited)........................................................... F-
Condensed Consolidated Statement of Stockholders' Equity.............................. F-
Condensed Consolidated Statements of Cash Flows for the Nine months ended September
30, 1996 and 1995 (unaudited)....................................................... F-
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-
</TABLE>
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
Financial Statements and related Notes.
F-1
<PAGE> 89
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Fort Brooke Bank
Brandon, Florida:
We have audited the consolidated balance sheets of Fort Brooke Bank and
Subsidiary (the "Bank") as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Bank as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
February 9, 1996
F-2
<PAGE> 90
FORT BROOKE BANK
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks................................................ $ 11,997 $ 8,436
-------- --------
Investment securities:
Available for sale, at market value.................................. 24,077 16,163
Held to maturity, at cost (market value of $19,726 and $27,813)...... 19,642 28,878
-------- --------
Total investment securities.......................................... 43,719 45,041
-------- --------
Loans, net of allowance for credit losses of $1,702 and $1,562......... 122,511 112,370
Other real estate owned................................................ 1,147 1,847
Premises and equipment, net............................................ 4,723 4,431
Federal Home Loan Bank stock........................................... 809 809
Accrued interest receivable............................................ 1,266 1,104
Deferred tax asset..................................................... 211 529
Other assets........................................................... 733 743
-------- --------
Total........................................................ $187,116 $175,310
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits...................................................... $ 35,181 $ 28,892
Savings and NOW deposits............................................. 31,334 32,170
Money market deposits................................................ 21,551 28,508
Other time deposits.................................................. 80,231 68,307
-------- --------
Total deposits............................................... 168,297 157,877
Advances by borrowers for taxes and insurance.......................... 128 202
Short term borrowings.................................................. 1,965 2,718
Accrued interest payable............................................... 490 325
Current income taxes................................................... 158 126
Other liabilities...................................................... 278 305
-------- --------
Total liabilities............................................ 171,316 161,553
-------- --------
Commitments and contingency (Notes 7 and 15)
Stockholders' equity:
Common stock, $8 par value; 2,000,000 shares authorized, 1,005,920
and 914,644 issued and outstanding................................ 8,047 7,317
Additional paid-in capital........................................... 4,571 3,944
Retained earnings.................................................... 3,298 2,994
Unrealized loss on investment securities............................. (116) (498)
-------- --------
Total stockholders' equity................................... 15,800 13,757
-------- --------
Total........................................................ $187,116 $175,310
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 91
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Interest income:
Interest on loans....................................... $ 10,883 $ 8,824 $ 8,790
Interest on investment securities....................... 2,567 2,397 2,209
Other interest.......................................... 479 392 297
---------- -------- --------
Total interest income........................... 13,929 11,613 11,296
---------- -------- --------
Interest expense:
Interest on deposits.................................... 5,487 4,448 4,606
Interest on other borrowings............................ 101 56 24
---------- -------- --------
Total interest expense.......................... 5,588 4,504 4,630
---------- -------- --------
Net interest income............................. 8,341 7,109 6,666
Provision for credit losses............................... 705 184 344
---------- -------- --------
Net interest income after provision for credit
losses........................................ 7,636 6,925 6,322
---------- -------- --------
Noninterest income:
Other fees and service charges.......................... 1,206 1,173 1,171
Gain (loss) on sale of investment securities............ (24) (16) 40
Other income............................................ 84 162 224
---------- -------- --------
Total noninterest income........................ 1,266 1,319 1,435
---------- -------- --------
Noninterest expense:
Employee compensation and benefits...................... 2,960 3,349 2,951
Occupancy............................................... 1,123 1,459 1,149
Data processing......................................... 330 306 238
Federal insurance premium............................... 329 400 429
Advertising............................................. 100 94 160
Real estate expense..................................... 137 141 186
Professional fees....................................... 165 145 132
Other................................................... 985 1,319 1,067
---------- -------- --------
Total noninterest expense....................... 6,129 7,213 6,312
---------- -------- --------
Earnings before income tax provision...................... 2,773 1,031 1,445
Income tax provision............................ 1,109 412 522
---------- -------- --------
Net earnings.............................................. $ 1,664 $ 619 $ 923
========== ======== ========
Earnings per share........................................ $ 1.65 $ .63 $ .95
========== ======== ========
Weighted average number of shares outstanding............. 1,005,920 984,711 966,864
========== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 92
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ADDITIONAL ON TOTAL
NUMBER OF COMMON PAID-IN RETAINED INVESTMENT STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS SECURITIES EQUITY
--------- ------- ---------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992.... 878,967 $7,032 $3,936 $ 1,572 -- $12,540
Net earnings.................. -- -- -- 923 -- 923
Dividend...................... -- -- -- (120) -- (120)
Unrealized gain on investment
securities ................ -- -- -- -- $ 128 128
--------- ------ ------ ------- ----- -------
Balance at December 31, 1993.... 878,967 7,032 3,936 2,375 128 13,471
Net earnings.................. -- -- -- 619 -- 619
Issuance of common stock ..... 35,677 285 8 -- -- 293
Unrealized loss on investment
securities ................ -- -- -- -- (626) (626)
--------- ------ ------ ------- ----- -------
Balance at December 31, 1994.... 914,644 7,317 3,944 2,994 (498) 13,757
Net earnings.................. -- -- -- 1,664 -- 1,664
Stock dividend................ 91,276 730 627 (1,357) -- --
Payment fractional shares .... -- -- -- (3) -- (3)
Unrealized gain on investment
securities................. -- -- -- -- 382 382
--------- ------ ------ ------- ----- -------
Balance at December 31, 1995.... 1,005,920 $8,047 $4,571 $ 3,298 $ (116) $15,800
========= ====== ====== ======= ===== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 93
FORT BROOKE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................. $ 1,664 $ 619 $ 923
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation.......................................... 482 594 440
Provision for credit losses........................... 705 184 344
Loss (gain) from sale of investment securities........ 24 16 (40)
Gain on sale of loans................................. -- -- (168)
Net amortization of fees, premiums and discounts...... (115) (148) 101
FHLB stock dividend................................... -- -- (43)
Write-down on other real estate owned................. 55 81 77
Loss (gain) on sale of other real estate owned........ 38 (34) (9)
Decrease (increase) in other assets................... 10 (55) 156
(Increase) decrease in accrued interest receivable.... (162) (191) 20
Increase (decrease) in accrued interest payable....... 165 (49) (39)
Deferred income tax provision (credit)................ 64 (263) (75)
Increase (decrease) in current income taxes........... 32 41 (152)
(Decrease) increase in other liabilities.............. (27) 14 (263)
-------- -------- --------
Net cash flow provided by operating activities... 2,935 809 1,272
-------- -------- --------
Cash flows from investing activities:
Purchase of investment securities........................ (25,672) (23,133) (24,055)
Proceeds from sales and maturities of investment
securities............................................ 25,056 15,026 12,808
Proceeds from sale of Federal Reserve Bank stock......... -- 110 --
Principal repayments on investment securities............ 2,541 6,076 4,830
Net decrease (increase) in loans......................... (10,458) (10,741) 4,821
Proceeds from sales of other real estate owned........... 343 858 863
Net additions of premises and equipment.................. (774) (801) (2,781)
-------- -------- --------
Net cash used in investing activities............ (8,964) (12,605) (3,514)
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits...................... 10,420 (335) 9,488
Net (decrease) increase in advance payments by borrowers
for taxes and insurance............................... (74) 119 (33)
(Decrease) increase in reverse repurchase agreements..... (753) 2,505 (1,787)
Sale of common stock..................................... -- 293 --
Cash dividend paid....................................... (3) -- (120)
-------- -------- --------
Net cash provided by financing activities........ 9,590 2,582 7,548
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... 3,561 (9,214) 5,306
Cash and cash equivalents at beginning of year............. 8,436 17,650 12,344
-------- -------- --------
Cash and cash equivalents at end of year................... $ 11,997 $ 8,436 $ 17,650
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 94
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, BACKGROUND AND BUSINESS
COMBINATION
Background. Fort Brooke Bank (the "Bank" or "Fort Brooke") is a state
chartered commercial bank headquartered in Brandon, Florida. The Bank was
founded on March 20, 1981 as a state savings and loan association. On December
31, 1991, Fort Brooke converted from a savings and loan association to a
commercial bank. On July 13, 1994, Fort Brooke merged with the Merchant
Bancorporation of Florida ("Merchant"). Merchant was a one-bank holding company
founded in 1984. Fort Brooke, through seven banking offices, provides a full
range of banking services to individuals and businesses located primarily in
Hillsborough County, Florida. The Bank also owns all of the common shares of BDW
Holdings Inc. (Subsidiary). The subsidiary's only business activity is the
ownership of a parcel of other real estate.
Business Combination. On July 13, 1994, Merchant was merged with and into
the Bank and 397,904 shares of the Bank's common stock were issued in exchange
for all of the outstanding common stock of Merchant. The merger was accounted
for as a pooling of interests, and accordingly, the accompanying consolidated
financial statements have been restated for all periods prior to the acquisition
to include the results of earnings, financial positions, and cash flows of
Merchant. Expenses of $192,000 relating to the acquisition of Merchant were
charged to expense during 1994.
Net interest income and net earnings for the individual entities were as
follows:
<TABLE>
<CAPTION>
JANUARY 1,
1994
THROUGH YEAR ENDED
JUNE 30, DECEMBER 31,
---------- ------------
1994 1993
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Net interest income after provision for credit losses and other
income:
Fort Brooke Bank............................................. $2,551 $5,024
Merchant..................................................... 1,378 2,733
------ ------
Combined.................................................. $3,929 $7,757
====== ======
Net earnings:
Fort Brooke Bank............................................. 115 542
Merchant..................................................... 89 381
------ ------
Combined.................................................. $ 204 $ 923
====== ======
</TABLE>
Summary of Significant Accounting Policies. The following is a description
of the significant accounting policies and practices followed by the Bank, which
conform with generally accepted accounting principles and prevailing practices
within the banking industry.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
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 the statements of cash flows,
cash and cash equivalents are defined as cash and due from banks.
F-7
<PAGE> 95
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investment Securities -- The Bank may categorize its investment securities
in one of three categories as follows:
Trading Securities -- Securities held principally for resale in the
near term are classified as trading securities and recorded at their fair
values. Unrealized gains and losses on trading securities are included in
other income.
Securities Available for Sale -- Securities available-for-sale consist
of securities not classified as trading securities nor as securities to be
held-to-maturity. Unrealized holding gains and losses, net of tax, on
securities available-for-sale are reported as a net amount in a separate
component of stockholders' equity.
Securities to be Held to Maturity -- Securities for which the Bank has
the positive intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums and accretion of discounts which are
recognized in interest income using the interest method over the period to
maturity.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary may result in write-downs of the individual securities to their
fair value. These write-downs would be included in earnings as realized
losses. Gains and losses on the sale of securities available-for-sale are
determined using the specific identification method.
Uncollected Interest -- The Bank places loans on nonaccrual status when the
loan is more than 90 days past due or if management believes the collection of
interest is doubtful. If the ultimate collectibility of principal and interest
due according to the contractual terms of the loan agreement is in doubt, the
loan is considered impaired, and interest is credited to income when collected.
Loan Impairment and Losses -- On January 1, 1995, the Bank adopted
Statements of Financial Accounting Standards No. 114 and 118 ("SFAS 114 and
118"). These Statements address the accounting by creditors for impairment of
certain loans. The Statements generally require the Bank to identify loans for
which the Bank probably will not receive full repayment of principal and
interest, as impaired loans. The Statements require that impaired loans be
valued at the present value of expected future cash flows, discounted at the
loan's effective interest rate, or at the observable market price of the loan,
or the fair value of the underlying collateral if the loan is collateral
dependent. The Bank has implemented the Statements by modifying its monthly
review of the adequacy of the allowance for credit losses to also identify and
value impaired loans in accordance with guidance in the Statements. The adoption
of the Statements did not have any material effect on the results of operations
for the year ended December 31, 1995.
Management considers a variety of factors in determining whether a loan is
impaired, including (i) any notice from the borrower that the borrower will be
unable to repay all principal and interest amounts contractually due under the
loan agreement, (ii) any delinquency in the principal and interest payments
other than minimum delays or shortfalls in payments, and (iii) other information
known by management which would indicate that full repayment of the principal
and interest is not probable. In evaluating loans for impairment, management
generally considers delinquencies of 60 days or less to be minimum delays, and
accordingly does not consider such delinquent loans to be impaired in the
absence of other indications of impairment.
Management evaluates smaller balance, homogeneous loans for impairment and
adequacy of allowance for credit losses collectively, and evaluates other loans
for impairment individually, on a loan-by-loan basis. The Bank evaluates the
consumer loan portfolio and the residential mortgage loan portfolio which are
smaller balance homogeneous loans for impairment on an aggregate basis, and
utilizes its own historical charge-off experience, as well as the charge-off
experience of its peer group and industry statistics to evaluate the adequacy of
the allowance for credit losses. For all commercial and commercial real estate
loans, the Bank evaluates for impairment on a loan-by-loan basis.
F-8
<PAGE> 96
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Bank evaluates all nonaccrual loans as well as any accruing loans
exhibiting collateral or other credit deficiencies for impairment. With respect
to impaired, collateral-dependent loans, any portion of the recorded investment
in the loan that exceeds the fair value of the collateral is charged off.
For impairment recognized in accordance with these Statements, the entire
change in the present value of expected cash flows, or the entire change in
estimated fair value of collateral for collateral dependent loans is reported as
a provision for credit losses in the same manner in which impairment initially
was recognized or as a reduction in the amount of the provision that otherwise
would be reported.
Loan Origination Fees and Costs -- Loan origination and commitment fees and
certain direct loan origination costs are deferred and the net amount amortized
to interest income as a yield adjustment over the contractual life of the
related loan.
Other Real Estate Owned -- Other real estate owned consists of properties
acquired through foreclosure or by deed in lieu of foreclosure. At the time of
acquisition, such properties are recorded at the lesser of the Bank's net
investment in the related loan or the fair value of the property as determined
by independent appraisal less anticipated selling costs. Any loss arising from
foreclosure is charged against the allowance for loan losses. Gains and losses
on the sale of other real estate owned, write-downs resulting from periodic
reevaluation of the property and expenses associated with holding the properties
are generally charged to other operating expense. Legal expenses and other
direct costs associated with foreclosure actions are included in the
accompanying statements of earnings in other noninterest expense.
Premises and Equipment -- Premises and equipment are stated at cost less
accumulated amortization and depreciation. Improvements to leased property are
amortized over the shorter of the estimated useful lives of the improvements or
the life of the lease. It is the policy of the Bank to provide depreciation
based on the estimated useful life of individual assets, calculated using the
straight-line method. Estimated useful lives generally range from three to
twenty-five years for bank building and improvements, five years for leasehold
improvements and five to ten years for furniture, fixtures and equipment.
Income Taxes -- Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and between the
tax bases of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the period in
which the deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
Fair Values of Financial Instruments -- The following methods and
assumptions were used by the Bank in estimating fair values of financial
instruments:
Cash and Cash Equivalents -- The carrying amounts of cash and due from
banks approximate their fair value.
Investment Securities -- Fair values for investment securities are
based on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of comparable
instruments.
Loans -- For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for certain fixed-rate mortgage (e.g. one-to-four
family residential), commercial real estate and commercial loans are
estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality.
F-9
<PAGE> 97
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deposit Liabilities -- The fair values disclosed for demand, NOW,
money market and savings deposits are, by definition, equal to the amount
payable on demand at the reporting date (that is, their carrying amounts).
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Short-Term Borrowings -- Rates currently available to the Bank for
debt with similar terms and remaining maturities are used to estimate fair
value of existing debt.
Off-Balance-Sheet Instruments -- Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Advertising -- The Bank expenses all media advertising as incurred.
Per Share Amounts -- Per share amounts are computed by dividing net
earnings by the weighted average number of common shares outstanding during the
period. Earnings per share would not be materially diluted by exercise of
outstanding stock options. All per share amounts have been presented to show the
effect of the ten percent stock dividend declared in 1995.
Future Accounting Requirements -- FASB has issued Statement of Financial
Accounting Standards No. 122 ("SFAS 122") which requires mortgage banking
enterprises that acquire mortgage servicing rights through either the purchase
or origination of mortgage loans and sells or securitizes those loans with
servicing rights retained to allocate the total cost of the mortgage loans to
the mortgage servicing rights and the loans based on their relative fair values.
Mortgage banking enterprises include commercial banks and thrift institutions
that conduct operations substantially similar to the primary operations of a
mortgage banking enterprise. This Statement is effective for 1996. Management
does not anticipate this Statement will have a material impact on the Bank.
The FASB has also issued Statement of Financial Accounting Standards No.
123 ("SFAS 123") which encourages employers to account for stock-based
compensation awards based on their fair value on the date the awards are
granted. The resulting compensation award would be shown as an expense on the
statement of earnings. Entities can choose not to apply the new accounting
method and continue to apply current accounting requirements, which generally
result in no compensation cost for most fixed stock-option plans. Those that do
so, however, will be required to disclose in the notes to the financial
statements what net earnings and earnings per share would have been had they
followed the Statement's accounting method. This Statement is effective for
1996. Management does not anticipate this Statement will have a material impact
on the Bank.
Reclassification. Certain amounts in the 1993 and 1994 financial
statements have been reclassified to conform with the 1995 presentation.
F-10
<PAGE> 98
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) INVESTMENT SECURITIES
The amortized cost of investment securities as shown in the accompanying
balance sheets of the Bank and their approximate fair values are as follows (in
thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1995:
Available-for-sale:
U.S. Government and agency obligations....... $11,832 $ 39 $ 15 $11,856
Municipal bonds.............................. 250 2 -- 252
Mortgage-backed securities................... 12,151 23 205 11,969
------- ---- ----- -------
Total................................ $24,233 $ 64 $ 220 $24,077
======= ==== ===== =======
Held-to-maturity:
U.S. Government and agency obligations....... $ 9,942 $ 10 $ 34 $ 9,918
Municipal bonds.............................. 2,228 77 -- 2,305
Mortgage-backed securities................... 7,472 52 21 7,503
------- ---- ----- -------
Total................................ $19,642 $139 $ 55 $19,726
======= ==== ===== =======
AT DECEMBER 31, 1994:
Available-for-sale:
U.S. Government and agency obligations....... $ 3,478 -- $ 210 $ 3,268
Municipal bonds.............................. 2,045 -- 39 2,006
Mortgage-backed securities................... 11,410 -- 521 10,889
------- ---- ----- -------
Total................................ $16,933 -- $ 770 $16,163
======= ==== ===== =======
Held-to-maturity:
U.S. Government and agency obligations....... $18,010 -- $ 611 $17,399
Municipal bonds.............................. 2,229 -- 107 2,122
Mortgage-backed securities................... 8,639 6 353 8,292
------- ---- ----- -------
Total................................ $28,878 $ 6 $1,071 $27,813
======= ==== ===== =======
</TABLE>
On December 31, 1993, the Bank adopted Statement of Financial Accounting
Standards No. 115 and classified investment securities as available-for-sale and
held-to-maturity. On April 30, 1994 the Bank reclassified certain investment
securities from available-for-sale to held-to-maturity. In accordance with
Statement of Financial Accounting Standards No. 115 the unrealized holding loss
at the date of transfer was included as a separate component of stockholders'
equity and is being amortized over the remaining term of the associated
securities as an adjustment of yield. Unrealized loss on investment securities
is summarized below (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1995 1994
----- -----
<S> <C> <C>
Unrealized loss on investment securities available-for-sale, net
of tax effect of $62 and $308 in 1995 and 1994.................. $ (94) $(462)
Net unamortized unrealized loss on investment securities
transferred from available-for-sale to held-to-maturity, net of
tax effect of $15 and $24 in 1995 and 1994...................... (22) (36)
----- -----
$(116) $(498)
===== =====
</TABLE>
F-11
<PAGE> 99
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled maturities of debt securities at December 31, 1995 are as follows
(in thousands):
<TABLE>
<CAPTION>
SECURITIES SECURITIES
AVAILABLE-FOR-SALE HELD-TO-MATURITY
--------------------- ---------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less.............................. $ -- $ -- $ 1,999 $ 1,992
Due from one to five years........................... 10,583 10,601 7,943 7,926
Due from five to ten years........................... 1,499 1,507 2,228 2,305
Mortgage-backed securities........................... 12,151 11,969 7,472 7,503
------- ------- ------- -------
$24,233 $24,077 $19,642 $19,726
======= ======= ======= =======
</TABLE>
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
prepayment penalties.
The following summarizes sales of investment securities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from sale of investment securities........... $ 11,936 $ 11,526 $ 12,808
======= ======= =======
Gross gains from sale of investment securities........ 9 22 40
Gross losses from sale of investment securities....... 33 38 --
------- ------- -------
Net (loss) gain....................................... $ (24) $ (16) $ 40
======= ======= =======
</TABLE>
At December 31, 1995, investment securities with an amortized cost of
approximately $4,909,000 and a market value of $4,889,000, were pledged to
secure public deposits and for other purposes required or permitted by law.
(3) LOANS
The Loan Portfolio -- Major categories of loans included in the loan
portfolio are as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Real estate loans:
Residential.................................................. $ 34,539 $ 29,039
Commercial................................................... 52,269 48,256
-------- --------
Total real estate loans.............................. 86,808 77,295
Commercial loans............................................... 25,247 23,774
Consumer loans................................................. 12,109 13,066
-------- --------
Total loans.......................................... 124,164 114,135
Add (deduct):
Allowance for credit losses.................................. (1,702) (1,562)
Deferred loan fees, net...................................... 26 (183)
Other, net................................................... 23 (20)
-------- --------
Loans, net........................................... $122,511 $112,370
======== ========
</TABLE>
At December 31, 1995, 1994 and 1993 the Bank was servicing loans for others
amounting to approximately $11,336,000, $13,135,000 and $17,538,000,
respectively. Servicing loans for others generally
F-12
<PAGE> 100
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consists of collecting mortgage payments, maintaining escrow accounts,
disbursing payments to investors and processing of foreclosures. Loan servicing
income includes servicing fees from investors and certain charges collected from
borrowers, such as late payment fees.
At December 31, 1995 and 1994, loans in the approximate amount of $879,000
and $1,236,000, respectively, were pledged as collateral for the Bank's line of
credit with the Federal Home Loan Bank of Atlanta.
Credit Risk -- The Bank grants loans to borrowers throughout the State of
Florida with a majority of the loans in the west coast area. Although the Bank
has a diversified loan portfolio, a significant portion of its borrowers'
ability to honor their contracts is dependent upon the economy of the west coast
area of Florida.
An analysis of the changes in the allowance for credit losses is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year............................. $1,562 $1,426 $1,145
Provision charged to operations.......................... 705 184 344
Charge-offs.............................................. (655) (151) (183)
Recoveries............................................... 90 103 120
------ ------ ------
Balance at end of year......................... $1,702 $1,562 $1,426
====== ====== ======
</TABLE>
Loan Impairment and Losses -- The following summarizes the reclassification
of December 31, 1994 amounts which were reclassified as a result of the Bank
adopting SFAS 114 and 118 in 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
----------------
(IN THOUSANDS)
<S> <C>
Insubstance foreclosures reclassified to loans receivable............ $ 72
===
</TABLE>
The following summarizes the amounts of impaired loans (in thousands):
<TABLE>
<CAPTION>
ESTIMATED FAIR
VALUE OF
COLLATERAL
DECEMBER 31,
---------------
1995 1994
---- ----
<S> <C> <C>
Loans identified as impaired:
Gross loans with no related allowance for losses.................. $ -- $ --
Gross loans with related allowance for losses recorded............ 263 --
Less: Allowances on these loans................................... (53) --
---- ----
Net investment in impaired loans.......................... $210 $ --
==== ====
</TABLE>
The average net investment in impaired loans and interest income recognized
and received on impaired loans is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER
31,
-----------
1995 1994
---- ----
<S> <C> <C>
Average investment in impaired loans.................................... $238 $139
==== ====
Interest income recognized on impaired loans............................ $ -- $ --
==== ====
Interest income received on impaired loans.............................. $ -- $ --
==== ====
</TABLE>
F-13
<PAGE> 101
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Loans to Related Parties -- The aggregate amount of loans owed to the Bank
by its executive and senior officers, directors, and their related entities at
December 31, 1995 and 1994, were approximately $3,371,000 and $5,060,000,
respectively. The activity for the year follows (in thousands):
<TABLE>
<S> <C>
Balance at beginning of year............................................... $ 5,060
Additions.................................................................. 249
Repayments................................................................. (1,938)
-------
Balance at end of year........................................... $ 3,371
=======
</TABLE>
(4) PREMISES AND EQUIPMENT
Premises and equipment are summarized below (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1995 1994
------ ------
<S> <C> <C>
Land................................................................. $1,181 $1,087
Building and leasehold improvements.................................. 3,271 3,194
Furniture, fixtures and equipment.................................... 3,405 3,112
------ ------
Total, at cost..................................................... 7,857 7,393
Less accumulated depreciation........................................ 3,134 2,962
------ ------
Premises and equipment, net................................ $4,723 $4,431
====== ======
</TABLE>
(5) DEPOSITS
A schedule of maturities for certificate of deposit accounts follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
DECEMBER 31, 1995
------------- ------------
<S> <C>
1996.................................................................. $ 49,905
1997.................................................................. 12,336
1998.................................................................. 12,700
1999.................................................................. 1,093
2000 and thereafter................................................... 4,197
-------
$ 80,231
=======
</TABLE>
At December 31, 1995 certificates of deposits in denominations of $100,000
and over were as follows (in thousands):
<TABLE>
<CAPTION>
MATURITY AMOUNT
--------------------------------------------------------------------------- -------
<S> <C>
Three months or less....................................................... $ 4,762
Three to six months........................................................ 4,108
Six months to one year..................................................... 1,861
Over one year.............................................................. 5,105
-------
$15,836
=======
</TABLE>
F-14
<PAGE> 102
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) SHORT-TERM BORROWINGS
At December 31, 1995, the Bank has agreements to sell investment securities
to its customers under revolving sales/repurchase agreements aggregating
$4,900,000, and the Bank has a $10,000,000 revolving reverse repurchase
agreement with another bank. The following table provides information on these
agreements (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Maximum borrowing at any month-end within the period..... $5,449 $4,250 $3,753
Average borrowing during the year........................ 2,091 1,322 781
Average interest cost during the year.................... 4.85% 4.24% 3.09%
Average interest cost at end of the year................. 3.90 4.84 2.50
</TABLE>
Securities sold under agreements to repurchase are summarized below (in
thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Agreements to repurchase the same security with another bank..... $ -- $ 1,225
Customer repurchase agreements................................... 1,965 1,493
------- -------
Total.................................................. $ 1,965 $ 2,718
======= =======
Securities pledged as collateral for the agreements, at amortized
cost which approximate market.................................. $15,323 $12,519
======= =======
</TABLE>
The Bank has an available line of credit with the Federal Home Loan Bank of
Atlanta in the amount of $5,000,000, which expires in March 1996. As of December
31, 1995 and 1994, no amounts had been drawn on this line.
The Bank has negotiated an unsecured overnight Federal Funds line of credit
of up to $1,500,000 with the Independent Bankers' Bank of Florida and $1,000,000
with another bank. As of December 31, 1995 and 1994 no funds had been drawn
against these lines.
(7) COMMITMENTS
Financial Instruments with Off-Balance Sheet Risk -- In the normal course
of business the Bank is party to financial instruments not reflected in the
accompanying financial statements. These financial instruments are shown below
(in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Unfunded loan commitments at variable rates...................... $ 5,272 $ 2,478
======= =======
Available lines of credit........................................ $18,981 $16,267
======= =======
Standby letters of credit........................................ $ 1,248 $ 350
======= =======
</TABLE>
The Bank's exposure to credit loss in the event of nonperformance by the
other party to these financial instruments is represented by the contractual
amount of those instruments. The credit and collateral policies applied in
extending these commitments are essentially the same as those required by the
Bank for the financial instruments which are included in the accompanying
balance sheets. The Bank evaluates each borrower's credit worthiness on a
case-by-case basis. The amount of collateral obtained by the Bank, if any, is
based upon management's credit evaluation of the borrower. Such collateral may
include real estate, receivables, inventory, vehicles and equipment or other
types of assets. Since the Bank's loan commitments
F-15
<PAGE> 103
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
often expire without being drawn upon, the total amount of these commitments
does not necessarily represent a required future use of the Bank's cash or
equivalents.
Leases -- The Bank leases certain facilities under operating leases with
noncancellable terms. Rental expense amounted to $286,000, $420,000 and $523,000
for the years ended December 31, 1995, 1994 and 1993, respectively. Rental
income amounted to $89,000 and $60,000 for the years ended December 31, 1995 and
1994. The operating lease agreements contain escalator clauses based upon the
consumer price index and increases in proportionate operating costs of the
facilities and provide for annual adjustments to the previous year's rental. A
summary of the future minimum operating lease commitments are as follows (in
thousands):
<TABLE>
<CAPTION>
OPERATING OPERATING
YEAR ENDING LEASE LEASE
DECEMBER 31, EXPENSE INCOME
---------------------------------------------------------------- --------- ---------
<S> <C> <C>
1996.......................................................... $ 200 $ 131
1997.......................................................... 137 131
1998.......................................................... 47 125
1999.......................................................... 35 122
2000.......................................................... 35 101
After 2000.................................................... 6 --
---- ----
$ 460 $ 610
==== ====
</TABLE>
(8) INCOME TAXES
The provision for income taxes is different than the amount computed by
applying the federal statutory rate of 34% as indicated in the following
analysis (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1995 1994 1993
--------------------- --------------------- ---------------------
% OF PRETAX % OF PRETAX % OF PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
------ ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory
rate....................... $ 943 34.0% $350 34.0% $491 34.0%
Increase (decrease) resulting
from:
State taxes, net of federal
income tax benefit...... 80 2.9 27 2.6 20 1.4
Nondeductible merger
expenses................ -- -- 50 4.9 -- --
Other, net................... 86 3.1 (15) (1.5) 11 .7
------ ---- ---- ---- ---- ----
Income tax
provision........ $1,109 40.0% $412 40.0% $522 36.1%
====== ==== ==== ==== ==== ====
</TABLE>
F-16
<PAGE> 104
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (credit) for income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Federal.................................................... $ 933 $ 55 $ 988
State...................................................... 112 9 121
------ ----- ------
Total.............................................. $ 1,045 $ 64 $1,109
====== ===== ======
YEAR ENDED DECEMBER 31, 1994:
Federal.................................................... $ 596 $ (225) $ 371
State...................................................... 79 (38) 41
------ ----- ------
Total.............................................. $ 675 $ (263) $ 412
====== ===== ======
YEAR ENDED DECEMBER 31, 1993:
Federal.................................................... $ 555 $ (64) $ 491
State...................................................... 42 (11) 31
------ ----- ------
Total.............................................. $ 597 $ (75) $ 522
====== ===== ======
</TABLE>
The tax effects of each type of significant item that gave rise to deferred
taxes are (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------
1995 1994
----- -----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses........................................... $ 364 $ 347
Real estate writedowns.............................................. 83 88
Unrealized loss on investment securities............................ 78 332
Other............................................................... 12 17
----- -----
Total gross deferred tax assets............................. 537 784
----- -----
Deferred tax liabilities:
Federal Home Loan Bank stock basis.................................. (109) (109)
Deferred loan fees.................................................. (98) (63)
Accumulated depreciation on property and equipment.................. (77) (28)
Section 481 change in accounting method adjustment.................. (16) (33)
Core deposit amortization........................................... (20) (22)
Other............................................................... (6) --
----- -----
Total gross deferred tax liabilities........................ (326) (255)
----- -----
Net deferred tax asset...................................... $ 211 $ 529
===== =====
</TABLE>
F-17
<PAGE> 105
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) STOCK OPTIONS
The Bank has a nonqualified stock option plan (the "Plan") for its officers
and employees. Under the Plan, the option price shall not be less than the
estimated fair market value of the shares on the date of grant. An individual
option granted under the Plan may not exceed 33,000 shares, is exercisable as of
the date of grant, and may have a term of up to ten years. The maximum number of
shares which may be subject to options issued and outstanding pursuant to the
Plan is initially 76,319 shares, which may be increased by the Board of
Directors to the lesser of 110,000 shares or an amount equal to 20% of the
shares which shall be issued and outstanding at any time during the term of the
Plan. A summary of transactions follows:
<TABLE>
<CAPTION>
AVERAGE
PER SHARE NUMBER OF AGGREGATE
PRICE SHARES OPTION PRICE
--------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Outstanding at December 31, 1993 and 1992............ $ 8.91 43,545 $388
Options granted.................................... 13.22 30,855 408
Options exercised.................................. 8.37 (22,110) (185)
Options from terminated employees.................. 9.09 (110) (1)
------- ----
Outstanding at December 31, 1994..................... 11.69 52,180 610
Options granted.................................... 15.07 9,050 136
Options from terminated employees.................. 12.98 (770) (10)
------ ------- ----
Outstanding at December 31, 1995..................... $ 12.17 60,460 $736
====== ======= ====
</TABLE>
(10) STOCK DIVIDEND
The Board of Directors declared a 10% stock dividend payable on August 1,
1995 to stockholders of record on June 30, 1995. Accordingly, the Bank
capitalized approximately $1,357,000 of retained earnings which represents
91,276 shares at date of record. All per share amounts have been presented to
reflect this stock dividend.
(11) PROFIT SHARING PLAN
The Bank maintains a qualified Section 401(k) profit sharing plan and trust
(the "Plan"). Under the Plan, a participating employee may make an elective
contribution under a salary reduction arrangement of up to 15% of his or her
compensation. In addition, the Bank may make a separate discretionary matching
contribution. The Bank's contribution in 1995, 1994 and 1993 was $22,300,
$17,300 and $13,600, respectively.
(12) REGULATORY MATTERS
Banking laws and regulations limit the amount of dividends that may be paid
by the Bank. The FDIC requires insured banks to maintain certain specified
levels of capital.
Leverage-Capital Ratio -- The FDIC requires banks to maintain a minimum
leverage-capital ratio of Tier I capital (as defined) to total assets. The
leverage-capital ratio generally ranges from 3% to 5% based on the bank's rating
under the regulatory rating system. The Bank's required leverage-capital ratio
at December 31, 1995 was 4%.
Risk-Weighted Assets Capital Ratios -- The FDIC has also adopted a
risk-based capital statement of policy which imposes an additional capital
standard on insured banks. Under this regulation, a bank must classify its
assets and certain off-balance sheet activities into categories, and maintain
specified levels of capital for each category. The amount of capital that is
required is dependent upon the amount of risk attributed to each category by the
FDIC. A bank must have a total risk-based capital ratio of no less than 8%
F-18
<PAGE> 106
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and a Tier I capital to risk-weighted assets ratio of no less than 4%. Under the
statement of policy, certain assets are required to be deducted from risk-based
capital. Such assets include certain nonqualifying intangible assets,
unconsolidated banking and finance subsidiaries, investments in securities
subsidiaries, and reciprocal holdings of capital instruments with other banks.
In addition, the FDIC may consider deducting other assets on a case-by-case
basis or investments in other subsidiaries on a case-by-case basis or based on
the general characteristics or functional nature of the subsidiaries.
Capital Ratios -- At December 31, 1995, a comparison of the required
capital ratios to actual capital ratios was as follows:
<TABLE>
<CAPTION>
RATIOS OF REGULATORY
THE BANK REQUIREMENT
---------- -----------
<S> <C> <C>
AT DECEMBER 31, 1995:
Total capital to risk-weighted assets......................... 13.64% 8.00%
Tier I capital to risk-weighted assets........................ 12.39 4.00
Tier I capital to total average assets -- leverage ratio...... 8.55 4.00
</TABLE>
(13) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cash paid during the period for:
Interest............................................... $5,423 $4,497 $4,669
====== ====== ======
Income taxes........................................... $1,027 $ 448 $ 447
====== ====== ======
Noncash transactions:
Reclassification of other real estate owned to loans... $ 374 $ -- $ --
====== ====== ======
Unrealized gain (loss) on securities
available-for-sale.................................. $ 614 $ (958) $ 128
====== ====== ======
Stock dividends........................................ $1,357 $ -- $ --
====== ====== ======
</TABLE>
F-19
<PAGE> 107
FORT BROOKE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
---------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Financial assets:
Cash and due from banks...................................... $ 11,997 $ 11,997
Investment securities........................................ 43,719 43,803
Loans........................................................ 122,511 122,560
Accrued interest receivable.................................. 1,266 1,266
FHLB stock................................................... 809 809
Financial liabilities:
Deposit liabilities.......................................... $168,297 $169,112
Short term borrowings........................................ 1,965 1,965
Off-balance-sheet instruments:
Commitments to extend credit................................. $ 5,272 $ 5,272
Available lines of credit.................................... 18,981 18,981
Standby letters of credit.................................... 1,248 1,248
</TABLE>
(15) CONTINGENT LIABILITY
The FDIC has proposed a one-time assessment on all SAIF-insured deposits,
in the range of 85 cents to 90 cents per $100 of domestic deposits, held as of
March 31, 1995. This one-time assessment is intended to recapitalize the SAIF to
the required level of 1.25% of insured deposits, and could be payable in early
1996. If the assessment is made at the proposed rate, the effect on the Bank
would be a pretax charge of approximately $839,000 (0.85% on deposits of $98.7
million at March 31, 1995), or $503,000 after tax (40% assumed tax rate).
F-20
<PAGE> 108
FORT BROOKE BANCORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C>
ASSETS
Cash and due from banks......................................................... $ 11,300
--------
Investment securities:
Available for sale............................................................ 21,228
Held to maturity.............................................................. 18,387
--------
Total investment securities........................................... 39,615
--------
Loans, net of allowance for credit losses of $1,877............................. 131,764
Other real estate owned......................................................... 1,398
Property and equipment, net..................................................... 5,201
Federal Home Loan Bank stock.................................................... 809
Accrued interest receivable..................................................... 1,306
Deferred tax asset.............................................................. 376
Other assets.................................................................... 827
--------
Total................................................................. $ 192,596
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits............................................................... $ 32,883
Savings and NOW deposits...................................................... 33,318
Money market deposits......................................................... 18,326
Other time deposits........................................................... 88,570
--------
Total deposits........................................................ 173,097
Advances by borrowers for taxes and insurance................................... 506
Short term borrowings........................................................... 707
Accrued interest payable........................................................ 483
Current income taxes............................................................ --
Other liabilities............................................................... 1,688
--------
Total liabilities..................................................... 176,481
--------
Stockholders' equity:
Common stock.................................................................. 7,924
Additional paid-in capital.................................................... 4,501
Retained earnings............................................................. 4,041
Unrealized loss on investment securities...................................... (351)
--------
Total stockholders' equity............................................ 16,115
--------
Total................................................................. $ 192,596
========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-21
<PAGE> 109
FORT BROOKE BANCORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Interest income:
Interest on loans................................................... $ 8,859 $ 8,152
Interest on investment securities................................... 1,897 1,870
Other interest...................................................... 241 357
--------- ---------
Total interest income.......................................... 10,997 10,379
--------- ---------
Interest expense:
Interest on deposits................................................ 4,253 4,016
Interest on other borrowings........................................ 71 89
--------- ---------
Total interest expense......................................... 4,324 4,105
--------- ---------
Net interest income............................................ 6,673 6,274
Provision (credit) for credit losses.................................. (30) 478
--------- ---------
Net interest income after provision (credit) for credit
losses........................................................ 6,703 5,796
--------- ---------
Noninterest income:
Other fees and service charges...................................... 1,007 849
Loss on sale of investment securities............................... (22) (24)
Other income........................................................ 146 103
--------- ---------
Total noninterest income....................................... 1,131 928
--------- ---------
Noninterest expense:
Employee compensation and benefits.................................. 2,469 2,198
Occupancy........................................................... 1,019 882
Data processing..................................................... 276 245
Federal insurance premium........................................... 179 253
SAIF recapitalization assessment.................................... 648 --
Advertising......................................................... 120 87
Real estate expense................................................. 131 52
Professional fees................................................... 216 108
Other............................................................... 951 931
--------- ---------
Total noninterest expense...................................... 6,009 4,756
--------- ---------
Earnings before income tax provision........................... 1,825 1,968
Income tax provision.................................................. 624 787
--------- ---------
Net earnings.......................................................... $ 1,201 $ 1,181
========= =========
Earnings per share.................................................... $ 1.20 $ 1.17
========= =========
Weighted average number of shares outstanding......................... 1,001,305 1,005,920
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-22
<PAGE> 110
FORT BROOKE BANCORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL LOSS ON TOTAL
NUMBER OF COMMON PAID-IN RETAINED INVESTMENT STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS SECURITIES EQUITY
--------- ------ ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ 1,005,920 $8,047 $4,571 $3,298 $ (116) $15,800
Net earnings (unaudited).......... -- -- -- 1,201 -- 1,201
Cash dividend (unaudited)......... -- -- -- (251) -- (251)
Purchase and retirement of shares
from dissenting stockholders
upon formation of holding
company (unaudited)............ (15,367) (123) (70) (207) -- (400)
Unrealized loss on investment
securities (unaudited)......... -- -- -- -- (235) (235)
--------- ------ ------ ------ ----- -------
Balance at September 30, 1996
(unaudited)....................... 990,553 $7,924 $4,501 $4,041 $ (351) $16,115
========= ====== ====== ====== ===== =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-23
<PAGE> 111
FORT BROOKE BANCORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings......................................................... $ 1,201 $ 1,181
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation...................................................... 412 355
Provision (credit) for credit losses.............................. (30) 478
Loss from sale of investment securities........................... 22 24
Net amortization of fees, premiums and discounts.................. (10) (107)
Write down on other real estate owned............................. 73 --
(Increase) decrease in other assets............................... (94) 100
Increase in accrued interest receivable........................... (40) (190)
(Decrease) increase in accrued interest payable................... (7) 130
Decrease in current income taxes.................................. (158) (46)
Increase in other liabilities..................................... 1,010 305
Gain on sale of other real estate owned........................... (1) (9)
Provision for deferred taxes...................................... -- 18
-------- --------
Net cash flow provided by operating activities............... 2,378 2,239
-------- --------
Cash flows from investing activities:
Purchase of investment securities.................................... (14,218) (16,270)
Proceeds from sales and maturities of investment securities.......... 15,026 14,555
Principal repayments on investment securities........................ 2,874 1,656
Net increase in loans................................................ (9,837) (3,805)
Proceeds from sales of other real estate owned....................... 301 234
Purchase of property and equipment................................... (890) (316)
-------- --------
Net cash used in investing activities........................ (6,744) (3,946)
-------- --------
Cash flows from financing activities:
Net increase in deposits............................................. 4,800 5,550
Net increase in advance payments by borrowers for taxes and
insurance......................................................... 378 302
Cash dividend........................................................ (251) (3)
Decrease in short term borrowings.................................... (1,258) (1,991)
-------- --------
Net cash provided by financing activities.................... 3,669 3,858
-------- --------
Net (decrease) increase in cash and due from banks........... (697) 2,151
Cash and due from banks at beginning of period......................... 11,997 8,436
-------- --------
Cash and due from banks at end of period............................... $ 11,300 $ 10,587
======== ========
Cash paid during the period for:
Interest............................................................. $ 4,331 $ 3,886
======== ========
Income taxes......................................................... $ 865 $ 814
======== ========
Noncash transactions:
Reclassification of loans to other real estate....................... $ 624 $ 47
======== ========
(Decrease) increase in unrealized loss on investment securities
available-for-sale................................................ (235) $ 650
======== ========
Liability incurred to purchase shares from dissenting stockholders... $ 400 $ --
======== ========
Stock dividend....................................................... $ -- $ 1,357
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-24
<PAGE> 112
FORT BROOKE BANCORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General. Effective July 10, 1996 the common shareholders of Fort Brooke
Bank (the "Bank") exchanged their common shares for common shares of Fort Brooke
Bancorporation (the "Holding Company"), and at that time the Bank became a
wholly-owned subsidiary of the Holding Company. The only business of the Holding
Company is the ownership and operation of the Bank. The Holding Company and the
Bank are collectively referred to as the "Company". The formation of the Holding
Company and exchange of shares has been accounted for as a pooling of interests.
In the opinion of the management of the Company, the accompanying condensed
consolidated financial statements contain all adjustments (consisting
principally of normal recurring accruals) necessary to present fairly the
financial position at September 30, 1996, the results of operations and cash
flows for the nine month period ended September 30, 1996 and 1995, for the
three-month and nine-month periods ended September 30, 1996 and 1995. The
results of operations for the three and nine months ended September 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
Loan Impairment and Losses. The Company has identified loans totaling
$67,000 and $184,000 as impaired at September 30, 1996 and 1995. The activity in
the allowance for credit losses is as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period..................................... $1,702 1,562
Provision (credit) charged to earnings........................... (30) 478
Recoveries, net of charge-offs................................... 205 (426)
------ ------
Balance, end of period........................................... $1,877 1,614
====== ======
</TABLE>
Earnings Per Common Share -- Earnings per common share were computed by
dividing the net earnings for the period by the weighted-average number of
shares outstanding. The effect of the outstanding options was not material.
Pending Acquisition of the Company. -- On September 23, 1996, the Company
entered into a contract to merge the Company into Colonial BancGroup
("Colonial"). Colonial will exchange sufficient common stock to equal $31.50 per
share for 990,553 shares of the Company. This transaction is subject to the
approval of stockholders and various regulatory authorities.
F-25
<PAGE> 113
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
FORT BROOKE BANCORPORATION
DATED AS OF
NOVEMBER 18, 1996
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................................ A-1
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law.............................................................. A-1
2.2 Corporate Existence......................................................... A-1
2.3 Articles of Incorporation and Bylaws........................................ A-1
2.4 Resulting Corporation's Officers and Board.................................. A-2
2.5 Stockholder Approval........................................................ A-2
2.6 Further Acts................................................................ A-2
2.7 Effective Date and Closing.................................................. A-2
2.8 Subsidiary Bank Merger...................................................... A-2
ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.................................... A-2
3.2 Surrender of Acquired Corporation Stock..................................... A-3
3.3 Fractional Shares........................................................... A-4
3.4 Adjustments................................................................. A-4
3.5 BancGroup Stock............................................................. A-4
3.6 Dissenting Rights........................................................... A-4
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................................ A-4
4.2 Capital Stock............................................................... A-4
4.3 Financial Statements; Taxes................................................. A-4
4.4 No Conflict with Other Instrument........................................... A-5
4.5 Absence of Material Adverse Change.......................................... A-5
4.6 Approval of Agreements...................................................... A-5
4.7 Tax Treatment............................................................... A-6
4.8 Title and Related Matters................................................... A-6
4.9 Subsidiaries................................................................ A-6
4.10 Contracts................................................................... A-6
4.11 Litigation.................................................................. A-6
4.12 Compliance.................................................................. A-6
4.13 Registration Statement...................................................... A-6
4.14 SEC Filings................................................................. A-7
4.15 Form S-4.................................................................... A-7
4.16 Brokers..................................................................... A-7
4.17 Government Authorization.................................................... A-7
4.18 Absence of Regulatory Communications........................................ A-7
4.19 Disclosure.................................................................. A-7
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
5.1 Organization................................................................ A-8
5.2 Capital Stock............................................................... A-8
5.3 Subsidiaries................................................................ A-8
5.4 Financial Statements; Taxes................................................. A-8
5.5 Absence of Certain Changes or Events........................................ A-9
5.6 Title and Related Matters................................................... A-10
5.7 Commitments................................................................. A-11
</TABLE>
i
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.8 Charter and Bylaws.......................................................... A-11
5.9 Litigation.................................................................. A-11
5.10 Material Contract Defaults.................................................. A-11
5.11 No Conflict with Other Instrument........................................... A-11
5.12 Governmental Authorization.................................................. A-11
5.13 Absence of Regulatory Communications........................................ A-11
5.14 Absence of Material Adverse Change.......................................... A-12
5.15 Insurance................................................................... A-12
5.16 Pension and Employee Benefit Plans.......................................... A-12
5.17 Buy-Sell Agreement.......................................................... A-12
5.18 Brokers..................................................................... A-12
5.19 Approval of Agreements...................................................... A-12
5.20 Disclosure.................................................................. A-13
5.21 Registration Statement...................................................... A-13
5.22 Loans; Adequacy of Allowance for Loan Losses................................ A-13
5.23 Environmental Matters....................................................... A-13
5.24 Transfer of Shares.......................................................... A-13
5.25 Collective Bargaining....................................................... A-14
5.26 Labor Disputes.............................................................. A-14
5.27 Derivative Contracts........................................................ A-14
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................................... A-14
6.2 Additional Covenants of Acquired Corporation................................ A-16
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................................... A-18
7.2 Press Release............................................................... A-18
7.3 Mutual Disclosure........................................................... A-18
7.4 Access to Properties and Records............................................ A-19
7.5 Notice of Adverse Changes................................................... A-19
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................................... A-19
8.2 Regulatory Authority Approval............................................... A-19
8.3 Litigation.................................................................. A-19
8.4 Registration Statement...................................................... A-19
8.5 Tax Opinion................................................................. A-20
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants................................... A-20
9.2 Adverse Changes............................................................. A-20
9.3 Closing Certificate......................................................... A-20
9.4 Opinion of Counsel.......................................................... A-21
9.5 Fairness Opinion............................................................ A-21
9.6 NYSE Listing................................................................ A-21
9.7 Other Matters............................................................... A-21
9.8 Material Events............................................................. A-21
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................................... A-21
10.2 Adverse Changes............................................................. A-21
10.3 Closing Certificate......................................................... A-22
10.4 Opinion of Counsel.......................................................... A-22
10.5 Controlling Shareholders.................................................... A-22
</TABLE>
ii
<PAGE> 116
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
10.6 Other Matters............................................................... A-22
10.7 Dissenters.................................................................. A-22
10.8 Material Events............................................................. A-23
10.9 Severance Agreements........................................................ A-23
10.10 Pooling of Interest......................................................... A-23
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES............................ A-23
ARTICLE 12 -- NOTICES.................................................................. A-23
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................................... A-24
13.2 Termination................................................................. A-24
13.3 Damages..................................................................... A-25
ARTICLE 14 -- DEFINITIONS.............................................................. A-25
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................................... A-29
15.2 Benefit..................................................................... A-29
15.3 Governing Law............................................................... A-29
15.4 Counterparts................................................................ A-29
15.5 Headings.................................................................... A-29
15.6 Severability................................................................ A-29
15.7 Construction................................................................ A-29
15.8 Return of Information....................................................... A-29
15.9 Equitable Remedies.......................................................... A-29
15.10 Attorneys' Fees............................................................. A-29
15.11 No Waiver................................................................... A-30
15.12 Remedies Cumulative......................................................... A-30
15.13 Entire Contract............................................................. A-30
</TABLE>
iii
<PAGE> 117
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
18th day of November 1996, by and between FORT BROOKE BANCORPORATION ("Acquired
Corporation"), a Florida corporation, and THE COLONIAL BANCGROUP, INC.
("BancGroup"), a Delaware corporation.
W I T N E S S E T H
WHEREAS, Acquired Corporation operates as a bank holding company for its
wholly owned subsidiary, Fort Brooke Bank (the "Bank"), with its principal
office in Brandon, Florida; and
WHEREAS, BancGroup is a bank holding company with Subsidiary banks in
Alabama, Florida, Georgia and Tennessee; and
WHEREAS, Acquired Corporation wishes to merge with BancGroup; and
WHEREAS, it is the intention of BancGroup and Acquired Corporation 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
"The Colonial BancGroup, Inc."
ARTICLE 2
MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective Date, Acquired Corporation shall be
merged with and into BancGroup (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 DGCL and, to the extent applicable, the FBCA.
The offices and facilities of Acquired Corporation and of BancGroup shall become
the offices and facilities of the Resulting Corporation.
2.2 Corporate Existence. On the Effective Date, the corporate existence of
Acquired Corporation and of BancGroup shall, as provided in the DGCL and the
FBCA, be merged into and continued in the Resulting Corporation, and the
Resulting Corporation shall be deemed to be the same corporation as Acquired
Corporation and BancGroup. All rights, franchises and interests of Acquired
Corporation and BancGroup, respectively, in and to every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
the Resulting Corporation by virtue of the Merger without any deed or other
transfer. The Resulting Corporation on the Effective Date, and without any order
or other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interests, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by Acquired
Corporation and BancGroup, 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 restated certificate of incorporation and bylaws of BancGroup as they exist
immediately before the Effective Date.
A-1
<PAGE> 118
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 BancGroup as of the Effective Date.
2.5 Stockholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Corporation at the Stockholders Meeting to be held as
promptly as practicable consistent with the satisfaction of the conditions set
forth in this Agreement. Upon approval by the requisite vote of the shareholders
of Acquired Corporation 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 Corporation or BancGroup,
acquired as a result of the Merger, or (ii) otherwise to carry out the purposes
of this Agreement, BancGroup 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 Corporation
or BancGroup, 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 Certificate of Merger to be issued by the
Secretary of State of the State of Delaware (such time being herein called the
"Effective Date"). The Closing shall take place at the offices of BancGroup, in
Montgomery, Alabama, at 11:00 a.m. on the date that the Effective Date occurs or
at such other place and time that the Parties may mutually agree.
2.8 Subsidiary Bank Merger. BancGroup and Acquired Corporation anticipate
that immediately after the Effective Date the Bank will merge with and into
Colonial Bank, BancGroup's Florida incorporated Subsidiary bank ("Colonial
Bank"). The exact timing and structure of such merger are not known at this
time, and BancGroup in its discretion will finalize such timing and structure at
a later date. Acquired Corporation will cooperate with BancGroup in the
execution of appropriate documentation relating to such merger.
ARTICLE 3
CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock. (a) On the Effective Date,
each share of common stock of Acquired Corporation outstanding and held by
Acquired Corporation's shareholders (the "Acquired Corporation Stock"), shall be
converted by operation of law and without any action by any holder thereof into
shares of BancGroup Common Stock at a per share price of $31.50 (the "Merger
Consideration") as specified below. Specifically, each outstanding share of
Acquired Corporation Stock shall (subject to section 3.3 hereof), be converted
into such number of shares of BancGroup Common Stock equal to $31.50 divided by
the Market Value. 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 immediately preceding the Effective Date, provided that if
the Market Value, as calculated, is less than $32.00, the Market Value shall be
deemed to be $32.00, and if the Market Value, as calculated, is greater than
$39.00, the Market Value shall be deemed to be $39.00. Accordingly, the maximum
number of shares of BancGroup Common Stock to be issued in the Merger shall be
975,076 and the minimum number of shares of BancGroup Common Stock to be issued
in the Merger shall be 800,062 assuming 990,553 shares of Acquired Corporation
common stock outstanding. To the extent that the number of shares of Acquired
Corporation Stock may increase based upon the exercise of Acquired Corporation
Options, the number of shares of BancGroup Common Stock to be issued in the
Merger shall be increased with each share
A-2
<PAGE> 119
of Acquired Corporation Stock outstanding at the Effective Date exchanged for
shares of BancGroup Common Stock equal to $31.50 divided by the Market Value,
provided that for this purpose the Market Value shall be deemed to be no less
than $32.00 and no greater than $39.00.
(b)(i) On the Effective Date, BancGroup shall assume all Acquired
Corporation Options outstanding, and each such option shall cease to represent a
right to acquire Acquired Corporation common stock and shall, instead, represent
the right to acquire BancGroup Common Stock on substantially the same terms
applicable to the Acquired Corporation Options except as specified below in this
section. The number of shares of BancGroup Common Stock to be issued pursuant to
such options shall equal the number of shares of Acquired Corporation common
stock subject to such Acquired Corporation 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 Corporation 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. The exercise price for the acquisition
of BancGroup Common Stock shall be the exercise price for each share of Acquired
Corporation 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 $31.50 by the Market Value. It is intended that the
assumption by BancGroup of the Acquired Corporation 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
Corporation Options, the number of shares of Acquired Corporation common stock
subject to such options, the exercise price and the expiration date of such
options.
(ii) As an alternative to the assumption of Acquired Corporation Options
provided for in section 3.1(b)(i), the holder of each such option may elect on
the Effective Date, by properly surrendering to Acquired Corporation the
Acquired Corporation Options, to receive shares of BancGroup Common Stock for
the difference between the exercise price (the "Exercise Price") of the Acquired
Corporation Options so surrendered and $31.50. The number of shares of BancGroup
Common Stock to be issued to such holder shall be such number of shares as shall
equal ($31.50 less the Exercise Price) divided by the Market Value.
(iii) 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 Acquired Corporation 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 Corporation Stock. After the Effective Date,
each holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation Stock shall have been properly
tendered.
A-3
<PAGE> 120
3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Acquired Corporation 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 Corporation 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 Corporation
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 the Resulting Corporation.
3.6 Dissenting Rights. Any shareholder of Acquired Corporation who shall
have, prior to the vote with respect to approval of the Merger, furnished notice
of intent to demand payment for his shares if the Merger is approved, who shall
not have voted such shares in favor of this Agreement and who shall have
complied with all other requirements set forth in the FBCA relating to the
establishment of preservation of rights of dissenting shareholders, shall be
entitled to receive payment for the fair value of his Acquired Corporation
Stock. If after the Effective Date a dissenting shareholder of Acquired
Corporation fails to perfect, or effectively withdraws or loses, his right to
appraisal and payment for his shares of Acquired Corporation Stock, BancGroup
shall issue and deliver the consideration to which such holder of shares of
Acquired Corporation Stock is entitled under Section 3.1 (without interest) upon
surrender of such holder of the certificate or certificates representing shares
of Acquired Corporation Stock held by him.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Acquired
Corporation as follows:
4.1 Organization. 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.
4.2 Capital Stock.
(a) The authorized capital stock of BancGroup consists of (A) 44,000,000
shares of Common Stock, $2.50 par value per share, of which as of September 19,
1996, 16,296,558 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
Corporation.
(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
Corporation copies of the following financial statements of BancGroup.
(i) Consolidated balance sheets as of December 31, 1994, and December
31, 1995, and for the nine months ended September 30, 1996;
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(ii) Consolidated statements of operations for each of the three years
ended December 31, 1993, 1994 and 1995, and for the nine months ended
September 30, 1996;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1993, 1994 and 1995, and for the nine months ended
September 30, 1996; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1993, 1994 and 1995, and for the nine
months ended September 30, 1996.
All such financial statements are in all material respects in accordance
with the books and records of BancGroup and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, all as more particularly set forth in the
notes to such statements. Each of the consolidated balance sheets presents
fairly as of its date the consolidated financial condition of BancGroup and its
Subsidiaries. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), BancGroup did not have, as of the
dates of such balance sheets, any material Liabilities or obligations (absolute
or contingent) of a nature customarily reflected in a balance sheet or the notes
thereto. The statements of consolidated income, shareholders' equity and changes
in consolidated financial position present fairly the results of operations and
changes in financial position of BancGroup and its Subsidiaries for the periods
indicated. The foregoing representations, insofar as they relate to the
unaudited interim financial statements of BancGroup for the nine months ended
September 30, 1996, 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. The board of directors of BancGroup has
approved this Agreement and the transactions contemplated by it and has
authorized the execution and delivery by BancGroup of this Agreement. This
Agreement constitutes the legal, valid and binding obligation of BancGroup,
enforceable against it in accordance with its terms. Approval of this Agreement
by the stockholders of BancGroup is not
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required by applicable law. Subject to the matters referred to in section 8.2,
BancGroup has full power, authority and legal right to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. BancGroup has
no Knowledge of any fact or circumstance under which the appropriate regulatory
approvals required by section 8.2 will not be granted without the imposition of
material conditions or material delays.
4.7 Tax Treatment. BancGroup has no present plan to sell or otherwise
dispose of any of the Assets of Acquired Corporation, subsequent to the Merger,
and BancGroup intends to continue the historic business of Acquired Corporation.
4.8 Title and Related Matters. BancGroup has good and marketable title to
all the properties, interests in properties and Assets, real and personal,
reflected in the most recent balance sheet referred to in section 4.3(a), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes of such balance sheet, (ii) liens for current Taxes not yet due and
payable and (iii) such imperfections 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.
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
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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
Corporation or any of its representatives expressly for use in the Proxy
Statement or information included in the Proxy Statement regarding the business
of Acquired Corporation, its operations, Assets and capital.
4.14 SEC Filings. (a) BancGroup has heretofore delivered to Acquired
Corporation copies of BancGroup's: (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 1995; (ii) 1995 Annual Report to Shareholders; (iii)
Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, June 30,
and September 30, 1996; and (iv) any reports on Form 8-K, filed by BancGroup
with the SEC since December 31, 1995. Since December 31, 1995, 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 Corporation 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, pursuant to which such Agency has imposed or has indicated it may
impose any material restrictions on the operations of, or the business conducted
by, such company 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 Corporation 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.
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ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to and with
BancGroup, as follows:
5.1 Organization. Acquired Corporation is a Florida corporation, and the
Bank is a Florida state bank. Each Acquired Corporation Company is duly
organized, validly existing and in good standing under the respective Laws of
its jurisdiction of incorporation and has all requisite power and authority to
carry on its business as it is now being conducted and is qualified to do
business in every jurisdiction in which the character and location of the Assets
owned by it or the nature of the business transacted by it requires
qualification or in which the failure to qualify could, individually, or in the
aggregate, have a Material Adverse Effect.
5.2 Capital Stock. (i) As of October 31, 1996, the authorized capital
stock of Acquired Corporation consisted of 10,000,000 shares of common stock,
$.001 par value per share, 990,553 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 Corporation has
60,410 shares of its common stock subject to exercise at any time pursuant to
Acquired Corporation Options. Except for the foregoing, Acquired Corporation
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, including the granting of
additional options to purchase its common stock.
5.3 Subsidiaries. Acquired Corporation has no direct Subsidiaries other
than the Bank, and there are no Subsidiaries of the Bank. Acquired Corporation
owns all of the issued and outstanding capital stock of the Bank free and clear
of any liens, claims or encumbrances of any kind. All of the issued and
outstanding shares of capital stock of the Subsidiaries have been validly issued
and are fully paid and non-assessable. As of October 31, 1996, there were
2,000,000 shares of the common stock, par value $8.00 per share, authorized of
the Bank, 990,553 of which are issued and outstanding and wholly owned by
Acquired Corporation. The Bank has no 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.
5.4 Financial Statements; Taxes (a) Acquired Corporation has delivered to
BancGroup copies of the following financial statements of Acquired Corporation:
(i) Consolidated statements of financial condition as of December 31,
1995 and 1996, and for the nine months ended September 30, 1996;
(ii) Consolidated statements of income for each of the three years
ended December 31, 1994, 1995 and 1996, and for the nine months ended
September 30, 1996;
(iii) Consolidated statements of stockholders' equity for each of the
three years ended December 31, 1994, 1995, and 1996, and for the nine
months ended September 30, 1996; and
(iv) Consolidated statements of cash flows for the three years ended
December 31, 1994, 1995 and 1996, and for the nine months ended September
30, 1996.
All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Corporation 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 Corporation. Except as and to the extent reflected or
reserved against in such balance sheets (including the notes thereto), Acquired
Corporation 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 Corporation for the
periods indicated. The foregoing representations, insofar as they relate to the
unaudited interim financial statements of Acquired Corporation for the nine
months ended September 30,
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1996, 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 Corporation 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
Corporation, 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 Corporation accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior thereto and for
which Acquired Corporation 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 Corporation, 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 Corporation. Acquired Corporation 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 Corporation Company has withheld from its employees (and
timely paid to the appropriate governmental entity) proper and accurate amounts
for all periods in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including without limitation,
income, social security and employment Tax withholding for all types of
compensation). Each Acquired Corporation 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 Corporation 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 or to be issued upon the
exercise of Acquired Corporation Options existing on the date hereof;
(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,
any of its outstanding securities, provided, however, that Acquired
Corporation shall be permitted to pay a cash dividend to its shareholders
for the fourth quarter of 1996 and the first quarter of 1997. Such dividend
shall be equal to $Dividend X .88732, where $Dividend equals the per share
dividend paid by BancGroup for that quarter in question;
(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;
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(g) suffered any Losses or waived any rights of value which in either
event in the aggregate are material considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any Contract, agreement or license to which it
is a party if such amendment or termination is material considering its
business as a whole;
(i) except in accordance with normal and usual practice, made any
accrual or arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice, increased the
rate of compensation payable to or to become payable to any of its officers
or employees or made any material increase in any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice or had Knowledge or reason to believe that any of
its substantial customers has terminated or intends to terminate its
relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;
(l) failed to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations;
(m) entered into any other material transaction other than in the
ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action described in
clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired Corporation
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 Corporation
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. Acquired Corporation has good and marketable title to all the
properties, interest in properties and Assets, real and personal, reflected in
the most recent balance sheet referred to in section 5.4(a)(i), or acquired
after the date of such balance sheet (except properties, interests and Assets
sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes to such balance sheet, (ii) Liens for current Taxes not yet due and
payable and (iii) such imperfections of title and easements as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair present business operations
at such properties. The Acquired Corporation has no Knowledge that any of the
material structures and equipment of each Acquired Corporation Company fail to
comply in any material respect 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 Corporation Company,
either as lessor or lessee.
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Corporation Company's fixed Assets as of October 31, 1996.
(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 Corporation Company.
Acquired Corporation 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 Corporation Company.
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5.7 Commitments. Except as set forth in Schedule 5.7, no Acquired
Corporation 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 Corporation Company. Complete and accurate copies of
all Contracts, plans and other items so listed have been made or will be made
available to BancGroup for inspection.
5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the articles of incorporation and bylaws of each Acquired Corporation 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 Corporation) pending or, to the Knowledge of Acquired
Corporation, threatened against or affecting any Acquired Corporation Company
(nor is Acquired Corporation aware 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 Corporation, and no Acquired Corporation Company is in Default with
respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental department, commission,
board, bureau, agency or instrumentality, which Default would have a Material
Adverse Effect on Acquired Corporation. To the Knowledge of Acquired
Corporation, each Acquired Corporation 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 Corporation.
5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Corporation 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 the Acquired Corporation
has no Knowledge of any 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 Corporation Company is a party and will not conflict with any
provision of the charter or bylaws of any Acquired Corporation Company.
5.12 Governmental Authorization. Each Acquired Corporation Company has all
Permits that, to the Knowledge of Acquired Corporation, are or will be legally
required to enable any Acquired Corporation Company to conduct its business in
all material respects as now conducted by each Acquired Corporation Company.
5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Corporation Company is subject to, nor has any Acquired
Corporation Company received during the past three years, any written
communication directed specifically to it from any Agency to which it is
subject,
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pursuant to which such Agency has imposed or has indicated it may impose any
material restrictions on the operations of, or the business conducted by, such
company 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
Corporation, 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 Corporation Company.
5.15 Insurance. Each Acquired Corporation Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Corporation reasonably believes to be
adequate for the type of business conducted by such company. No Acquired
Corporation 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 Corporation 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, no Acquired Corporation 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 Corporation 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 Corporation, all employee benefit plans of
each Acquired Corporation 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 Corporation Company sponsors
or otherwise maintains a "pension plan" within the meaning of section 3(2) of
ERISA or any other retirement plan other than the Bank's 401k Profit Sharing
Plan 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 Corporation, 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 Corporation Company.
(b) To the Knowledge of Acquired Corporation, no amounts payable to any
employee of any Acquired Corporation 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 Corporation, 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
Corporation, any similar agreement or any voting agreement or voting trust in
respect of any such shares.
5.18 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by Acquired
Corporation directly with BancGroup and without the intervention of any other
person, either as a result of any act of Acquired Corporation, or otherwise, in
such manner as to give rise to any valid claim against Acquired Corporation for
a finder's fee, brokerage commission or other like payment.
5.19 Approval of Agreements. The board of directors of Acquired
Corporation has approved this Agreement and the transactions contemplated by
this Agreement and has authorized the execution and delivery by Acquired
Corporation of this Agreement. Subject to the matters referred to in section
8.2, Acquired Corporation has full power, authority and legal right to enter
into this Agreement, and, upon appropriate vote of the shareholders of Acquired
Corporation in accordance with this Agreement, Acquired
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Corporation 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 Corporation,
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 Corporation, its Assets, properties, operations, and
capital stock or to information furnished in writing by Acquired Corporation 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
Corporation 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 any Acquired Corporation Company. Acquired Corporation
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 Corporation 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. No Acquired Corporation Company has in its
portfolio any loan exceeding its legal lending limit, nor, except as disclosed
on Schedule 5.22, any known significant delinquent, substandard, doubtful, loss,
nonperforming or problem loans.
5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired Corporation, each Acquired Corporation 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
Corporation has no Knowledge that any Acquired Corporation Company has not
complied with all regulations and requirements promulgated by the Occupational
Safety and Health Administration that are applicable to any Acquired Corporation
Company. To the Knowledge of Acquired Corporation, there is no Litigation
pending or threatened with respect to any violation or alleged violation of the
Environmental Laws. Acquired Corporation has no Knowledge, with respect to
Assets of or owned by any Acquired Corporation Company, that (i) there has been
spillage, leakage, contamination or release of any substances for which the
appropriate remedial action has not been completed; (ii) any owned or leased
property is contaminated with or contains any hazardous substance or waste; and
(iii) there are any underground storage tanks on any premises owned or leased by
any Acquired Corporation Company. Acquired Corporation has no Knowledge of any
facts which might suggest that any Acquired Corporation 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 Corporation 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, Acquired Corporation has no Knowledge
that any Acquired Corporation 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 Permit under
any Environmental Law which has not been obtained.
5.24 Transfer of Shares. Acquired Corporation has no Knowledge of any plan
or intention on the part of Acquired Corporation'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
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having, in the aggregate, a fair market value of less than fifty (50%) percent
of the total fair market value of Acquired Corporation 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 Corporation Company and any union or labor
organization covering any of Acquired Corporation 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 Corporation, each
Acquired Corporation 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 Corporation Company is or has been
engaged in any unfair labor practice, and, to the Knowledge of Acquired
Corporation, no unfair labor practice complaint against any Acquired Corporation
Company is pending before the National Labor Relations Board. Relations between
management of each Acquired Corporation Company and the employees are amicable
and there have not been, nor to the Knowledge of Acquired Corporation, are there
presently, any attempts to organize employees, nor to the Knowledge of Acquired
Corporation, are there plans for any such attempts.
5.27 Derivative Contracts. No Acquired Corporation 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
Corporation'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 Corporation 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 Corporation and its counsel, with
respect to the Common Stock to be issued pursuant to this Agreement.
BancGroup shall use reasonable good faith efforts to prepare all necessary
filings with any Agencies which may be necessary for approval to consummate
the transactions contemplated by this Agreement.
(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
Corporation:
(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;
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(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 Corporation may reasonably request.
(d) No Control of Acquired Corporation by BancGroup. Notwithstanding
any other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Acquired Corporation shall
continue to reside solely in Acquired Corporation'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. On the Effective Date, all employees of
any Acquired Corporation 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
Corporation 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 Corporation
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
Corporation 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 Corporation 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
or group dental plan of the Resulting Corporation and its Subsidiaries,
each such Acquired Corporation Company employee shall be given credit for
covered expenses paid by that employee under comparable employee benefit
plans of the Acquired Corporation 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 or group dental plan of the Resulting Corporation and its
Subsidiaries.
(g) Acquisition of Discovery Period Insurance Coverage. BancGroup
shall, or shall cause Colonial Bank to, use its reasonable best efforts to
purchase a runoff "discovery period" extension under the Acquired
Corporation's existing director and officer liability insurance policy
covering persons who are currently covered by such insurance for a period
of two years after the Effective Date; provided, that neither BancGroup nor
Colonial Bank shall be obligated to pay more than $20,000 in premium costs
for such coverage.
(h) Indemnification. (i) Subject to the conditions set forth in the
succeeding paragraph, for a period of five years after the Effective Date
BancGroup shall, and shall cause Colonial Bank to, indemnify, defend and
hold harmless each person entitled to indemnification from the Acquired
Corporation (each being an "Indemnified Party") against all liabilities
arising out of actions or omissions occurring upon or prior to the
Effective Date (including without limitation the transactions contemplated
by this Agreement) to the maximum extent authorized under Section 607.0850
of the FBCA.
(ii) Any Indemnified Party wishing to claim indemnification under this
subsection (h), upon learning of any such liability or Litigation, shall
promptly notify BancGroup thereof. In the event of any such Litigation
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(whether arising before or after the Effective Date (i) BancGroup or Colonial
Bank shall have the right to assume the defense thereof with counsel reasonably
acceptable to such Indemnified Party and, upon assumption of such defense,
BancGroup shall not be liable to such Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if BancGroup or
Colonial Bank elects not to assume such defense or counsel for the Indemnified
Parties advises that there are substantive issues which raise conflicts of
interest between BancGroup and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and BancGroup or Colonial Bank shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided that BancGroup shall be
obligated pursuant to this subsection to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such Litigation; and (iii) BancGroup shall not
be liable for any settlement effected without its prior consent; and further
provided that BancGroup and Colonial Bank shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(iii) In consideration of and as a condition precedent to the effectiveness
of the indemnification obligations provided by BancGroup in this section to a
director or officer of the Acquired Corporation, such director or officer of the
Acquired Corporation shall have delivered to BancGroup on or prior to the
Effective Date a letter in form reasonably satisfactory to BancGroup concerning
claims such directors or officer may have against Acquired Corporation. In the
letter, the directors or officer shall: (i) acknowledge the assumption by
BancGroup as of the Effective Date of all Liability (to the extent Acquired
Corporation is so liable) for claims for indemnification arising under section
6.1(h) hereof; (ii) affirm that they do not have nor are they aware of any
claims they might have (other than those referred to in the following clause
(iii)) against Acquired Corporation; (iii) identify any claims or any facts or
circumstances of which they are aware that could give rise to a claim for
indemnification under section 6.1(h)(i) hereof; and (iv) release as of the
Effective Date any and all claims that they may have against any Acquired
Corporation Company other than (A) those referred to in the foregoing
clause(iii) and disclosed in the letter of the director or officer, (B) claims
which have not yet been asserted against such director or officer (other than
claims arising from facts and circumstances of which such director or officer is
aware but which are not disclosed in such director or executive officer's
letter), (C) claims arising from any transaction contemplated by this Agreement
or disclosed in any schedule to this Agreement, and (D) claims arising in the
ordinary course of business of any Acquired Corporation Company after the date
of the letter.
(iv) Acquired Corporation hereby represents and warrants to BancGroup that
it has no Knowledge of any claim, pending or threatened, or of any facts or
circumstances that could give rise to any obligation by BancGroup to provide the
indemnification required by this section 6.1(h) other than as disclosed in the
letters of the directors and executive officers referred to in section
6.1(h)(iii) hereof or described in any schedule to this Agreement and claims
arising from any transaction contemplated by this Agreement.
6.2 Additional Covenants of Acquired Corporation. Acquired Corporation
covenants to and with BancGroup as follows:
(a) Operations. (i) Acquired Corporation will conduct its business
and the business of each Acquired Corporation 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 Corporation
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 Corporation 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
Corporation will take no action that would prevent or impede the Merger
from qualifying (i) for pooling of interests accounting treatment or (ii)
as a reorganization with the meaning of Section 368 of the Code.
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(ii) If requested by BancGroup, Acquired Corporation shall use its
best efforts to cause all officers and directors of any Acquired
Corporation Company that own any stock of Acquired Corporation and all
shareholders of Acquired Corporation who own more than five percent (5%) of
Acquired Corporation 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 Corporation 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. Until the termination of this Agreement,
neither Acquired Corporation nor any of Acquired Corporation's 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,
an Acquisition Proposal other than as contemplated by this Agreement.
Acquired Corporation will notify BancGroup immediately if any such
Acquisition Proposal is received by Acquired Corporation, if any such
information is requested from Acquired Corporation, or if any such
negotiations or discussions are sought to be initiated with Acquired
Corporation, and Acquired Corporation shall instruct Acquired Corporation's
officers, directors, agents or affiliates or their subsidiaries to refrain
from doing any of the above; provided, however, that Acquired Corporation
may communicate information about such an Acquisition Proposal to its
shareholders if and to the extent that legal counsel provides a written
opinion to Acquired Corporation (a copy of which shall be provided in
advance to BancGroup) that it is required to do so in order to comply with
its legal obligations. Acquired Corporation shall immediately cease and
cause to be terminated any existing activities, discussions, or
negotiations with any Persons other than BancGroup conducted hereto with
respect to any of the foregoing.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Corporation agree to support publicly the Merger, provided,
however, that nothing contained herein shall be deemed to prohibit any
officer or director of Acquired Corporation from fulfilling his fiduciary
duty or from taking any action that is required by Law.
(e) Shareholder Voting. Acquired Corporation shall on the date of
execution of this Agreement obtain and submit to BancGroup an agreement
from certain of its shareholders substantially in the form set forth in
Exhibit A.
(f) Financial Statements. Acquired Corporation 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
Corporation 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
Corporation 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 Corporation by independent auditors in connection
with each annual, interim or special audit of the books of Acquired
Corporation 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 Corporation may file with the
SEC or any other Agency; and
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(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request.
(g) Fiduciary Duties. Prior to the Effective Date, (i) no director or
officer (each an "Executive") of any Acquired Corporation 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
Corporation Company, (ii) all Executives, at all times, shall satisfy their
fiduciary duties to Acquired Corporation and its Subsidiaries, and (iii)
such Executives shall not (except as required in the course of his or her
employment with any Acquired Corporation 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
Corporation, any confidential information which is possessed, owned or used
by or licensed by or to any Acquired Corporation Company or confidential
information belonging to third parties which any Acquired Corporation
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 Corporation
Company.
(h) Certain Practices. At the request of BancGroup, (i) Acquired
Corporation shall consult with BancGroup and advise BancGroup through its
bank Subsidiary in Orlando, Florida of all of the Bank's loan requests over
$2,000,000 that are not single-family residential loan requests or of any
other loan request outside the Bank's normal course of business, and (ii)
Acquired Corporation will consult with BancGroup to coordinate, on a basis
mutually satisfactory to Acquired Corporation and BancGroup, such business
issues as the Acquired Corporation reasonably believes should be brought to
the attention of BancGroup. Acquired Corporation and the Bank shall not be
required to undertake any of such activities, however, except as such
activities may be in compliance with existing Law and Regulations.
ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided, BancGroup and Acquired Corporation 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, 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.
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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.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Acquired Corporation 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 Corporation as is required by
applicable Law and Acquired Corporation's articles of incorporation and bylaws.
8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and Acquired Corporation,
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, including the merger of the Bank with Colonial Bank as structured
pursuant to section 2.8 hereof and (ii) satisfying all other requirements
prescribed by Law. No Order, Consent or approval so obtained which is necessary
to consummate the transactions as contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable good faith judgment of the Board
of Directors of BancGroup would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority pursuant to
the 1934 Act, and 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.
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8.5 Tax Opinion. An opinion of Coopers & Lybrand, LLP, shall have been
received in form and substance reasonably satisfactory to the Acquired
Corporation 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 Corporation; (iii) no gain or
loss will be recognized to the shareholders of Acquired Corporation 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 Corporation 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 Corporation common stock
exchanged in the Merger and the amount of gain, if any, which was recognized by
the exchanging Acquired Corporation 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 Corporation common
stock exchanged therefor if such shares of Acquired Corporation common stock are
capital assets in the hands of the exchanging Acquired Corporation shareholder;
and (vi) cash received by an Acquired Corporation 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 Corporation common stock is a capital asset in his or her hands as of
the Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation 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 Corporation may waive such conditions in writing:
9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Corporation, 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 or which would impair the rights of Acquired Corporation or its
shareholders pursuant to this Agreement.
9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Corporation 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,
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condition (financial or otherwise), or Assets of BancGroup or 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 Corporation's shareholders, or any amendments or revisions thereto
so delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made (it being understood that such persons need not express a
statement as to information concerning or provided by Acquired Corporation
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 Corporation 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 Fairness Opinion. Acquired Corporation shall have received prior to
the mailing of the Proxy Statement from The Carson Medlin Company a letter
setting forth its opinion that the Merger Consideration to be received by the
shareholders of Acquired Corporation under the terms of this Agreement is fair
to them from a financial point of view, and such opinion shall not have been
withdrawn as of the Effective Date.
9.6 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.7 Other Matters. There shall have been furnished to counsel for Acquired
Corporation certified copies of such corporate records of BancGroup and copies
of such other documents as such counsel may reasonably have requested for such
purpose.
9.8 Material Events. There shall have been no determination by the board
of directors of Acquired Corporation 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 Corporation 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
Corporation 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
Corporation which constitute a Material Adverse Effect, nor shall there have
been any material changes in the Laws governing the business of Acquired
Corporation which would impair BancGroup's rights pursuant to this Agreement.
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10.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, BancGroup shall have received a certificate from
Acquired Corporation executed by the President or Vice President and from the
Secretary or Assistant Secretary of Acquired Corporation dated as of the Closing
certifying that:
(a) the Board of Directors of Acquired Corporation 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 Corporation 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
Corporation is an officer of Acquired Corporation 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 Corporation
and the Bank referenced in section 5.8 hereof remain in full force and
effect and have not been amended or modified since the date hereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Corporation'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 Corporation
for inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Corporation have been satisfied.
10.4 Opinion of Counsel. BancGroup shall have received an opinion of Bush
Ross Gardner Warren & Rudy, P.A., counsel to Acquired Corporation, dated as of
the Closing, substantially as set forth in Exhibit C hereto.
10.5 Controlling Shareholders. Each shareholder of Acquired Corporation
who may be an "affiliate" of Acquired Corporation, within the meaning of Rule
145 of the general rules and regulations under the 1933 Act shall have executed
and delivered an agreement satisfactory to BancGroup to the effect that such
person shall not make a "distribution" (within the meaning of Rule 145) of the
Common Stock which he receives upon the Effective Date and that such Common
Stock will be held subject to all applicable provisions of the 1933 Act and the
rules and regulations of the SEC thereunder, and the undersigned 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 Corporation recognizes and acknowledges that BancGroup Common
Stock issued to such persons may bear a legend, in form reasonably acceptable to
the Acquired Corporation, 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 Corporation 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
Corporation shall have exercised dissenters rights of appraisal under section
3.6 does not exceed 10 percent of the outstanding shares of common stock of
Acquired Corporation.
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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 Severance Agreement. A severance agreement, in form and substance
reasonably satisfactory to BancGroup and Richard H. Eatman, shall have been
executed between BancGroup and Richard H. Eatman.
10.10 Pooling of Interest. 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
Sections 7.2, 7.4, Article 11, Article 15 and 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 in such Exhibits and Schedules is provided only in response
to the specific section of this Agreement which calls for such information.
ARTICLE 12
NOTICES
All notices, requests, demands, consents, approvals and other
communications under this Agreement shall be in writing and shall be given to
the recipient party by hand delivery; or by sending a copy thereof by first
class or express mail, postage prepaid, by telegram (with messenger service
specified), or by courier service (with charges prepaid), in each case to the
address indicated below or to such other address as the recipient shall have
provided in accordance with the terms hereof; or by sending a copy thereof by
whatever telecopier service the recipient shall have designated below (or by
subsequent notice provided in accordance with the terms hereof). If the notice
is sent by mail, telegraph or courier services, it shall be deemed to have been
given to the recipient when deposited in the United States mail or with a
telegraph office or courier service for delivery to that party; or if by
telecopier, when the sending party is in receipt of documentary evidence that
the transmission has been successfully completed. Whenever the furnishing of
notice is required,
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the same may be waived by the party entitled to receive such notice. Until
further notice is provided, the address and telecopier number of each party is
as stated below:
<TABLE>
<S> <C>
As to BancGroup: One Commerce Street, Suite 800
Montgomery, Alabama 33602
Attention: W. Flake Oakley, IV
Telecopier No. (334) 240-601
Copy to: Michael D. Waters, Esq.
Miller, Hamilton, Snider & Odom, L.L.C.
One Commerce Street, Suite 802
Montgomery, Alabama 36104
Telecopier No. (334) 265-4533
As to Acquired Corporation: 510 Vonderburg Drive
Brandon, Florida 33511
Attention: Richard H. Eatman, President
Telecopier No. (813) 651-1629
Copy to: Jeremy P. Ross, Esq.
Bush Ross Gardner Warren & Rudy, P.A.
220 South Franklin Street
Tampa, Florida 33602
Telecopier No. (813) 223-9620
</TABLE>
ARTICLE 13
AMENDMENT OR TERMINATION
13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup and Acquired Corporation before or after approval of the transactions
contemplated herein by the shareholders of Acquired Corporation.
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 Corporation, as follows:
(a) by the mutual consent of the respective boards of directors of
Acquired Corporation 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 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 for failure to satisfy the
condition 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
Corporation;
(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 Corporation
or Article 10 as to BancGroup shall not have been satisfied in full; or
(d) by the board of directors of either BancGroup or Acquired
Corporation if all transactions contemplated by this Agreement shall not
have been consummated on or prior to June 30, 1997, if the
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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).
13.3 Damages. In the event of termination pursuant to section 13.2,
Acquired Corporation and BancGroup shall not be liable for damages for any
breach of warranty or representation contained in this Agreement made in good
faith, and, in that case, the expenses incurred shall be borne as set forth in
section 15.1 hereof.
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:
Acquired Corporation....... Fort Brooke Bancorporation, a Florida corporation.
Acquired Corporation
Company.................. Shall mean Acquired Corporation, the Bank, any
Subsidiary of Acquired Corporation or the Bank, or
any person or entity acquired as a Subsidiary of
Acquired Corporation or the Bank in the future and
owned by Acquired Corporation or the Bank at the
Effective Date.
Acquired Corporation
Options.................. Options respecting the issuance of 60,410 shares of
Acquired Corporation common stock pursuant to
Acquired Corporation's stock option plans.
Acquired Corporation
Stock.................... Shares of common stock, par value $.001 per share,
of Acquired Corporation.
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 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.
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Bank....................... Fort Brooke Bank, a Florida state bank.
Closing.................... The closing of the transactions contemplated hereby
as described in section 2.7 of this Agreement.
Code....................... The Internal Revenue Code of 1986, as amended.
Colonial Bank.............. BancGroup's Subsidiary bank located in Orlando,
Florida.
Common Stock............... BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.
Consent.................... Any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or
Permit.
Contract................... Any written or oral agreement, arrangement,
authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any
kind or character, or other document to which any
Person is a party or that is binding on any Person
or its capital stock, Assets or business.
Default.................... Shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii)
any occurrence of any event that with the passage
of time or the giving of notice or both would
constitute a breach or violation of or default
under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the
passage of time or the giving of notice would give
rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any
Contract, Order or Permit.
DGCL....................... The Delaware General Corporation Law.
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 $31.50 by the Market
Value, as set forth in section 3.1(b).
Exercise Price............. The exercise price of Acquired Corporation Options
as set forth in section 3.1(b)(ii).
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.
FBCA....................... The Florida Business Corporation Act
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 Corporation and the Bank,
in the case of knowledge of Acquired Corporation.
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Law........................ Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including those promulgated, interpreted or
enforced by any Agency.
Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including costs of investigation,
collection and defense), deficiency, guaranty or
endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts
presented for collection or deposit in the ordinary
course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
Lien....................... Any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or
other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property
interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii)
Liens in the form of easements and restrictive
covenants on real property which do not create a
Material Adverse Effect with respect to the use of
such property by the current owner thereof.
Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding relating to or affecting a Party,
its business, its Assets (including Contracts
related to it), or the transactions contemplated by
this Agreement.
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.
Material................... For purposes of this Agreement shall be determined
in light of the facts and circumstances of the
matter in question; provided that any specific
monetary amount stated in this Agreement shall
determine materiality in that instance.
Material Adverse Effect.... On a Party shall mean an event, change or
occurrence which has a material adverse impact on
(i) the financial position, Assets, business, or
results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability
of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement,
provided that "material adverse impact" shall not
be deemed to include the impact of (x) changes in
banking and similar laws of general applicability
or interpretations thereof by courts or
governmental authorities, (y) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, and (z) the Merger
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and compliance with the provisions of this
Agreement on the operating performance of the
Parties.
Merger..................... The merger of Acquired Corporation with BancGroup
as contemplated in this Agreement.
Merger Consideration....... The distribution of BancGroup Common Stock and cash
for each share of Acquired Corporation Stock 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 Corporation or BancGroup, and
"Parties" shall mean both Acquired Corporation 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 Corporation 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 Corporation.
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
Corporation, to register the shares of BancGroup
Common Stock offered to stockholders of the Bank
pursuant to his Agreement, including the Proxy
Statement.
Resulting Corporation...... BancGroup, as the surviving corporation resulting
from the Merger.
SEC........................ United States Securities and Exchange Commission.
Stockholders Meeting....... The special meeting of stockholders of Acquired
Corporation called to approve the transactions
contemplated by this Agreement.
Subsidiaries............... Shall mean all those corporations, banks,
associations, or other entities of which the entity
in question owns or controls 5% or more of the
outstanding equity securities either directly or
through an unbroken chain of entities as to each of
which 5% or more of the outstanding equity
securities is owned directly or indirectly by its
parent; provided, however, there shall not be
included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.
Tax or Taxes............... Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.
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1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in connection with
this Agreement and the transactions contemplated hereby.
15.2 Benefit. This Agreement shall inure to the benefit of and be binding
upon Acquired Corporation and BancGroup, and their respective successors. This
Agreement shall not be assignable by any Party without the prior written consent
of the other Party.
15.3 Governing Law. Except to the extent that the laws of the State of
Florida apply to the Merger, this Agreement shall be governed by, and construed
in accordance with the Laws of the State of Delaware 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.
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
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recover from the other Party its costs and expenses incurred in connection with
such action (including fees, disbursements and expenses of attorneys and costs
of investigation).
15.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or Default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of any such right,
power or remedy, or an acquiescence in any similar breach or Default; nor shall
any waiver of any single breach or Default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Agreement must be in writing and be executed by the Parties
to this Agreement and shall be effective only to the extent specifically set
forth in such writing.
15.12 Remedies Cumulative. All remedies provided in this Agreement, by law
or otherwise, shall be cumulative and not alternative.
15.13 Entire Contract. This Agreement and the documents and instruments
referred to herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings with respect to the subject
matter of this Agreement.
IN WITNESS WHEREOF, Acquired Corporation and BancGroup have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
<TABLE>
<S> <C>
ATTEST: FORT BROOKE BANCORPORATION
/s/ JOHN D. ADAMS /s/ RICHARD H. EATMAN
- -------------------------------------------- --------------------------------------------
By: John D. Adams By: Richard H. Eatman
Its: Secretary Its: President and Chief Executive Officer
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
/s/ TERESA R. SKIPPER /s/ W. FLAKE OAKLEY
- -------------------------------------------- --------------------------------------------
By: By:
Its: Assistant Secretary Its: Chief Financial Officer
(CORPORATE SEAL)
</TABLE>
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APPENDIX B
November 8, 1996
Board of Directors
Fort Brooke Bancorporation
510 Vonderburg Drive
Brandon, FL 33511
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the shareholders of Fort Brooke
Bancorporation ("Fort Brooke") under the terms of a certain Agreement and Plan
of Merger dated November 8, 1996 (the "Agreement") pursuant to which Fort Brooke
will be acquired by The Colonial BancGroup, Inc. ("Colonial") (the "Merger").
Under the terms of the Agreement, each of the outstanding shares of Fort Brooke
common stock shall be converted into the right to receive consideration of
$31.50 per share in Colonial common stock, subject to certain limitations. The
foregoing summary of the Merger is qualified in its entirety by reference to the
Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Florida and the major commercial banks operating
in that market. We have been retained by Fort Brooke in a financial advisory
capacity to render our opinion hereunder, for which we will receive
compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of Colonial and Fort Brooke. We have
reviewed: (i) the Agreement; (ii) the annual reports to shareholders of
Colonial, including audited financial statements for the five years ended
December 31, 1995; (iii) audited financial statements of Fort Brooke for the
five years ended December 31, 1995; (iv) the unaudited interim financial
statements of Colonial for the nine months ended September 30, 1996; (v) the
unaudited interim financial statements of Fort Brooke for the nine months ended
September 30, 1996; and, (vi) certain financial and operating information with
respect to the business, operations and prospects of Colonial and Fort Brooke.
We also: (i) held discussions with members of the senior management of Colonial
and Fort Brooke regarding historical and current business operations, financial
condition and future prospects of their respective companies; (ii) reviewed the
historical market prices and trading activity for the common stock of Colonial
and Fort Brooke and compared them with those of certain publicly traded
companies which we deemed to be relevant; (iii) compared the results of
operations of Colonial and Fort Brooke with those of certain banking companies
which we deemed to be relevant; (iv) compared the proposed financial terms of
the Merger with the financial terms, to the extent publicly available, of
certain other recent business combinations of commercial banking organizations;
(v) analyzed the pro forma financial impact of the Merger on Colonial; and (vi)
conducted such other studies, analyses, inquiries and examinations as we deemed
appropriate.
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We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
Fort Brooke or Colonial. The opinion we express herein is necessarily based upon
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the aggregate
consideration provided for in the Agreement is fair, from a financial point of
view, to the unaffiliated shareholders of Fort Brooke Bancorporation.
Very truly yours,
THE CARSON MEDLIN COMPANY
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APPENDIX C
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. -- The following definitions
apply to sec.sec. 607.1302 and 607.1302 and 607.132:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in
the case of a merger pursuant to sec. 607.1104, the day prior to the date
on which a copy of the plan of merger was mailed to each shareholder of
record of the subsidiary corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT. -- (1) Any shareholder has the
right to dissent from, and obtain payment of the fair value of his shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under sec. 607.1104, and the shareholders would have been
entitled to vote on action taken, except for the applicability of
sec. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to sec. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale of cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within 1 year after the date of sale;
(c) As provided in sec. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights
of new shares then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage or
equity in the corporation, or effecting a reduction or cancellation of
accrued dividends or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any
of his shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
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6. Reducing the stated dividend preference to any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A Shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on a interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS. -- (1)(a) If a
proposed corporate section creating dissenters' rights under sec. 607.1320 is
submitted to a vote at a shareholders' meeting, the meeting notice shall state
that shareholders are or may be entitled to assert dissenters' rights and be
accompanied by a copy of sec.sec. 607.1301, 607.1302, and 607.1320. A
shareholder who wishers to assert dissenter's rights shall:
1. Deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of
intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under
sec. 607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of sec.sec. 607.1301, 607,1302, and 607.1320 to
each shareholder simultaneously with any request for his written consent or, if
such a request is not made, within 10 days after the date the corporation
received written consents without a meeting from the requisite number of
shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
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(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
right of such shareholder to be paid the fair value of his shares shall cease,
and he shall be reinstated to have all his rights as a shareholder as of the
filing of his notice of election, including any intervening preemptive rights
and the right to payment of any intervening dividend or other distribution or,
if any such rights have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election of the corporation,
the fair value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceeding that may have been taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was
not in existence throughout such 12-month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specific
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholders
(whether or not residents of this state), other than shareholders who have
agreed with the corporation as to the value of their shares, shall be made
parties to the proceeding as an action against their shares. The corporation
shall serve a copy of the initial pleading in such proceeding upon each
dissenting shareholder who is a resident of
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this state in the manner provided by law for the service of a summons and
complaint and upon each nonresident dissenting shareholder either by registered
or certified mail and publication or in such other manner as is permitted by
law. The jurisdiction of the court is plenary and exclusive. All shareholders
who are proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may, if
it so elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as is specified in the order of their appointment or an
amendment thereof. The corporation shall pay each dissenting shareholder the
amount found to be due him within 10 days after final determination of the
proceedings. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that action of such shareholders in failing to accept such
offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this action, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
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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 all of its directors
insurance policy pursuant to which officers and 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
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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, 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.
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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.
DESCRIPTION
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:
(A) Agreement and Plan of Merger between The Colonial BancGroup,
Inc. and Fort Brooke Bancorporation, dated as of November 18,
1996, included in the Prospectus portion of this Registration
Statement at Appendix A and incorporated herein by reference.
(B) Fort Brooke Bank Non-Qualified Stock Option Plan and form of
Stock Option Grant and Agreement
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Exhibit 3 Articles of Incorporation and Bylaws:
(A) 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.
(B) 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.
Exhibit 4 Instruments defining the rights of security holders:
(A) 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.
(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21, 1995, and incorporated herein by reference.
(C) Dividend Reinvestment and Class A Common Stock Purchase Plan
of the Registrant dated January 15, 1986, and Amendment No. 1
thereto dated as of June 10, 1986, filed as Exhibit 4(C) to
the Registrant's Registration Statement on Form S-4 (File No.
33-07015), effective July 15, 1986, and incorporated herein by
reference.
(D) Trust Indenture dated as of March 25, 1986, included as
Exhibit 4 to the Registrant's Amendment No. 1 to Registration
Statement on Form S-2, file number 33-4004, effective March
25, 1986, and incorporated herein by reference.
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.
Exhibit 8 Tax Opinion of Coopers & Lybrand, LLP
Exhibit 10 Material Contracts:
(A)(1) Second Amendment and Restatement of 1982 Incentive Stock Plan
of the Registrant, filed as Exhibit 4-1 to the Registrant's
Registration Statement on Form S-8 (Commission Registration
No. 33-41036), effective June 4, 1991,
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<PAGE> 157
and incorporated herein by reference.
(A)(2) Second Amendment and Restatement to 1982 Nonqualified Stock
Option Plan of the Registrant filed as Exhibit 4-2 to the
Registrant's Registration Statement on Form S-8 (Commission
Registration No. 33-41036), effective June 4, 1991, and
incorporated herein by reference).
(A)(3) 1992 Incentive Stock Option Plan of the Registrant, filed as
Exhibit 4-1 to Registrant's Registration Statement on Form S-8
(File No. 33-47770), effective May 8, 1992, and incorporated
herein by reference.
(A)(4) 1992 Nonqualified Stock Option Plan of the Registrant, filed as
Exhibit 4-2 to Registrant's Registration Statement on Form S-8
(File No. 33-47770), effective May 8, 1992, and incorporated
herein by reference.
(B)(1) Residential Loan Funding Agreement between Colonial Bank and
Colonial Mortgage Company dated January 18, 1988, included as
Exhibit 10(B)(1) to the Registrant's Registration Statement as
Form S-4, file no. 33-52952, and incorporated herein by
reference.
(B)(2) Amended and Restated Loan Agreement by and between the
Registrant and SunTrust Bank, Central Florida, National
Association, dated December 20, 1996.
(C)(1) The Colonial BancGroup, Inc. First Amended and Restated
Restricted Stock Plan for Directors, as amended, included as
Exhibit 10(C)(1) to the Registrant's Registration Statement as
Form S-4, file no. 33-52952, and incorporated herein by
reference.
(C)(2) The Colonial BancGroup, Inc., Stock Bonus and Retention Plan,
included as Exhibit 10(C)(2) to the Registrant's Registration
Statement as Form S-4, file no. 33-52952, and incorporated
herein by reference.
(D) Stock Purchase Agreement dated as of July 20, 1994, by and
among The Colonial BancGroup, Inc., Colonial Bank, The
Colonial Company, Colonial Mortgage Company, and Robert E.,
James K. and Thomas H. Lowder, included as Exhibit 2 in
Registrant's registration statement on Form S-4, Registration
No. 33-83692 and incorporated herein by reference.
ii-5
<PAGE> 158
Exhibit 13 Registrant's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, and June 30, 1996, and incorporated
herein by reference.
Exhibit 21 List of subsidiaries of the Registrant.
Exhibit 23 Consents of experts and counsel:
(A) Consents of Coopers & Lybrand, L.L.P.
(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.
(C) Consent of Hacker, Johnson, Cohen & Grieb
(D) Consent of The Carson Medlin Company
Exhibit 24 Power of Attorney.
Exhibit 99 Additional exhibits:
(A) Form of Proxy of Fort Brooke Bancorporation
(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
ii-6
<PAGE> 159
called for by the applicable registration form with
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately above, or (ii) that
purports to meet the requirements of section 10(a)(3)
of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement
and will not be used until such amendment is
effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to such securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors,
officers, and controlling persons of the Registrant,
the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the
successful defense of any action, 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.
ii-7
<PAGE> 160
(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.
ii-8
<PAGE> 161
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 23rd day of January, 1997.
THE COLONIAL BANCGROUP, INC.
By: /s/ Robert E. Lowder
-------------------------------
Robert E. Lowder
Its Chairman of the Board
of Directors, Chief
Executive Officer, and
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Robert E. Lowder Chairman of the Board **
- --------------------------- of Directors, President
Robert E. Lowder and Chief Executive
Officer
/s/ W. Flake Oakley, IV Chief Financial **
- --------------------------- Officer, Secretary
W. Flake Oakley, IV and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
* Director **
- --------------------------
Young J. Boozer
* Director **
- --------------------------
William Britton
</TABLE>
ii-9
<PAGE> 162
<TABLE>
<S> <C> <C>
* Director **
- --------------------------
Jerry J. Chesser
* Director **
- --------------------------
Augustus K. Clements, III
* Director **
- -------------------------
Robert C. Craft
* Director **
- -------------------------
Patrick F. Dye
* Director **
- -------------------------
Clinton O. Holdbrooks
* Director **
- -------------------------
D. B. Jones
* Director **
- -------------------------
Harold D. King
* Director **
- -------------------------
John Ed Mathison
* Director **
- -------------------------
Milton E. McGregor
</TABLE>
ii-10
<PAGE> 163
<TABLE>
<S> <C> <C>
* Director **
- -------------------------
John C. H. Miller, Jr.
* Director **
- -------------------------
Joe D. Mussafer
* Director **
- -------------------------
William E. Powell
* Director **
- -------------------------
Donald J. Prewitt
* Director **
- -------------------------
Jack H. Rainer
* Director **
- -------------------------
Frances E. Roper
* 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: January 23, 1997
ii-11
<PAGE> 1
EXHIBIT 2(B)
FORT BROOKE BANK NON-QUALIFIED STOCK OPTION PLAN AND FORM OF
STOCK OPTION GRANT AND AGREEMENT.
<PAGE> 2
FORT BROOKE BANK
NON-QUALIFIED STOCK OPTION PLAN
1. Purpose
It is the belief of the Board of Directors of FORT BROOKE BANK, a Florida
corporation with administrative offices located at 510 Vonderburg Drive,
Brandon, Florida 33511 (the "Company"), that the Company should seek to attract
and retain persons of special abilities as employees, thereby materially
enhancing the Company's prospects for stable and rapid economic growth; and
that such persons should be afforded the opportunity to acquire shares of its
single class of authorized common capital stock at a price which the Company
expects to be below the fair market value of such shares on a permissible
future exercise date. By providing this opportunity through the adoption of a
Non-Qualified Stock Option Plan (the "Plan"), the Company is attempting to give
appropriate recognition of superior performance to individuals which have held
and will hold a substantive and continuing responsibility for the Company's
growth.
2. Administration
(a) In General
The plan shall be administered by a committee (the "Committee"), consisting of
certain members of the Board of Directors (the "Board"), designated by the full
Board. Initially, the members of the Committee shall be Richard H. Eatman,
Thomas H. Miller, Melvin R. Belisle, A.D. McKinnon and William F. Poe. Each
member of the Committee shall serve at the pleasure of the Board and may be
removed from the Committee by the Board at any time, with or without cause or
notice. Upon the death, resignation or removal of any member of the Committee,
the Board shall choose a successor to such member.
(b) Procedural Guidelines
The Committee shall act by agreement of a majority of its entire membership,
either by vote taken at a duly convened meeting (which may include a meeting
conducted by way of conference telephone call) or by written direction executed
by all members of the Committee. In the event of a deadlock or other
occurrence which prevents agreement by a majority of the Committee members, the
unresolved matter shall be decided by action of the Board.
(c) Powers and Duties
The Committee shall have the power and duty to do all things necessary or
convenient to
<PAGE> 3
effect the intent and purpose of the Plan not inconsistent with any of the
provisions hereof, whether or not such powers and duties are specifically set
forth herein, and not in limitation but amplification of the foregoing, shall
have the power and/or obligation to:
(1) provide rules and regulations for the administration
of the Plan and the conduct of the Committee's affairs, and from time to time,
as appropriate, to amend or supplement such rules and regulations;
(2) correct any defect, supply any omission or reconcile
any inconsistency in the Plan of a procedural nature in such manner and to such
extent as it shall deem advisable to maintain the Plan in the manner intended;
but it shall have no power to add to, subtract from or modify any of the
substantive terms of the Plan;
(3) appoint or employ such advisors, agents or
representatives as it shall reasonably deem advisable in connection with its
proper administration of the Plan, and to rely upon their written opinions,
certificates or advice.
(d) Compensation and Expenses
No committee member shall receive special compensation as a result of the
rendition of services hereunder, but each shall be entitled to reimbursement
from the Company for all reasonable expenses actually incurred in administering
the Plan, as long as the same are substantiated in such manner as the Board may
require.
3. Eligibility
The only persons eligible to receive options under the Plan shall be individual
employees (including officers) that have been designated by the Board of
Directors by agreement of a majority of its entire membership, either by vote
taken at a duly called meeting (which may include a meeting conducted by way of
a telephone call) or by written action executed by all directors ("Eligible
Employees").
4. Shares Subject to Plan
The shares which shall be issued and delivered upon exercise of options being
granted under the Plan to eligible Employees shall be shares of the Company's
authorized but unissued or issued and reacquired common capital stock, $8.00
par value (the "Shares"). The maximum numbers of shares which may be issued
upon exercise of options granted under the Plan shall initially be 69,381 but
the Board of Directors shall be authorized to increase the number of Shares
reserved for issuance under the Plan to the lesser of 100,000 or an amount
equal to 20% of the Shares which shall be issued and outstanding at any time
during the pendency of the Plan. If any option expires or terminates before
being completely exercised, the Shares subject to the unexercised portion of
such option may again be made subject to the terms of this Plan.
<PAGE> 4
Appropriate adjustments in the number of Shares available under the Plan and in
the option price per Share shall be made by the Committee to give effect to
adjustments made in the number of shares as the result of a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split or other relevant change in the capital structure of the Company.
A dissolution or liquidation of the Company or a merger or consolidation in
which the Company is not the surviving corporation shall cause each outstanding
option to terminate, provided that each optionholder shall have the right at a
time designated by the Committee prior to such dissolution, liquidation,
merger, or consolidation to fully exercise his or her option.
5. Term and Conditions of Options
An individual option may be granted under the Plan for such number of Shares,
up to 30,000 as may be determined by the Committee, which grant shall be
subject to the following terms and conditions:
(a) Option Agreement
Each option granted shall be evidenced by a written option agreement between
the Company and the Eligible Employee stating the number of Shares which may be
purchased upon its exercise and containing such other terms as the Committee may
approve.
(b) Date of Grant
The date on which an option grant is approved by the Committee shall be
considered the date on which such option is granted (the "Date of Grant"), and
such date shall be reflected in the option agreement.
(c) Option Price
Each option agreement shall state the purchase price of each Share which may be
acquired upon exercise of the option. Such purchase price, as determined by
the Committee, shall not be less than the greater of the Share's fair market
value as of the date the option is granted, as determined by the Board of
Directors, or its par value; however, if Shares are not publicly traded at the
time of the grant, the book value of each Share may be substituted for its fair
market value.
(d) Option Exercise
Subject to the provisions of Section 5(g) below, each option granted under the
Plan shall be exercisable during the ten year period commencing as of the Date
of Grant, provided that if the optionholder is terminated by the Company for
cause, the option shall thereupon be void and of no further legal effect. For
purposes of this paragraph, cause shall be defined as the optionholder's
willful misconduct or gross negligence; conscious disregard of
<PAGE> 5
his obligations or duties reasonably assigned to him by the Company; his
repeated conscious violation of any provision of the Company's by-laws or of
its other stated policies, standards or regulations; the commission of any act
involving moral turpitude; or a determination that he has demonstrated a
dependence upon any addictive substance, including alcohol, controlled
substances, narcotics or barbiturates.
(e) Mechanics of Exercise
An optionholder entitled to exercise any portion of an option granted to him or
her under the Plan may exercise the same either in whole or in part at anytime
by delivering written notice of exercise to the office of the Secretary of the
Company or to such other location as may be designated by the Committee,
specifying therein the number of Shares with respect to which the option is
being exercised, which notice shall be accompanied by payment in full of the
purchase price of the Shares being acquired. Payment must be made in the
amount, form and manner set forth in the option agreement. No Shares shall be
issued until full payment therefor has been made, and the granting of an option
shall give the holder no rights as a shareholder except as to Shares actually
issued and registered in his or her name.
(f) Expiration of Option
Each option granted under the Plan shall expire and all rights to purchase
Shares thereunder shall cease ten years after the Date of Grant or on such
prior date as may be fixed by the Committee and specified in the subject option
agreement.
(g) Transferability and Termination of Option
Each option granted hereunder may be exercised only by the individual to whom
it is issued and only during the period in which he is serving as an employee;
provided that if such holder resigns, is terminated other than for a cause
specified in paragraph 5(d) above or dies before fully exercising any portion
of an option then exercisable, such option may thereafter only be exercised by
the former employee or, in case of death such employee's legal
representative(s), heir(s) or devisee(s), at any time within the six month
period following his or her retirement, termination or death.
(h) Investment Purpose
Each option shall be granted on the express condition that the purchase of
Shares upon an exercise thereof shall be made for investment purposes only and
not with a view to their resale or further distribution unless such Shares, at
the time of their issuance and delivery, are registered under the Securities
Act of 1933, as amended (the "Act"), or, alternatively, at some time following
such issuance their resale is determined by counsel for the Company to be
exempt from the registration requirements of the Act and of any applicable law,
regulation or ruling.
<PAGE> 6
6. No Prior Right of Award
Nothing in this Plan shall be deemed to give any employee of the Company or
such persons's legal representatives or assigns, or any other person or entity
claiming under or through such person, any contract or other right to
participate in the benefits of this Plan. Nothing in this Plan shall be
construed as constituting a commitment, guarantee, agreement or understanding
or any kind or nature that the company shall continue to employ, or continue
any other relationship with, any individual (whether or not an optionholder) or
entity. This Plan shall not affect in any way the right of the Company to
terminate the employment of, or other relationship with, any individual whether
or not an optionholder at any time and for any reason whatsoever. No change of
an optionholder's duties as an officer or employee shall result in a
modification of the terms of any rights of such optionholder under this Plan or
any option agreement executed by such.
7. Effective Date and Term of Plan
The effective date of the Plan shall be August 17, 1994, and it shall remain in
existence for a period of ten years thereafter. No option may be granted
hereunder subsequent to the expiration date of the Plan, but options then
outstanding shall be exercisable in accordance with the terms hereof.
8. Amendment or Termination of Plan
Except as otherwise provided herein, this Plan may be amended, in whole or in
part, or terminated by the Board of Directors (in its sole discretion), but no
such action shall (i) modify the option exercise price contained in the Plan,
(ii) increase the number or shares that may be delivered upon the exercise of
options granted under the Plan above 100,000 shares (subject to the right of
the Board of Directors to make adjustments to reflect changes in the capital
structure of the Company), (iii) authorize any change inconsistent with Florida
law, or (iv) adversely affect or alter any right or obligation with respect to
any option agreement then in effect.
<PAGE> 7
FORT BROOKE BANK
NON-QUALIFIED STOCK OPTION PLAN
STOCK OPTION GRANT AND AGREEMENT
This Stock Option Grant and Agreement is made by Fort Brooke Bank, a
Florida corporation, with its administrative offices located at 510 Vonderburg
Drive, Brandon Florida 33511 ( the "Company"), in favor of _____________________
whose current mailing address is set forth below (the
"Optionholder").
BACKGROUND INFORMATION
By appropriate action of the Company's Board of Directors, the Company
has adopted and placed into operation a Non-Qualified Stock Option Plan (the
"Plan"), and 100,000 shares of the Company's authorized but unissued common
stock, $ 8.00 par value (the "Shares"), have been reserved for issuance and
sale upon the exercise of such options during the term of the Plan.
Certain members of the Company's Board of Directors have been
authorized to administer the Plan (the"Committee") and grant options to acquire
such number of Shares to such employees or officers, as may be determined by
the Company's Board of Directors.
The Board of Directors has determined that the Optionholder should be
granted an option to purchase certain shares of the Shares subject to the
terms, conditions and limitations of the Plan, all of which are hereby
incorporated into this option grant by specific references thereto and are made
part hereof (a copy of the Plan being attached hereto as Exhibit "A").
In consideration of the foregoing facts and of the covenants and
conditions set forth below, it is agreed as follows:
OPERATIVE PROVISIONS
1. Grant of Option. The company hereby grants to the
Optionholder an option (the" Option") to purchase ____________ Shares (the
"Option Shares").
2. Purchase Price. The purchase price for each Option shall be
$___________ per share ("the Option Price") and shall be paid in cash.
3. Data of Grant. The date of Grant with respect to this Option
is ___________
<PAGE> 8
(the "Date of Grant").
4. Exercise Period. The Option shall be exercisable solely by
the Optionholder during the period commencing ________________ and ending on
the earliest of (i) the date that all of the Shares subject to this Option are
purchased pursuant to this Agreement, or subject to this Option are purchased
pursuant to this Agreement, or (ii) the date the Optionholder's employment is
terminated for cause, as such term is defined in the Plan; provided that if the
Optionholder shall die before fully exercising any portion of the Option, such
Option may be exercised by the Optionholder's legal representative(s), heir(s)
or devisee(s) at any time within the next six month period following the
Optionholder's death, but only as to the Option Shares subject to exercise by
the Optionholder at the time of death.
5. Modification of Capital Structure. A dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation shall cause the Option to terminate unless the
Option shall instead be converted into an option to acquire a commensurate
number of shares of the authorized capital stock of the entity into which the
company is merged or consolidated. If such termination is to be effective, the
Optionholder shall have the right at a time designated by the Committee prior
to such dissolution liquidation, merger, or consolidation to fully exercise his
Option to purchase the Option Shares.
6. Notice of Exercise. The Option may be exercised by the
Optionholder as to those Shares then eligible for purchase by his delivery of
written notice of exercise to the office of the Secretary of the Company or to
such other location as may be designated by the Committee, specifying therein
the number of eligible Option Shares with respect to which the Option is being
exercised. Such notice shall be accompanied by payment in full of the purchase
price of the Option Shares being acquired.
7. Tax Withholding. As a condition to the issuance of this
Option, the Optionholder authorizes the Company to withhold, in accordance with
applicable law from any cash compensation payable to him, any taxes which the
company believes it is required to withhold under federal, state or local laws
(the Taxes), as a result of his exercise of this Option. In the alternative,
the Company may require the Optionholder to remit the taxes to the Company at
the time of exercise of this Option.
8. Purchase for Investment. This Option is granted under the
express condition that the purchase of Option Shares upon an exercise hereof
shall be made by the Optionholder for investment purposes only and not with a
view to their resale or further distribution unless such Shares, at the time of
their issuance and delivery, are registered under the Securities Act of 1933,
as amended (the "Act"), or, alternatively, at some time following such issuance
their resale is determined by counsel for the Company to be exempt from the
registration requirements of the Act and of any other applicable state law,
regulation or ruling. The Optionholder, by his execution of this Agreement,
expressly
<PAGE> 9
agrees to such condition.
9. Issuance of Certificates. Upon the exercise of the Option or
as soon thereafter as is practicable, the Company shall issue and deliver to
Optionholder a certificate or certificates evidencing such Shares. Such
certificate or certificates shall be registered in the name of Optionholder and
shall bear an appropriate investment legend requiring by any Federal or state
securities law, rule or regulation and, if applicable, a legend referring to
the restrictions provided hereunder and under the Plan and any legend requiring
by the Florida General Corporation Act. Upon the exercise of the Option and
the issuance and delivery of such certificate or certificates, Optionholder
shall have all rights of a stockholder with respect to such Shares and to
receive all dividends or other distributions paid or made with respect thereto;
provided, however, that such Shares shall be subject to the restrictions
hereunder and in the Plan.
10. No Rights Prior to Exercise. Optionholder shall have no
equity interest in the Company or any voting, dividend, liquidation or
dissolution rights with respect to any capital stock of the Company solely by
reason of the Option or having executed this Agreement. Furthermore, prior to
the exercise of all or a portion of the Option and the issuance and delivery of
a certificate or certificates evidencing the Shares purchased pursuant to the
exercise of all or a portion of such Option, Optionholder shall have no
interest in, or any voting, dividend, liquidation or dissolution rights with
respect to the Shares, except to the extent that Optionholder has exercised all
or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.
11. Representations Correct. The Optionholder represents that he
is acquiring the Shares to be purchased for private investment and with no
present intention of reselling or distributing any part thereof; and that each
of the additional understandings, representations and warranties contained in
the Notice of Exercise, in the form attaching hereto as Exhibit "B", to be
executed by the Optionholder, is presently and will be at the time of such
execution and delivery accurate and complete.
12. No Other Agreements. The Optionholder acknowledges that this
Option does not entitle him to employment by the Company, to receive dividends
or other distributions on his shareholdings, except as may be approved from
time to time by the Company's Board of Directors in their sole discretion.
13. Conflicting Terms. If any conflict develops between the terms
of this Option Grant and the Plan, the Plan shall always control.
14. Miscellaneous Provisions.
a. Notices: All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly
<PAGE> 10
given or made if hand delivered, mailed from within the United States by
certified or registered mail, or sent by prepaid telegram to the applicable
address set forth in the preamble hereto, or to such other address as any such
party may have designated by like notice forwarded to the other party hereto.
All notices, except notices of change of address, shall be deemed given when
mailed or hand delivered and notices of change of address shall be deemed given
when received.
b. Binding Agreements; Assignability: Each of the provisions and
agreements herein contained shall be binding upon and endure to the benefit of
the respective parties hereto, as well as their personal representatives,
heirs, devisees, successors and assigns.
c. Entire Agreement: This Agreement, and any other document
referenced herein, constitute the entire understanding of the parties hereto
with respect to the subject matter hereof, and no amendment, modification or
alteration of the terms hereof shall be binding unless the same be in writing,
dated subsequent to the date hereof and duly approved and executed by each of
the parties hereto.
d. Severability: Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatever, such illegality or invalidity shall not affect the validity of
the remainder of this Agreement.
e. Headings: The headings of this Agreement are inserted for
convenience and identification only, and are in no way intended to describe,
interpret, define or limit the scope, extent or intent hereof.
f. Application of Florida Law: This Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
terms and by the laws of the State of Florida. Venue for all purposes shall be
deemed to lie within Hillsborough County, Florida.
g. Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
h. Legal Fees and Costs: If a legal action is initiated by any
party to this Agreement against another, arising out of or relating to the
alleged performance or non-performance of any right or obligation established
hereunder, or any dispute concerning the same, any and all fees, costs and
expenses reasonably incurred by each successful party or his or its legal
counsel in investigating, preparing for, prosecuting, defending against, or
providing evidence, producing documents or taking any other action in respect
of, such action shall be the joint and several obligation of and shall be paid
or reimbursed by the unsuccessful party(ies).
<PAGE> 11
IN WITNESS WHEREOF, the Committee has caused this Stock Option Grant and
Agreement to be executed by an appropriate officer of the Company.
FORT BROOKE BANK
By:
-------------------------------------
<PAGE> 12
IN WITNESS WHEREOF, the Optionholder has executed this Stock Option
Grant and Agreement to acknowledge and confirm his agreement and acceptance of
the terms hereof.
----------------------------------------
----------------------------------------
----------------------------------------
(current mailing address)
<PAGE> 1
EXHIBIT 5
OPINION AS TO CERTAIN DELAWARE LAW ISSUES OF THE
SECURITIES BEING REGISTERED
<PAGE> 2
December 20, 1996
Montgomery Office
The Colonial BancGroup, Inc.
P. O. Box 1108
Montgomery, AL 36101
Re: Registration Statement on Form S-4 relating to the issuance of
shares of Common Stock of The Colonial BancGroup, Inc., in
connection with the acquisition by merger of Fort Brooke
Bancorporation ("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 November 18, 1996
(the "Agreement"), by and between the Company and Fort Brooke Bancorporation
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
December 20, 1996
Page 36
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,
MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
By: /s/ Michael D. Waters
--------------------------------
Michael D. Waters
MDW/mfm
<PAGE> 1
EXHIBIT 8
TAX OPINION
<PAGE> 2
December 17, 1996
Fort Brooke Bancorporation
510 Vonderburg Drive
Brandon, Florida 33511
Colonial BancGroup
One Commerce Street
Suite 800
Montgomery, Alabama 36104
Ladies and Gentlemen:
For various business reasons, Fort Brooke Bancorporation (Acquired
Corporation) and The Colonial BancGroup, Inc. (BancGroup) have entered into an
Agreement and Plan of Merger (Agreement) on November 18, 1996. 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 (Code). We will also address additional income tax
consequences to Acquired Corporation, BancGroup, and shareholders.
BACKGROUND
Acquired Corporation, a Florida corporation, operates as a bank holding company
for its wholly owned subsidiary, Fort Brooke Bank (Bank) and certain other
Subsidiaries, with its principal office in Brandon, 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 Corporation will merge with and
into BancGroup, with BancGroup as the surviving corporation. Pursuant to the
terms of the transaction, each share of common stock of Acquired Corporation
outstanding and held by Acquired Corporation'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 per share price of
$31.50. On the effective date and as a result of the merger, BancGroup will
assume all the outstanding options of Acquired Corporation, whether or not
vested or exercisable. Each such option will cease to represent a right to
acquire Acquired Corporation Common Stock and will, instead, represent a right
to acquire BancGroup common stock
<PAGE> 3
on substantially the same terms applicable to the Acquired Corporation Options
except as specified in the Agreement.
No fractional shares of BancGroup Common Stock will be issued. Instead, each
holder of shares of Acquired Corporation 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 Corporation Stock, be paid by BancGroup an amount in cash.
Any shareholder of Acquired Corporation 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 Corporation Stock.
Further, after consummation of the merger, BancGroup and Acquired Corporation
anticipate merging two bank subsidiaries, the Bank and Colonial Bank,
BancGroup's Florida Subsidiary Bank. Colonial Bank will be the surviving
entity.
REPRESENTATIONS OF PARTIES
+
BancGroup and Acquired Corporation intend that the merger will qualify for
federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code.
+
The fair market value of the BancGroup stock received by each shareholder of
Acquired Corporation pursuant to the terms of the Agreement will be
approximately equal to the fair market value of Acquired Corporation
surrendered in the exchange. The terms of the Agreement are the result of
arm's-length negotiations between unrelated parties.
+
There is no plan or intention by the shareholders of Acquired Corporation to
sell, exchange, or otherwise dispose of a number of shares of acquiring stock
received in the transaction that will reduce the Acquired Corporation
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 Corporation as
of the same date. For purposes of this representation, shares of Acquired
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 Corporation stock on the date of the transaction.
Shares of Acquired stock and shares of BancGroup stock held by Acquired
Corporation shareholders and otherwise sold, redeemed or disposed of prior or
subsequent to the transaction will be considered in making this
representation.
<PAGE> 4
+
Following the merger, BancGroup will continue the historic business of
Acquired Corporation or use a significant portion of Acquired Corporation's
historic business assets in a business.
+
Acquired Corporation, BancGroup and Acquired Corporation 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 Corporation 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 Corporation 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 price and
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 Corporation as a part of
the merger and reissued by Bancgroup will be issued at substantially the same
terms, so as not to create material modification as defined in I.R.C. Section
424.
TAX CONSEQUENCES TO ACQUIRED CORPORATION AND BANCGROUP
The merger of Acquired Corporation with and into BancGroup will constitute a
merger within the meaning of I.R.C. Section 368(a)(1)(A), provided that the
merger qualifies as a statutory merger pursuant to state law. Acquired
Corporation and BancGroup will
<PAGE> 5
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
Corporation will recognize no gain or loss when it transfers its assets to
BancGroup in a constructive exchange solely for BancGroup's stock and the
assumption of Acquired Corporation's liabilities by BancGroup. Acquired
Corporation 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 upon the acquisition by BancGroup of the assets of Acquired
Corporation in exchange for BancGroup common stock and the assumption of
Acquired Corporation's liabilities. BancGroup's basis in the assets acquired
in the transaction will be equal to the basis of the assets in the hands of
Acquired immediately before the transaction under I.R.C. Section 362(b). I.R.C.
Section 362(b) provides that BancGroup's holding period for each Acquired
Corporation asset received in the merger will include the period during which
the asset was held by Acquired Corporation immediately before the transaction
based upon I.R.C. Section 1223(2).
Pursuant to I.R.C. Section 381(a), BancGroup will succeed to and take into
account the items of Acquired Corporation 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. BancGroup will succeed to and
take into account the earnings and profits, or deficit in earnings and profits,
of Acquired Corporation 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 BANK AND COLONIAL BANK
The merger of Bank with and into Colonial Bank will constitute a merger within
the meaning of I.R.C. Section 368(a)(1)(A), provided that the merger qualifies
as a statutory merger pursuant to state law. Bank and Colonial Bank 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), Bank will
recognize no gain or loss when it transfers its assets to Colonial Bank's in a
constructive exchange solely for Colonial Bank's stock and the assumption of
Colonial Bank's liabilities by BancGroup. 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 Colonial Bank upon the acquisition by Colonial Bank of the assets of Bank in
exchange for Colonial Bank's common stock and the assumption of 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 Bank immediately
before the transaction per I.R.C. Section 362(b). I.R.C. Section 362(b)
provides that Colonial Bank's holding period for each
<PAGE> 6
Bank asset received in the merger will include the period during which the
asset was held by Bank immediately before the transaction based upon I.R.C.
Section 1223(2).
Pursuant to I.R.C. Section 381(a), Colonial Bank will succeed to and take into
account the items of 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 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 CORPORATION SHAREHOLDERS
I.R.C. Section 354 states that a shareholder who receives solely BancGroup
common stock in exchange for Acquired Corporation 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
Corporation 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 Corporation 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 Corporation 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 Corporation
shareholder could be treated as a dividend (to the extent of the shareholder's
ratable
<PAGE> 7
share of applicable earnings and profits) if the shareholder constructively
owns shares of Acquired Corporation 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 Corporation shareholder in exchange
for his stock will not be treated as a dividend if such exchange or receipt
results in a meaningful reduction or a substantially disproportionate reduction
in the shareholder's ownership interest or results in a complete termination of
the shareholder's interest, taking into account, in each case, the constructive
ownership rules described above. A complete termination of a shareholder's
interest will occur if, after the receipt of cash in exchange for stock, the
shareholder owns no shares of stock in BancGroup. Thus, a shareholder who
receives solely cash for all of the stock actually owned by him will generally
qualify for capital gain treatment under the complete termination test if none
of the shares constructively owned by him are exchanged in the merger for
BancGroup Common Stock and the shareholder does not otherwise own, actually or
constructively, any shares of BancGroup Common Stock after the merger.
Where the complete termination of interest test is not satisfied with respect
to a particular shareholder (because, for example, Acquired Corporation 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 Corporation shareholders who constructively own stock in Acquired
Corporation should consult a tax advisor regarding the characterization of cash
payments received in the reorganization in exchange for Acquired Corporation
stock as either capital gain income or dividend income.
<PAGE> 8
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 will disqualify the option as
a statutory stock option.
The shareholders of Acquired Corporation, in lieu of receiving Bancgroup
options, can elect to receive shares of Bancgroup common stock for the
difference between the exercise price of Acquired Corporation options and
$31.50. It is possible that the Internal Revenue Service could argue that a
cashless exercise of incentive stock options is a material modification of the
existing options. If the Internal Revenue Service is successful with this
argument, the entire fair market value of the stock received in conjunction
with the exercise of the options will be taxed as ordinary income. Bancgroup
would be entitled to a corresponding compensation deduction for the same amount.
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 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.
<PAGE> 9
The shareholders of Acquired Corporation, in lieu of receiving Bancgroup
options, can elect to receive shares of Bancgroup common stock for the
difference between the exercise price of Acquired Corporation options and
$31.50. The cashless exercise of nonqualified stock options does not alter the
timing or character of income recognition. The shareholders of Acquired
Corporation will recognize ordinary income for the fair market value of the
stock received in conjunction with the exercise of the options. Bancgroup
would be entitled to a corresponding compensation deduction of the same amount.
SUMMARY
The merger of Bancgroup and Acquired Corporation will qualify as a tax-free
reorganization within the meaning of I.R.C. Section 368(a)(1)(A). BancGroup's
basis in Acquired Corporation's assets will be the same as Acquired
Corporation's basis in its assets before the merger. The merger of Colonial
Bank and Bank will also qualify as a tax-free reorganization within the meaning
of I.R.C. Section 368(a)(1)(A). Colonial Bank's basis in Bank's assets will be
the same as Bank's basis in its assets before the merger. Acquired Corporation
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 Corporation and BancGroup stock
for purposes of determining the tax consequences of the cash payments. In
addition, the receipt of Bancgroup stock in exchange for Acquired Corporation
incentive stock options may result in the incentive stock options being taxed
as nonqualified stock options.
If you have any questions or comments, please call Thomas Lee or Mark Borden at
(205) 252-8400.
Very Truly Yours,
Coopers & Lybrand L.L.P.
<PAGE> 1
EXHIBIT 10(B)(2)
AMENDED AND RESTATED LOAN AGREEMENT
By and Between
THE COLONIAL BANCGROUP, INC.,
a Delaware corporation
(the "Borrower")
and
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION
F/K/A SUN BANK, NATIONAL ASSOCIATION,
a national banking association
(the "Bank")
December , 1996
<PAGE> 2
TABLE OF CONTENTS
(The Table of Contents for this Amended and Restated Loan Agreement is for
convenience of reference only and is not intended to define, limit or describe
the scope or intent of any provisions of this Amended and Restated Loan
Agreement.)
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------------- ----
<S> <C> <C>
ARTICLE ONE DEFINITIONS AND ACCOUNTING TERMS 1
SECTION 1.01 Definitions 1
"Advance" 1
"Agreement" 2
"Average Total Assets" 2
"Banking Day" 2
"Borrower's Loan Certificate" 2
"Collateral" 2
"Day" 2
"Default" 2
"Default Rate" 2
"Dollars" 2
"Due Date" 2
"Events of Default" 2
"GAAP" 2
"IRS Code" 2
"Initial Advance" 2
"Initial Advance Date" 2
"Interest Period" 2
"Interest Rate" or "Interest Rates" 3
"Interest Rate Determination Date" 3
"Liabilities" 3
"LIBOR" 3
"LIBOR Loan" 3
"Loan" or "Loans" 3
"Loan Documents" 3
"Margin Securities" 3
"Maturity Date" 3
"Net Income" 3
"Net Loans" 3
"Non-Accrual Loans" 3
"Non-Performing Assets" 3
"Non-Performing Assets to Net Loans Ratio" 4
"Note" or "Notes" 4
"Obligations" 4
"Officer's Certificate" 4
"Opinion" 4
"Other Real Estate" 4
"Person" 4
"Places of Business" 4
"Pledge Agreement" 4
"Primary Capital" 4
"Primary Capital to Total Assets Ratio" 4
"Prime Loan" 5
"Prime Rate" 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
"Principal Place of Business" 5
"Restructured Loans" 5
"Return on Assets Ratio" 5
"Revolving Loan" 5
"Revolving Period" 5
"Subsequent Advances" 5
"Subsidiary" or "Subsidiaries" 5
"Term Loan" 5
"Term Note" 6
"Treasury Loan" 6
"Treasury Rate" 6
"UCC" 6
SECTION 1.02 Accounting Terms; Testing of Financial Ratios. 6
SECTION 1.03 Subsidiary Compliance. 6
ARTICLE TWO AMOUNTS AND TERMS OF THE LOANS 6
SECTION 2.01 (a) Revolving Loan 6
(b) Term Loan 7
SECTION 2.02 Advances; Interest Rate Selection 7
SECTION 2.03 Interest on The Notes 8
SECTION 2.04 Restriction on Prepayment 8
SECTION 2.05 Calculation of Interest. 9
SECTION 2.06 Place of Payment. 9
SECTION 2.07 Set-off. 9
SECTION 2.08 Payment of Notes. 9
SECTION 2.09 Application of Payments. 10
ARTICLE THREE REPRESENTATIONS AND WARRANTIES 10
SECTION 3.01 Organization; Corporate Powers; Etc. 10
SECTION 3.02 Authorization of Loans; Etc. 10
SECTION 3.03 Conflicting Agreements and Other Matters. 11
SECTION 3.04 Financial Statements. 11
SECTION 3.05 Changes in Financial Conditions; Adverse Developments. 11
SECTION 3.06 Tax Returns and Payments. 11
SECTION 3.07 Agreements. 12
SECTION 3.08 Title to Properties and Assets; Liens; Etc. 12
SECTION 3.09 Securities Acts. 12
SECTION 3.10 Regulation G; Etc. 12
SECTION 3.11 Litigation; Etc. 13
SECTION 3.12 Regulation U 13
SECTION 3.13 Patents; Trademarks; Franchises; Etc. 13
SECTION 3.14 Governmental Consent. 13
SECTION 3.15 Holding Company Status. 13
SECTION 3.16 Investment Company Status. 13
SECTION 3.17 Outstanding Debt. 14
SECTION 3.18 Consents and Approvals. 14
SECTION 3.19 Places of Business. 14
SECTION 3.20 Priority of Security Interest. 14
ARTICLE FOUR COVENANTS OF THE BORROWER 14
SECTION 4.01 Affirmative Covenants. 14
(a) Accounting: Financial Statements; Etc. 14
(b) Inspection. 15
(c) Maintenance of Corporate Existence; Compliance with Laws. 15
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
(d) Notice of Default 15
(e) Maintenance of Properties 15
(f) Notice of Suit; Proceedings; Adverse Change. 16
(g) Insurance 16
(h) Debts and Taxes and Liabilities 16
(i) Notification of Change of Name or Business Location. 16
(j) Further Assurances; Additional Collateral Documents. 16
(k) Financial Covenants 17
(l) Use of Proceeds 17
SECTION 4.02 Negative Covenants 17
(a) Sale of Assets 17
(b) Acquisition or Mergers 17
(c) Fiscal Year 17
(d) Changes in Business 17
(e) Other Agreements 18
(f) Additional Indebtedness 18
ARTICLE FIVE CONDITIONS OF LENDING 18
SECTION 5.01 Representations and Warranties 18
SECTION 5.02 No Default 18
SECTION 5.03 Loan Documents 18
SECTION 5.04 Supporting Documents 18
SECTION 5.05 Loans Permitted by Applicable Laws 19
SECTION 5.06 Proceedings 19
ARTICLE SIX EVENTS OF DEFAULT 19
SECTION 6.01 Events of Default 19
(a) Monetary Default 19
(b) Non-Monetary Default 19
(c) Third Party Default 20
(d) False Representation 20
(e) Bankruptcy or Insolvency 20
(f) Dissolution 20
(g) Fraudulent Conveyance 20
(h) Pledge Agreement 20
(i) Affiliate or Subsidiary Default 20
ARTICLE SEVEN RIGHTS UPON DEFAULT 21
SECTION 7.01 Acceleration 21
SECTION 7.02 Right of Setoff 21
SECTION 7.03 Other Rights 21
SECTION 7.04 Uniform Commercial Code 21
ARTICLE EIGHT MISCELLANEOUS 21
SECTION 8.01 No Waiver; Cumulative Remedies 21
SECTION 8.02 Amendments; Etc 21
SECTION 8.03 Addresses for Notices; Etc 21
SECTION 8.04 Applicable Law 22
SECTION 8.05 Survival of Representations and Warranties. 22
SECTION 8.06 Time of the Essence 22
SECTION 8.07 Headings 22
SECTION 8.08 Severability 22
SECTION 8.09 Counterparts 23
SECTION 8.10 Conflict 23
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 8.11 Term. 23
SECTION 8.12 Expenses. 23
SECTION 8.13 Successors and Assigns. 23
SECTION 8.14 No Third Party Beneficiaries. 23
SECTION 8.15 Venue 23
SECTION 8.16 WAIVER OF JURY TRIAL 24
SECTION 8.17 Entire Agreement. 24
</TABLE>
SIGNATURES AND SEALS
EXHIBIT "A" - List of Places of Business
EXHIBIT "B" - List of Representatives of Borrower
EXHIBIT "C" - List of Subsidiaries
<PAGE> 6
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT made and entered into this
____ day of December, 1996 by and between:
THE COLONIAL BANCGROUP, INC., a Delaware corporation, with its
corporate offices located at 250 Commerce Street, 2nd Floor,
Montgomery, Alabama 36104, (hereinafter referred to as the
"Borrower");
and
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION F/K/A SUN
BANK, NATIONAL ASSOCIATION, a national banking association,
200 South Orange Avenue, Orlando, Florida 32801 (hereinafter
referred to as the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank previously extended to the Borrower (i) a revolving
line of credit loan up to the maximum principal amount of $15,000,000.00
pursuant to the terms of that certain Loan Agreement dated as of August 29, 1995
and (ii) a term loan up to the maximum principal amount of $15,000,000.00
pursuant to the terms of that certain Loan Agreement dated as of August 6, 1993;
and
WHEREAS, the Borrower has requested the Bank to renew and increase said
revolving line of credit loan up to the maximum principal amount of
$35,000,000.00 and to renew and increase said term loan up to the maximum
principal amount of $15,500,000.00; and
WHEREAS, the Bank is willing to extend and increase such loans upon the
terms and conditions set forth in this Agreement and the Bank and the Borrower
have agreed to amend and restate each of the Loan Agreements noted above.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements contained herein, the Borrower and the Bank
agree as follows:
ARTICLE ONE
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the respective meanings specified in this Section
1.01 (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ADVANCE" shall mean individually and collectively the proceeds of the
Revolving Loan delivered to the Borrower by the Bank pursuant to Section 2.02
hereof.
"AGREEMENT" shall mean this Amended and Restated Loan Agreement as
originally executed by the parties hereto and all permitted supplements,
amendments, modifications and restatements hereof.
"AVERAGE TOTAL ASSETS" shall mean twenty-five percent (25.0%) of the
aggregate sum of the Borrower's consolidated total assets as indicated on the
Borrower's four (4) most recent quarterly financial statements submitted
pursuant to Section 4.01 (a) (i) hereof.
"BANKING DAY" shall mean that part of any day for dealings by and
between banks, excluding Saturday,
<PAGE> 7
Sunday or a day in which commercial banks are authorized to close under the laws
of the State of Florida.
"BORROWER'S LOAN CERTIFICATE" shall mean the Certificate of the
Secretary or Assistant Secretary of the Borrower referred to in and required by
Section 5.04(a) of this Agreement.
"COLLATERAL" shall mean one hundred percent (100%) of the issued and
outstanding shares of common stock of all present and future Subsidiaries of the
Borrower.
"DAY" shall mean a calendar day, unless the context indicates
otherwise.
"DEFAULT" shall mean any event or condition which with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"DEFAULT RATE" shall mean (i) twenty five percent (25%) per annum or
(ii) the highest rate of interest permitted from time to time by applicable law,
whichever is less.
"DOLLARS" shall mean lawful money of the United States of America.
"DUE DATE" shall mean the date any payment of principal or interest is
due and payable on the Loans or the Notes.
"EVENTS OF DEFAULT" shall mean the events of default specified in
Article Six of this Agreement and each of the Events of Default shall be an
"Event of Default".
"GAAP" shall mean generally accepted accounting principles consistently
applied to the particular item.
"IRS CODE" shall mean the Internal Revenue Code of 1986, as amended.
"INITIAL ADVANCE" shall mean the initial delivery of a portion of the
proceeds of the Revolving Loan pursuant to the terms hereof.
"INITIAL ADVANCE DATE" shall mean the date of this Agreement.
"INTEREST PERIOD" shall mean any interest period applicable to a
particular Advance on a Loan which, in the case of a Prime Loan, shall be thirty
(30) days, and, in the case of either a LIBOR Loan or Fixed Rate Loan, shall be
determined in accordance with Section 2.02 hereof.
"INTEREST RATE" OR "INTEREST RATES" shall mean the fluctuating interest
rate(s) applicable to the Loans, which shall equal either (i) LIBOR plus one
hundred fifty (150) basis points or (ii) Prime Rate or (iii) the Treasury Rate
plus one hundred fifty (150) basis points; provided, however, the Interest Rate
shall never exceed the maximum rate allowable by law.
"INTEREST RATE DETERMINATION DATE" shall mean each date for calculating
LIBOR, the Prime Rate or the Treasury Rate, as the case may be, for the purpose
of determining the Interest Rate with respect to a particular Interest Period
which date shall be the fifth (5th) Banking Day prior to the first day of the
related Interest Period in the case of a borrowing which is a Prime Loan, LIBOR
Loan or Treasury Rate Loan.
"LIABILITIES" shall mean all of the liabilities and obligations of the
Borrower all determined in accordance with GAAP.
"LIBOR" shall mean, with respect to any Interest Period, the interest
rate in effect on the
<PAGE> 8
applicable Interest Rate Determination Date for the applicable Interest Period
as published from time to time in Telerate or such other publication as may be
designated by the Bank from time to time.
"LIBOR LOAN" shall mean that portion of a Loan bearing interest based
upon LIBOR.
"LOAN" OR "LOANS" shall mean the Revolving Loan and the Term Loan.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Pledge
Agreement, and all of the other documents, agreements, certificates, schedules,
notes, statements, financing statements and opinions, however described,
referenced herein or executed or delivered pursuant hereto or in connection with
or arising with the Loans or the transactions contemplated by this Agreement.
"MARGIN SECURITIES" shall mean any "margin securities" within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR Part 207).
"MATURITY DATE" shall mean the earlier of an Event of Default or
October 30, 2001.
"NET INCOME" shall mean, for any period, the aggregate of the net
income of the Borrower, determined in accordance with GAAP.
"NET LOANS" shall mean the sum of the Borrower's (i) total loans less
unearned income (ii) Other Real Estate plus (iii) repossessions less (iv)
mortgages held for sale in the ordinary course of business.
"NON-ACCRUAL LOANS" shall mean loans extended by the Borrower or its
Subsidiaries in which the accrual of interest has been discontinued due to a
deterioration in the financial condition of any borrower.
"NON-PERFORMING ASSETS" shall mean the sum of the Borrower's and its
Subsidiaries' (i) Non-Accrual Loans (ii) Other Real Estate (iii) Restructured
Loans and (iv) repossessions.
"NON-PERFORMING ASSETS TO NET LOANS RATIO" shall mean the ratio of the
Borrower's and its Subsidiaries' Non-Performing Assets to its Net Loans
determined quarterly at the end of each fiscal quarter of the Borrower on a
rolling four quarters basis by averaging each such ratio for the most recently
ended fiscal quarter and the three fiscal quarters immediately preceding the
most recently ended fiscal quarter.
"NOTE" OR "NOTES" shall mean the Revolving Note and/or the Term Note,
as the context may require.
"OBLIGATIONS", with respect to the Borrower, shall mean, individually
and collectively, the payment and performance duties, obligations and
liabilities of the Borrower to the Bank, evidenced by the Notes, together with
all accrued but unpaid interest thereon, and all other payment and performance
duties, obligations and liabilities of the Borrower to the Bank, however and
whenever incurred, acquired or evidenced, whether primary or secondary, direct
or indirect, absolute or contingent, sole or joint and several, or due or to
become due, including, without limitation, all such duties, obligations and
liabilities of the Borrower to the Bank, under and pursuant to this Agreement,
the Notes and the Pledge Agreement and all renewals, modifications or extensions
of any thereof.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
Borrower, by its President, one of its Vice Presidents, or its Treasurer.
"OPINION" shall mean the legal opinion of counsel to the Borrower, in
form and substance acceptable to the Bank.
"OTHER REAL ESTATE" shall mean the real estate acquired by the Borrower
or any of the Subsidiaries
<PAGE> 9
as a result of the deterioration of the financial condition of any borrower.
"PERSON" shall mean any individual, joint venturer, partnership, firm,
corporation, trust, unincorporated organization or other organization or entity,
or a governmental body or any department or agency thereof, and shall include
both the singular and the plural.
"PLACES OF BUSINESS" shall mean any location in which the Borrower
undertakes its business, all as set forth in Exhibit "A" attached hereto.
"PLEDGE AGREEMENT" shall mean the amended and restated pledge agreement
of the Borrower pledging and granting a security interest to the Bank in the
Collateral, in form and substance acceptable to the Bank, and all supplements
and amendments thereto and modifications and restatements thereof.
"PRIMARY CAPITAL" shall mean the sum of the Borrower's and its
Subsidiaries' (i) total equity capital (ii) allowance for loan and lease losses
and (iii) minority interest in consolidated Subsidiaries.
"PRIMARY CAPITAL TO TOTAL ASSETS RATIO" shall mean the ratio of the
Borrower's Primary Capital to its total assets determined quarterly at the end
of each fiscal quarter of the Borrower on a rolling four quarters basis by
averaging each such ratio for the most recently ended fiscal quarter and the
three fiscal quarters immediately preceding the most recently ended fiscal
quarter.
"PRIME LOAN" shall mean that portion of a Loan bearing interest based
upon the Prime Rate.
"PRIME RATE" shall mean the floating interest rate announced by
SunTrust Banks, Inc., from time to time, as the prime rate (which interest rate
is only a bench mark, is purely discretionary and is not necessarily the best or
lowest interest rate charged borrowing customers of any subsidiary bank of
SunTrust Banks, Inc.), with any change in the Prime Rate to be effective at
12:01 A.M. on the day any such change in the Prime Rate is announced by SunTrust
Banks, Inc.
"PRINCIPAL PLACE OF BUSINESS" shall mean the principal place of
business and the headquarters of the Borrower at which all of its records are
kept, currently at the address set forth in the preamble to this Agreement.
"RESTRUCTURED LOANS" shall mean loans extended by the Borrower or its
Subsidiaries that have been restructured to provide a reduction or deferral of
interest or principal because of a deterioration in the financial condition of
any borrower.
"RETURN ON ASSETS RATIO" shall mean the ratio of the Borrower's net
income for the current quarter and preceding three quarters to its average total
assets determined quarterly at the end of each fiscal quarter of the Borrower on
a rolling four quarters basis by averaging each such ratio for the most recently
ended fiscal quarter and the three fiscal quarters immediately preceding the
most recently ended fiscal quarter.
"REVOLVING LOAN" shall mean the loan or loans up to but not exceeding
the principal amount of $35,000,000.00 made to the Borrower by the Bank pursuant
to and in accordance with the terms of this Agreement.
"REVOLVING NOTE" shall mean the Borrower's promissory note or notes
evidencing the Revolving Loan, in form acceptable to the Bank, and any and all
allonges thereto, and any and all extensions, renewals or modifications thereof.
"REVOLVING PERIOD" shall mean the period during the term of the
Revolving Loan, commencing on the date hereof and ending on the occurrence of
(i) an Event of Default or (ii) October 30, 1998 or (iii) such later date as the
Bank may in its absolute discretion agree to in writing, whichever first occurs.
<PAGE> 10
"SUBSEQUENT ADVANCES" with respect to the Borrower, shall mean
individually and collectively all Advances hereunder after the Initial Advance.
"SUBSIDIARY" OR "SUBSIDIARIES" shall mean, individually or
collectively, as the context may require, any national or state banking
association, corporation or other entity whose assets and income are at any time
includible in the financial statements of the Borrower in accordance with GAAP,
and shall include subsidiaries of a Subsidiary.
"TERM LOAN" shall mean the term loan extended by the Bank to the
Borrower in the original principal amount of $15,500,000.00.
"TERM NOTE" shall mean the note or notes evidencing the Term Loan
together with any and all amendments, modifications, supplements or renewals
thereto or thereof.
"TREASURY LOAN" shall mean that portion of a Loan bearing interest
based upon the Treasury Rate.
"TREASURY RATE" shall mean the annual yield on the highest yielding
United States Treasury issue maturing in the calendar month closest to the
Maturity Date of the applicable Note, as published in the Wall Street Journal on
the Interest Rate Determination Date.
"UCC" shall mean the Florida Uniform Commercial Code, as amended.
SECTION 1.02 ACCOUNTING TERMS; TESTING OF FINANCIAL RATIOS. All
accounting terms used herein shall be construed in accordance with GAAP and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with GAAP. In the event of ambiguities in GAAP, the more conservative
principle or interpretation shall be used. All financial ratios and covenants
contained herein shall be tested quarterly, as at the end of each fiscal quarter
of the Company, commencing with the fiscal quarter ending as at December 31,
1996. Compliance with such ratios and covenants shall be tested on a "rolling
four (4) quarters" basis by calculating the average of each such ratio for the
most recently ended fiscal quarter and the three (3) fiscal quarters immediately
preceding the most recently ended fiscal quarter determined on an "as reported"
basis.
SECTION 1.03 SUBSIDIARY COMPLIANCE. Whenever the term Borrower is used
throughout this Agreement, it shall also mean to include, if applicable in the
context as so used, Subsidiaries such that the Borrower and each of the
Subsidiaries shall perform, be in compliance with or otherwise discharge the
applicable term or condition of this Agreement.
ARTICLE TWO
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01 (A) REVOLVING LOAN. The Bank agrees from time to time
during the Revolving Period to lend to the Borrower on the terms and conditions
set forth herein, upon the Borrower's request, up to the aggregate principal
amount of $35,000,000.00. During the Revolving Period, the Borrower shall be
entitled to receive the entire proceeds of the Revolving Loan in one or more
Advances pursuant to Section 2.02 hereof, except as otherwise specifically set
forth in this Agreement. Advances under the Revolving Loan shall be evidenced by
the Revolving Note in the principal amount of $35,000,000.00, payable as
provided in Section 2.08 hereof. After the expiration of the Revolving Period,
the Borrower shall not be entitled to receive any Subsequent Advance. The
Revolving Loan may revolve during the Revolving Period; accordingly, during the
Revolving Period, the Borrower may borrow up to the maximum principal amount
available under said Revolving Loan, repay all or any portion of such principal
amount of said Revolving Loan, and reborrow up to such maximum principal amount,
subject to the terms and
<PAGE> 11
conditions set forth herein.
(B) TERM LOAN. The Bank agrees to extend to the Borrower the proceeds
of the Term Loan upon the term and conditions set forth herein.
SECTION 2.02 ADVANCES; INTEREST RATE SELECTION. (a) On the Initial
Advance Date and upon satisfaction of the conditions precedent set forth in
Article Five hereof, the Initial Advance with respect to the Revolving Loan and
the proceeds of the Term Loan shall be disbursed by the Bank to or on behalf of
the Borrower. If the Borrower shall fail to satisfy the conditions precedent set
forth in Article Five hereof on the Initial Advance Date, the Bank's commitment
to lend funds to or on behalf of the Borrower shall terminate. After the Initial
Advance and upon continued satisfaction of the conditions precedent set forth in
Article Five hereof, the Borrower shall be entitled to receive Subsequent
Advances under the Revolving Loan.
(b) When requested by the Borrower, the Bank shall, as soon as
practical, provide Borrower with its determination of the then available
Interest Rates offered by the Bank on the Loans for the requested Interest
Periods (which determination shall, absent manifest error, be final, conclusive
and binding upon all parties) and the Borrower shall give the Bank five (5) Days
prior notice (in writing or by telephone confirmed immediately thereafter in
writing), or such other time as may be acceptable to the Bank (an "Interest Rate
Selection Notice") which shall specify (i) the amount(s) of the Advance(s) on
the Loan(s), and (ii) the Borrower's designation of the selected Interest
Rate(s)/Interest Period(s) applicable to the Loans (which may be up to ten (10)
separate Interest Rate(s)/Interest Period(s) with respect to either the
Revolving Loan or the Term Loan). The Bank shall have no duty or obligation to
verify or confirm the authority of the representative of the Borrower requesting
any such Subsequent Advance as long as said person identifies himself as one of
the persons noted on EXHIBIT "B" attached hereto.
(c) By giving notice as set forth hereinabove, the Borrower shall have
the option, subject to the other provisions of this Section 2.02, to specify
whether the Interest Period applicable to a LIBOR Loan commencing on any such
date shall be a period of 30, 60, 90 or 180 Days or such other period as may be
agreed upon between the Borrower and the Bank; provided, that:
(i) in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the Day on which the
immediately preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a Day
which is not a Banking Day, that Interest Period shall be extended to expire on
the next succeeding Banking Day; provided, that if any such Interest Period
would otherwise expire on a Day which is not a Banking Day but is a Day of the
month after which no further Banking Day occurs in that month, that Interest
Period shall expire on the next preceding Banking Day;
(iii) any Interest Period which begins on the last Banking Day
of a calendar month (or on a Day for which there is no numerically corresponding
Day in the calendar month at the end of such Interest Period) shall end on the
last Banking Day of a calendar month;
(iv) (A) no Interest Period applicable to the Revolving Loan
shall extend beyond, the last day of the Revolving Period, as it may exist from
time to time and (B) no Interest Period applicable to the Term Loan shall extend
beyond the Maturity Date as it may exist from time to time.
(v) if the Borrower fails to timely provide the Bank with an
Interest Rate Selection Notice, the Borrower shall be deemed to have selected
the same Interest Period as was previously in effect for such Advance.
(d) Any Advance for which the Treasury Rate has been selected shall
have an Interest Period that expires on the then scheduled maturity of such
Loan.
<PAGE> 12
(e) Requests by the Borrower for any Subsequent Advance under the
Revolving Loan on any date shall be in the minimum principal amount of
$10,000.00 or such lesser amount as may be acceptable to the Bank. The Bank
shall make each Subsequent Advance hereunder on the date proposed by the
Borrower therefor (which may be the same Banking Day if such request is made by
the Borrower and is received by the Bank prior to 1:00 p.m. Orlando time),
otherwise no earlier than the following Banking Day) by crediting the amount of
each Subsequent Advance requested by the Borrower to the general deposit account
of the Borrower maintained with the Bank or any other subsidiary bank of
SunTrust Banks, Inc.
SECTION 2.03 INTEREST ON THE NOTES. The Loans shall be evidenced by the
Notes and shall be due and payable in accordance with and as required by Section
2.08. The Borrower shall not be liable under the Notes except with respect to
funds actually advanced to the Borrower by the Bank pursuant to the terms
hereof. The Notes shall bear interest from the date thereof on the unpaid
principal balance thereof from time to time outstanding at the Interest Rate(s)
applicable to any Loan. From and after the Due Date, interest shall accrue on
the unpaid principal balance of the Loans and on all accrued but unpaid interest
thereon, or on any defaulted payment, from the Due Date at the Default Rate.
Such interest shall continue to accrue until the date of payment in full of all
principal and accrued but unpaid interest of such defaulted payment, if
applicable.
SECTION 2.04 RESTRICTION ON PREPAYMENT. (a) Treasury Loans. The
Borrower may not prepay all or any part of the principal amount of a Treasury
Loan outstanding except on the last Banking Day of the Interest Period
applicable to a particular Advance. In the event that a Treasury Loan is prepaid
other than in accordance with the terms hereof, the Borrower agrees to pay upon
demand such amounts as the Bank determines in its good faith judgment to be
required to compensate it for any loss (including the loss of anticipated
profits) direct or indirect costs incurred by reason of the liquidation of
deposits or investments or the redeployment of deposits, investments or funds
acquired by the Bank to fund any such Treasury Loan being prepaid. A certificate
of the Bank claiming compensation under this section delivered to the Borrower
and setting forth the amount to be paid to it and its calculations in support
hereof in reasonable detail shall be, in the absence of manifest error, final,
conclusive and binding.
(b) Prime Loans and LIBOR Loans. The Borrower may prepay all
or any portion of the outstanding principal balance of a Prime Loan or LIBOR
Loan without penalty as provided in this Section 2.04.
Each prepayment other than full payment shall be made prior to 2:00 P.M.
(Orlando time) on the date of the prepayment, and shall be made on a Banking Day
in immediately available funds. All prepayments of a Loan shall be applied as
follows: (i) first to any outstanding costs or fees of the Bank and relating to
its administration of the Loans or exercising its rights hereunder, (ii) next to
the payment of accrued but unpaid interest, and (iii) finally to the principal
then due on the Loans.
SECTION 2.05 CALCULATION OF INTEREST. Any interest due on the Loans or
any other Obligations shall be calculated on the basis of a year containing 365
days. The interest due on any date for payment of interest hereunder shall be
that interest to the extent accrued as of midnight on the last Day immediately
prior to that interest payment date. Notwithstanding anything herein or in any
Loan Document to the contrary, the sum of all interest and all other amounts
deemed interest under Florida or other applicable law which may collected by the
Bank hereunder shall not exceed the maximum lawful interest rate permitted by
such law from time to time. The Bank and the Borrower intend and agree that
under no circumstance shall the Borrower be required to pay interest on the
Loans or on any other Obligations at a rate in excess of the maximum interest
rate permitted by applicable law from time to time, and in the event any such
interest is received or charged by the Bank in excess of that rate, the Borrower
shall be entitled to an immediate refund of any such excess interest by a credit
to and payment toward the unpaid balance of the Loans (such credit to be
considered to have been made at the time of the payment of the excess interest)
with any excess interest not so credited to be immediately paid to the Borrower
by the Bank.
<PAGE> 13
SECTION 2.06 PLACE OF PAYMENT. All payments by the Borrower under the
Loan Documents shall be made to the Bank at its office located at 200 South
Orange Avenue, Orlando, Florida, in lawful money of the United States of America
and in immediately available funds.
SECTION 2.07 SET-OFF. The Borrower hereby grants to the Bank a lien on,
and a security interest in, the deposit balances, accounts, items, certificates
of deposit and monies of the Borrower in the possession of or on deposit with
the Bank or any of its affiliates to secure, and as collateral for, the payment
and performance of the Obligations. Upon Default, the Bank may at any time and
from time to time, without demand or notice, appropriate and set-off against and
apply the same to the Obligations when and as due and payable.
SECTION 2.08 PAYMENT OF NOTES. (a) Revolving Note. The Borrower shall
pay the Revolving Note together with interest at the applicable Interest Rate as
follows:
(i) Interest shall be payable on the last day of each
and every quarter during the Revolving Period commencing on the last day of the
first quarter following the date of the Initial Advance.
(ii) The entire unpaid principal balance together
with accrued interest shall be due and payable in full on the last day of the
Revolving Period.
(b) Term Note. The Borrower shall pay the Term Note together
with interest at the applicable Interest Rate as follows:
(i) Interest shall be payable monthly on the last Day
of each calendar month, until the Maturity Date.
(ii) The outstanding principal balance of the Term
Loan shall be payable in equal quarterly installments of $258,333.34, commencing
March 31, 1997 and continuing on the same Day of each and every succeeding
quarter until the Maturity Date, whereupon the entire remaining outstanding
principal balance, together with all accrued but unpaid interest, shall be due
and payable in full.
SECTION 2.09 APPLICATION OF PAYMENTS. All payments (other than
prepayments as set forth in Section 2.04) made on the Notes shall be applied
first to interest accrued to the date of payment and next to the unpaid
principal balance; provided, however, in the event an Event of Default occurs,
payments shall be applied first to any costs or expenses, including attorneys
fees, that the Bank may incur in exercising its rights under the Loan Documents,
as the Bank may determine.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:
SECTION 3.01 ORGANIZATION; CORPORATE POWERS; ETC. (a) The Borrower (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, (ii) has all requisite power and authority,
corporate and otherwise, to own its respective properties and assets and to
carry on its respective businesses as now conducted and proposed to be
conducted, (iii) is duly qualified to do business and are in good standing in
every jurisdiction in which the character of its properties or assets owned or
the nature of its activities conducted makes such qualification necessary
including the State of Florida, and (iv) has the corporate power and authority
to execute and deliver, and to perform its respective obligations under this
Agreement, the Notes, the Pledge Agreement and the other Loan Documents.
<PAGE> 14
(b) Each Subsidiary of the Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the United
States of America or the jurisdiction in which formed, (ii) has all requisite
power and authority, corporate and otherwise, to own its respective properties
and assets and to carry on its respective businesses as now conducted and
proposed to be conducted, (iii) is duly qualified to do business and are in good
standing in every jurisdiction in which the character of its properties or
assets owned or the nature of its activities conducted makes such qualification
necessary including the State of Florida, and (iv) has the corporate power and
authority to execute and deliver, and to perform its respective obligations
under the Loan Documents to which it is a party.
SECTION 3.02 AUTHORIZATION OF LOANS; ETC. The execution, delivery and
performance of the Loan Documents by the Borrower (a) have been duly authorized
by all requisite action, corporate or otherwise, (no shareholder action being
required pursuant to applicable law) and (b) will not (i) violate (A) any
provision of law, any governmental rule or regulation, any order of any court or
other agency of government or the Articles of Incorporation or by-laws of the
Borrower or (B) any provision of any indenture, agreement or other instrument to
which the Borrower is a party or by which the Borrower or any of its properties
or assets are bound, (ii) be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than as permitted by the terms
hereof.
SECTION 3.03 CONFLICTING AGREEMENTS AND OTHER MATTERS. The Borrower is
not a party to any contract or agreement or subject to any charter, corporate,
or other restriction which materially and adversely affects its business,
property or assets, or financial condition. Neither the execution nor delivery
of this Agreement, the Notes, the Pledge Agreement or the other Loan Documents,
nor fulfillment of nor compliance with the terms and provisions hereof or the
other Loan Documents will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any lien upon any of the properties
or assets of the Borrower pursuant to, the charter or by-laws of the Borrower,
any award of any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Borrower is subject. The Borrower is not a party to, or
otherwise subject to any provision contained in, any instrument evidencing
indebtedness of the Borrower, any agreement relating thereto or any other
contract or agreement (including in the case of a non-natural person, its
charter) which restricts or otherwise limits the incurring of the debt to be
evidenced by the Notes.
SECTION 3.04 FINANCIAL STATEMENTS. The Borrower has furnished the Bank
with the following financial statements, certified to be correct by a principal
financial officer of the Borrower: (i) audited balance sheets of the Borrower as
at December 31, 1994 and 1995, and (ii) audited profit and loss and surplus
statement of the Borrower for the fiscal years ended on such dates, all prepared
by Coopers & Lybrand and (iii) the call reports of each Subsidiary bank (signed
and certified to the Bank by an authorized officer of each Subsidiary and (iv)
the 10-Q reports and 10-K reports of the Borrower and any related reports on
Form 8-K for a period from December 31, 1992 through the date hereof. Such
financial statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments) and have been prepared in
accordance with GAAP and show all liabilities, direct and contingent, required
to be shown in accordance with such principles of the various entities and
individuals to which they relate. The balance sheets fairly present the
financial condition of the various entities and individuals to which they relate
as at the dates thereof, and the profit and loss and surplus statements fairly
present the results of the operations of the various entities and individuals to
which they relate for the periods indicated. There has been no material adverse
change in the business, condition or operations (financial or otherwise) of the
Borrower taken as a whole since the date of the latest financial statement
referred to above.
SECTION 3.05 CHANGES IN FINANCIAL CONDITIONS; ADVERSE DEVELOPMENTS.
From the date of the latest annual financial statements referenced in Section
3.04 hereof, to the date of this Agreement, there
<PAGE> 15
has been, and to the date of the Initial Advance and each Subsequent Advance
there will be, no change in the properties, assets, liabilities, financial
condition, business, operations, affairs or prospects of the Borrower from that
set forth or reflected in the latest fiscal year-end balance sheets referred to
in Section 3.04, other than changes in the ordinary course of business,
including acquisitions, none of which have been, either in any case or in the
aggregate, materially adverse.
SECTION 3.06 TAX RETURNS AND PAYMENTS. All federal, state and local tax
returns and reports of the Borrower required to be filed have been filed, and
all taxes, assessments, fees and other governmental charges upon the Borrower,
or upon any of their respective properties, assets, incomes or franchises, which
are due and payable in accordance with such returns and reports, have been paid,
other than those presently (a) payable without penalty or interest, or (b)
contested in good faith and by appropriate and lawful proceedings prosecuted
diligently. The aggregate amount of the taxes, assessments, charges and levies
so contested is not material to the condition (financial or otherwise) and
operations of the Borrower, as applicable. The charges, accruals, and reserves
on the books of the Borrower in respect of federal, state and local taxes for
all fiscal periods to date are adequate and the Borrower knows of any other
unpaid assessment for additional federal, state or local taxes for any such
fiscal period or of any basis therefor. The Borrower has and will establish all
necessary reserves and make all payments required of them to be set aside or
made in regard to all F.I.C.A., withholding, sales or excise, and all other
similar federal, state and local taxes.
SECTION 3.07 AGREEMENTS.
(a) The Borrower is not a party to any agreement, indenture, lease or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree, rule or regulation materially and
adversely affecting its respective business, properties, assets, operations or
condition (financial or otherwise). There are no material unrealized losses with
respect to any such agreement, indenture, lease or instrument.
(b) The Borrower is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
material agreement or instrument to which it is a party.
(c) The Borrower enjoys peaceful and undisturbed possession in all
material respects under all leases as to which they are a lessee and all such
leases are valid and subsisting and in full force and effect.
SECTION 3.08 TITLE TO PROPERTIES AND ASSETS; LIENS; ETC. The Borrower
has good and marketable title to its respective real properties other than
properties which it leases and good title to all of its other properties and
assets, including the properties and assets reflected in the latest balance
sheet described in Section 3.04 hereinabove (other than properties and assets
disposed of in the ordinary course of business); provided, however, the Borrower
hereby advises and the Bank hereby acknowledges that, the Federal Home Loan Bank
has been granted a security interest in certain residential real estate loans of
the Borrower as collateral for borrowings made by the Borrower from the Federal
Home Loan Bank. Borrower enjoys peaceful and undisturbed possession of all
leases necessary in any material respect for the operation of its respective
properties and assets, none of which contains any unusual or burdensome
provisions which might materially affect or impair the operation of such
properties and assets.
SECTION 3.09 SECURITIES ACTS. Neither the Borrower nor any agent acting
on its behalf has, directly or indirectly, taken or will take any action which
would subject the issuance of the Notes to the provisions of Section 5 of the
Securities Act of 1933, as amended, or to the provisions of any securities or
Blue Sky law of any applicable jurisdiction.
SECTION 3.10 REGULATION G; ETC. Neither the Borrower nor any agent
acting on the behalf of any of them has taken or will take any action which
might cause this Agreement or the Notes to violate
<PAGE> 16
Regulation G, T or X or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Securities Exchange Act of 1934, in
each case as in effect now or as the same may hereafter be in effect.
SECTION 3.11 LITIGATION; ETC. There are no actions, proceedings or
investigations, however described or denominated, pending or, to the knowledge
of the Borrower, threatened, against the Borrower, or affecting the Borrower (or
any basis therefor known to the Borrower) which, either in any case or in the
aggregate, might result in any material adverse change in the financial
condition, business, prospects, affairs or operations of the Borrower in any of
its properties or assets, or in any material impairment of the right or ability
of the Borrower to carry on its respective operations as now conducted or
proposed to be conducted, or in any material liability on the part of the
Borrower, or which questions the validity of this Agreement, the Notes, the
Pledge Agreement or any of the other Loan Documents or of any action taken or to
be taken in connection with the transactions contemplated hereby or thereby.
SECTION 3.12 REGULATION U. The Borrower is not engaged principally in,
nor has it as one of its important activities, the business of extending credit
for the purpose of purchasing or carrying any Margin Securities. No part of the
proceeds of the Loans hereunder will be used to carry on any margin security
transactions within the meaning of said Regulation.
SECTION 3.13 PATENTS; TRADEMARKS; FRANCHISES; ETC. The Borrower owns or
has the right to use all of the patents, trademarks, service marks, trade names,
copyrights, franchises and licenses, and all rights with respect thereto,
necessary for the conduct of its business as now conducted or proposed to be
conducted without any known conflict with the rights of others, and, in each
case, subject to no mortgage, pledge, lien, lease, encumbrance, charge, security
interest, title retention agreement or option. Each such asset or agreement is
in full force and effect, and the holder thereof has fulfilled and performed all
of its obligations with respect thereto. No event has occurred or exists which
permits, or after notice or lapse of time or both would permit, revocation or
termination, or which materially adversely affects or in the future may (so far
as the Borrower now foresees) materially adversely affect, the rights of such
holder thereof with respect thereto. No other license or franchise is known by
the Borrower to be necessary to the operations of the business of the Borrower
as now conducted or proposed to be conducted.
SECTION 3.14 GOVERNMENTAL CONSENT. Neither the nature of the Borrower
nor any relationship between any other Person, nor any circumstance in
connection with the Loans or the issuance and delivery of the Notes is such as
to require any consent, approval or other action by or any notice to or filing
with any court or administrative or governmental body (other than routine
filings after the date of any closing with the Securities and Exchange
Commission and/or State Blue Sky authorities) in connection with the execution
and delivery of this Agreement, the Loans or the issuance and delivery of the
Notes or fulfillment of or compliance with the terms and provisions hereof or of
the Notes.
SECTION 3.15 HOLDING COMPANY STATUS. The Borrower is not a holding
company, or a subsidiary or affiliate of a holding company, or a public utility,
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or a public utility within the meaning of the Federal Power Act, as
amended.
SECTION 3.16 INVESTMENT COMPANY STATUS. The Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
adviser" within the meaning of the Investment Advisers Act of 1940, as amended.
SECTION 3.17 OUTSTANDING DEBT. On the date of the Initial Advance, the
Borrower does not have any outstanding funded Liabilities or current
Liabilities, except as reflected in the latest year end financial statements of
the Borrower referred to in Section 3.04 hereof and changes thereto resulting
from the ordinary course of business. There exists no default and, after giving
effect to the transactions contemplated in this Agreement, there will exist no
default under the provisions of any instrument evidencing such Liabilities or of
any agreement relating thereto.
<PAGE> 17
SECTION 3.18 CONSENTS AND APPROVALS. No authorization, license,
consent, approval, or undertaking is required under any applicable law in
connection with the execution, delivery and performance by the Borrower of this
Agreement, the Notes, the Pledge Agreement or any of the other Loan Documents.
SECTION 3.19 PLACES OF BUSINESS. The Places of Business set forth in
EXHIBIT "A" attached hereto are true and correct and set forth, whenever
applicable, whether said Place of Business is owned or leased by the Borrower
and, if leased, the name and address of the lessor.
SECTION 3.20 PRIORITY OF SECURITY INTEREST. The pledge of and security
interest in the Collateral is a first priority security interest and there will
be no other security interests or other encumbrances upon the Collateral during
the term of the Loans.
SECTION 3.21 SUBSIDIARIES. As of the date of this Agreement, the
Borrower's Subsidiaries are identified on the attached EXHIBIT "C".
ARTICLE FOUR
COVENANTS OF THE BORROWER
SECTION 4.01 AFFIRMATIVE COVENANTS. The Borrower covenants, for so long
as any of the principal amount of or interest on the Notes is outstanding and
unpaid or any duty or obligation of the Borrower or the Bank hereunder or under
any of the other Obligations remains unpaid or unperformed, as follows:
ACCOUNTING: FINANCIAL STATEMENTS; ETC. The Borrower will
deliver or cause to be delivered to the Bank copies of each of the following:
(i) as soon as practicable and in any event within forty-five
(45) days after the end of each quarterly period during the term of this
Agreement, internally generated financial statements of the Borrower for the
period from the beginning of the current fiscal year to the end of such quarter,
in reasonable detail and certified by the Chief Financial Officer of the
Borrower;
(ii) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year, audited profit and loss statement,
reconciliation of surplus statement, and source and application of funds
statement of the Borrower for such year, and an audited balance sheet of the
Borrower as at the end of such year, setting forth in each case in comparative
form corresponding figures from the preceding annual audit, all in form and
scope acceptable to the Bank, reviewed by a certified public accountant
acceptable to the Bank, all in reasonable detail and certified to the Bank by
the Chief Financial Officer of the Borrower;
(iii) promptly upon the preparation thereof, copies of all
quarterly call reports submitted by the Subsidiaries to all appropriate federal
and/or state regulatory agencies;
(iv) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices, and reports as the Borrower
shall send to all stockholders and of all registration statements (with
exhibits) and all reports which the Borrower is or may be required to file with
the Securities and Exchange Commission or any governmental body or agency
succeeding to the functions of such Commission;
(v) promptly upon receipt thereof, a copy of each other report
submitted to the Borrower by independent accountants in connection with any
annual, interim or special audit made by them of the books of the Borrower or
any Subsidiary; and
<PAGE> 18
(vi) such other information as from time to time may be
reasonably required from time to time by the Bank.
INSPECTION. The Borrower and the Subsidiaries will permit the
Bank to visit and inspect any of their properties and places of business,
including their books and records (and to make extracts therefrom to the extent
reasonably related to credit-worthiness), and to discuss their affairs, finances
and accounts with their officers and employees as the case may be, all at such
reasonable times and as often as may reasonably be requested.
MAINTENANCE OF CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. The
Borrower shall at all times preserve and maintain in full force and effect its
respective existence, powers, rights, licenses, permits and franchises in the
jurisdiction of its incorporation; continue to conduct and operate its
businesses substantially as conducted and operated during the present and
preceding fiscal year; operate in substantial compliance with all applicable
laws, statutes, regulations, certificates of authority and orders in respect of
the conduct of its business; and qualify and remain qualified as a foreign
entity in each jurisdiction in which such qualification is necessary or
appropriate in view of their business and operations.
NOTICE OF DEFAULT. The Borrower shall immediately notify the
Bank in writing upon the happening, occurrence or existence of any Event of
Default or Default and shall provide the Bank with such written notice, a
detailed statement by a responsible officer of the Borrower of all relevant
facts and the action being taken or proposed to be taken by the Borrower with
respect thereto.
MAINTENANCE OF PROPERTIES. The Borrower shall maintain or
cause to be maintained in good repair, working order and condition all
properties used in its business including, but not limited to, any real property
and all improvements located thereon, and from time to time will make or cause
to be made all appropriate repairs, renewals, improvements and replacements
thereof so that the businesses carried on in connection therewith may be
properly conducted at all times. The Borrower will not do or permit any act or
thing which might materially impair the value or commit or permit any material
waste of its properties or any part thereof, or permit any unlawful occupation,
business or trade to be conducted on or from any of its properties. To the
extent the Borrower leases any of Places of Business, it shall maintain and keep
current at all times all leases for said Places of Business.
NOTICE OF SUIT; PROCEEDINGS; ADVERSE CHANGE. The Borrower
shall promptly give the Bank notice in writing (a) of all threatened or actual
actions or suits (at law or in equity) and of all threatened or actual
investigations or proceedings by or before any court, arbitrator or any
governmental department, commission, board, bureau, agency or other
instrumentality, state, federal or foreign, affecting the Borrower or its rights
or properties, (i) which involves potential liability in an amount in excess of
$2,500,000.00 or (ii) which the Borrower believes in good faith is likely to
materially and adversely affect the financial condition of the Borrower or to
impair the right or ability of the Borrower to carry on its businesses as now
conducted or to pay the Obligations or perform the duties under the Loan
Documents; (b) of any material adverse change in the condition (financial or
otherwise) of the Borrower or any of the Subsidiaries; (c) of any seizure or
levy upon any material part of their properties under any process or by a
receiver and (d) of any memorandum or understanding, cease and desist order or
similar action taken by any state or federal regulatory body against the
Borrower of any or its Subsidiaries.
INSURANCE. The Borrower shall timely procure and maintain and
comply with such insurance and policies of insurance (including without
limitation public liability, property damage and casualty business interruption)
as may be required by law and such other insurance, to such extent and against
such hazards and liabilities, as is customarily maintained by parties similarly
situated, and to furnish to the Bank upon its request evidence of said insurance
and further providing for 30 Days notice to the Bank prior to any material
amendment, expiration or cancellation thereof.
DEBTS AND TAXES AND LIABILITIES. The Borrower shall pay and
discharge (i) all of its respective indebtedness and obligations in accordance
with their terms and before they shall become in
<PAGE> 19
default, (ii) all taxes, assessments and governmental charges or levies imposed
upon any of them or upon their income and profits or against its properties,
prior to the date on which penalties attach thereto, and (iii) all lawful claims
which, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Borrower shall not be required to pay any such
indebtedness, obligation, tax, assessment, charge, levy or claim which is being
contested in good faith by appropriate and lawful proceedings diligently
prosecuted and for which adequate reserves (with respect to any material claims)
have been set aside on its books. The Borrower shall also set aside and/or pay
as and when due all monies required to be set aside and/or paid by any federal,
state or local statute or agency in regard to F.I.C.A., withholding, sales or
excise or other similar taxes.
NOTIFICATION OF CHANGE OF NAME OR BUSINESS LOCATION. The
Borrower shall notify the Bank of each change in the name of the Borrower and of
each change of the location of any place of business and the office where the
records of the Borrower are kept, and, in such case, shall execute such
documents as the Bank may reasonably request to reflect said change of name or
change of location, as the case may be; provided, however, the Principal Place
of Business of the Borrower and the office where the records of the Borrower are
kept may not be kept out of or removed from Montgomery County, Alabama without
the prior written consent of the Bank.
FURTHER ASSURANCES; ADDITIONAL COLLATERAL DOCUMENTS. The
Borrower will, at its expense, take all such other action as the Bank may from
time to time reasonably request for the purpose of further assuring to the Bank
the security for the Obligations provided for, or intended to be provided for,
in this Agreement and the other Loan Documents and to confirm the Obligations.
FINANCIAL COVENANTS. As at the end of each of the Borrower's
fiscal quarters, commencing with the fiscal quarter ending December 31, 1996,
the Borrower shall comply with the following financial covenants:
(i) The Borrower shall maintain a Primary Capital to Total
Assets Ratio of at least 6.50%, or shall maintain total risk-based capital of at
least 10.0%; and
(ii) The Borrower shall maintain a Return on Assets Ratio of
at least 0.95%; and
(iii) The Borrower shall maintain a Nonperforming Assets to
Net Loans Ratio of less than 1.50%.
Compliance with each of the financial covenants contained in this
Section 4.1(n) shall be calculated in the manner set forth in Section 1.02 of
this Agreement.
USE OF PROCEEDS. The proceeds of the Revolving Loan shall be
used for the repurchase of the Borrower's outstanding equity stock, future asset
acquisitions, or for any other lawful business purpose.
SECTION 4.02 NEGATIVE COVENANTS. The Borrower covenants, for so long as
any of the principal amount of or interest on the Notes is outstanding and
unpaid or any duty or obligation of the Borrower or the Bank hereunder or under
any of the other Obligations remains unpaid or unperformed, as follows:
SALE OF ASSETS. The Borrower will not sell, lease, assign,
transfer, convey or otherwise dispose of its assets or properties, tangible or
intangible, without prior written notice to the Bank other than the sale of
mortgages in the usual course of business or for the sale of investments
classified as available for sale or trading, or permit any of its Subsidiaries
to do the same; provided, however, in the event the Borrower or any of its
Subsidiaries propose to sell certain real estate equities which it or they now
or at any time during the term hereof own or acquire in connection with
conducting its or their respective business operations, the Bank shall not
unreasonably withhold approval with respect to the sale of any such real estate
equities, such prior notice shall not be required for assets having a book value
of less than $5,000,000 per transaction.
<PAGE> 20
ACQUISITION OR MERGERS. During the term of this Agreement, the
Borrower shall notify the Bank in writing of any Borrower acquisition, merger or
consolidation with any other Person, provided however, the Borrower shall not,
without the Bank's prior written consent, which consent shall not be
unreasonably withheld, become a party to a merger or consolidation with any
other Person in which the Borrower is not the surviving entity.
FISCAL YEAR. The Borrower will not change its fiscal year
ending December 31 without reasonable notice to the Bank.
CHANGES IN BUSINESS. The primary business of the Borrower will
not change from that conducted by it on the date of this Agreement without the
consent of the Bank.
OTHER AGREEMENTS. Borrower will not enter into any
arrangements, contractual or otherwise, which would materially and adversely
affect its duties or the rights of the Bank under the Loan Documents, or which
is inconsistent with or limits or abrogates the Loan Documents.
ADDITIONAL INDEBTEDNESS. The Borrower shall not create or
assume any liability for money borrowed or the equivalent in excess of the
aggregate amount of $20,000,000.00 during the term of this Agreement, except for
real estate assets pledged to the Federal Home Loan Bank Board of Atlanta in the
usual course of business, the indebtedness permitted by this Agreement,
indebtedness that is subordinated to the Obligations, indebtedness that results
from the sale of commercial paper or similar short term borrowings that arise in
the normal and ordinary course of business or indebtedness relating to any bank
note or deposit note program of any bank Subsidiary.
ARTICLE FIVE
CONDITIONS OF LENDING
The obligation of the Bank to lend hereunder and advance any monies
under the Notes and to make any Advance under Section 2.02 of this Agreement
from time to time are subject to the following conditions precedent:
SECTION 5.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in the Loan Documents are true and correct on and as of the
date hereof, and on the date of each Advance hereunder.
SECTION 5.02 NO DEFAULT. On the date hereof and on the date of each
Advance, the Borrower and each Subsidiary shall be in compliance with all the
terms and provisions set forth in the Loan Documents on its part to be observed
or performed, and no Event of Default or Default, shall have occurred and be
continuing at such time.
SECTION 5.03 LOAN DOCUMENTS. The Borrower shall have delivered or
caused to be delivered to the Bank all the Loan Documents, in form and substance
satisfactory to the Bank, as the Bank may request and all of the Loan Documents
are in full force and effect.
SECTION 5.04 SUPPORTING DOCUMENTS. On or prior to the date hereof, the
Bank shall have received the following supporting documents, all of which shall
be satisfactory in form and substance to the Bank:
(a) a certificate or certificates, dated as of the date hereof, of (i)
the Secretary or any Assistant Secretary of the Borrower certifying (A) that
attached thereto is a true and correct copy of certain resolutions adopted by
its Board of Directors authorizing the execution, delivery and performance of
the Loan Documents and the performance of the obligations of the Borrower and
the borrowings
<PAGE> 21
thereunder, which resolutions have not been altered or amended in any respect,
and remain in full force and effect at all times since their adoption; (B) that
attached thereto is a true and correct copy of the Certificate of Incorporation
of the Borrower, and that such Certificate of Incorporation has not been altered
or amended, and no other charter documents have been filed, since the date of
the filing of the last amendment thereto or other charter document as indicated
on the certificate of the Secretary of State of the State of Delaware or other
appropriate public official in any other state of incorporation attached
thereto; (C) that attached thereto is a true and correct copy of the Bylaws of
the Borrower and that such Bylaws are in full force and effect and no amendment
thereto is pending which would in any way affect the ability of the Borrower to
enter into and perform the Obligations contemplated hereby; and (D) the
incumbency and signatures of the officers of the Borrower signing the Loan
Documents and any report, certificate, letter or other instrument or document
furnished by the Borrower in connection therewith, and (ii) another authorized
officer of the Borrower certifying the incumbency and signature of the Secretary
or Assistant Secretary of the Borrower; and
(b) a certificate or certificates of Delaware Secretary of State or
other appropriate public official in any other state of incorporation, dated as
of a recent date, as to the good standing of the Borrower.
SECTION 5.05 LOANS PERMITTED BY APPLICABLE LAWS. The Loans from the
Bank to the Borrower on the terms and conditions herein provided (including the
use of the proceeds of the Loans by the Borrower) shall not violate any
applicable law or governmental regulation (including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System)
and shall not subject the Bank to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and the Bank shall have received such certificates or other evidence as it may
request to establish compliance with this condition.
SECTION 5.06 PROCEEDINGS. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in substance and form to the
Bank, and the Bank shall have received all such counterpart originals or
certified or other copies of such documents as the Bank may reasonably request.
ARTICLE SIX
EVENTS OF DEFAULT
SECTION 6.01 EVENTS OF DEFAULT. The following each and all are Events
of Default hereunder:
MONETARY DEFAULT. If the Borrower shall default in any payment
of the principal of or interest on the Loans when and as the same shall become
due and payable, whether on demand, at maturity, by acceleration or otherwise
and such default shall not be cured within fifteen (15) Days following written
notice thereof from the Bank to the Borrower; or
NON-MONETARY DEFAULT. If the Borrower or any Subsidiary shall
default in the performance of or compliance with any term or covenant contained
in one or more of the Loan Documents other than a term or covenant a default in
the performance of which or noncompliance with which is elsewhere specifically
dealt with under this Article Six and such default shall not be cured within
thirty (30) Days following written notice thereof from the Bank to the Borrower;
or
THIRD PARTY DEFAULT. If the Borrower shall default in the
performance of any material agreement with any Person other than the Bank and
such default shall not be cured within thirty (30) Days following written notice
thereof from the Bank to the Borrower; or
FALSE REPRESENTATION. If any representation or warranty made
in writing by or on behalf of
<PAGE> 22
the Borrower or any Subsidiary or in any other Loan Document shall prove to have
been false or incorrect in any material respect on the date as of which made or
reaffirmed; or
BANKRUPTCY OR INSOLVENCY. If the Borrower or any Subsidiary
shall admit in writing its inability, or be generally unable, to pay its debts
as they become due or shall make an assignment for the benefit of creditors,
file a petition in bankruptcy, petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for the Borrower or any
Subsidiary or a substantial part of its assets, or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or if there shall have been filed any such petition or
application, or any such proceeding shall have been commenced against the
Borrower or any Subsidiary, in which an order for relief is entered or which
remains undismissed for a period of thirty (30) days or more, or the Borrower or
any Subsidiary by any act or omission shall indicate its consent to, approval of
or acquiescence in any such petition, application, or proceeding or order for
relief or the appointment of a custodian, receiver or any trustee for the
Borrower or any Subsidiary or any substantial part of any of its properties, or
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) Days or more; or
DISSOLUTION. If any order, judgment, or decree is entered in
any proceedings against the Borrower or any Subsidiary decreeing the dissolution
of the Borrower or any Subsidiary and such order, judgment, or decree remains
unstayed and in effect for more than thirty (30) Days; or
FRAUDULENT CONVEYANCE. If the Borrower or any Subsidiary shall
have concealed, removed, or permitted to be concealed or removed, any part of
its properties, with intent to hinder, delay or defraud its creditors or any of
them, or made or suffered a transfer of any of its properties which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law, or shall
have made any transfer of its properties to or for the benefit of a creditor at
a time when other creditors similarly situated have not been paid, or shall have
suffered or permitted, while insolvent, any creditor to obtain a lien upon any
of its properties through legal proceedings or distraint which is not vacated
within thirty (30) days from the date thereof; or
PLEDGE AGREEMENT. If the Borrower shall (i) fail to fulfill or
comply in any material respect with the Pledge Agreement or (ii) default under
the Pledge Agreement and such default shall not be cured within thirty (30) Days
following written notice thereof from the Bank to the Borrower; or
AFFILIATE OR SUBSIDIARY DEFAULT. If the Borrower, any
Affiliate or any Subsidiary shall default under any other material agreement or
obligation between the Borrower, any Affiliate or any Subsidiary and the Bank
and such default shall not be cured within thirty (30) Days following written
notice thereof from the Bank to the Borrower.
<PAGE> 23
ARTICLE SEVEN
RIGHTS UPON DEFAULT
Upon the occurrence and its continuing of any Event of Default, the
Bank shall have and may exercise any or all of the rights set forth herein;
provided, however, the Bank shall be under no duty or obligation to do so:
SECTION 7.01 ACCELERATION. To declare the indebtedness evidenced by the
Notes and all other Obligations to be forthwith due and payable, whereupon the
Notes and all other Obligations shall become forthwith due and payable, both as
to principal and interest, without presentment, demand, protest or any other
notice or grace period of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes or in such other Obligations to the
contrary notwithstanding and, upon such acceleration, the unpaid principal
balance and accrued interest upon the Notes shall from and after such date of
acceleration bear interest at the Default Rate.
SECTION 7.02 RIGHT OF SETOFF. To exercise its right of setoff as
permitted under Section 2.07.
SECTION 7.03 OTHER RIGHTS. To exercise such other rights as may be
permitted under any of the Loan Documents or applicable law.
SECTION 7.04 UNIFORM COMMERCIAL CODE. To exercise from time to time any
and all rights and remedies of a secured creditor under the UCC as in effect
from time to time in the State of Florida and any and all rights and remedies
available to it under any other applicable law.
ARTICLE EIGHT
MISCELLANEOUS
SECTION 8.01 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of the Bank in exercising any right, power or remedy hereunder, or under
the Notes or the other Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder or thereunder. The remedies herein and therein provided are
cumulative and not exclusive of any remedies provided by law or in equity.
SECTION 8.02 AMENDMENTS; ETC. No amendment, modification, termination
or waiver of any provision of this Agreement, the Notes or the other Loan
Documents, nor consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 8.03 ADDRESSES FOR NOTICES; ETC. All notices, requests, demands
and other communications provided for hereunder shall be in writing (including
telecopy, telex or telegraphic communications) and shall be sufficient if
mailed, telecopied, telexed or telegraphed or delivered to the applicable party
at the address indicated below:
If to the Borrower: The Colonial BancGroup, Inc.
250 Commerce Street, 2nd Floor
Montgomery, Alabama 36104
Attention: Mr. W. Flake Oakley,
Chief Financial Officer,
Secretary and Treasurer
<PAGE> 24
(334) 240-6035 telephone
(334) 240-6019 telecopy
If to the Bank: SunTrust Bank, Central Florida, National Association
200 South Orange Avenue
Orlando, Florida 32801
Attention: Mr. Michael D. Reynolds, Vice President
Mail Code 0-2068
(407) 237-4296 telephone
(407) 237-1735 telecopy
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to the delivery with the
terms of this Section. Except as otherwise expressly provided in this Agreement,
all such notices, requests, demands and other communications shall, when mailed,
telecopied, telexed or telegraphed, be effective when deposited in the mails
(postage paid), telecopied with an affirmative confirmation of transmission,
sent over a telex owned or operated by a party hereto with an answerback
response set forth on the sender's copy of the document or delivered to the
Borrower addressed as aforesaid or delivered to the other party and at the
address set forth above.
SECTION 8.04 APPLICABLE LAW. This Agreement, and each of the Loan
Documents and transactions contemplated herein (unless specifically stipulated
to the contrary in such document) shall be governed by and interpreted in
accordance with the laws of the State of Florida.
SECTION 8.05 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants and agreements contained herein or made
in writing by the Borrower in connection herewith shall survive the execution
and delivery of this Agreement, the Notes and the other Loan Documents and be
true and correct during the term of the Loans.
SECTION 8.06 TIME OF THE ESSENCE. Time is of the essence of this
Agreement, the Notes and the other Loan Documents.
SECTION 8.07 HEADINGS. The headings in this Agreement are intended to
be for convenience of reference only, and shall not define or limit the scope,
extent or intent or otherwise affect the meaning of any portion hereof.
SECTION 8.08 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement, the Notes or the other Loan Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect, the same
shall not affect any other provision of this Agreement, the Notes or the other
Loan Documents, but this Agreement, the Notes and the other Loan Documents shall
be construed as if such invalid or illegal or unenforceable provision had never
been contained therein. Provided, however, in the event said matter would
adversely affect the rights of the Bank under any or all of the Loan Documents,
the same shall be an Event of Default.
SECTION 8.09 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
SECTION 8.10 CONFLICT. In the event any conflict arises between the
terms of this Agreement and the terms of any other Loan Document, the Bank shall
have the option of selecting which conditions shall govern the loan relationship
evidenced by this Agreement and, if the Bank does not so indicate, the terms of
this Agreement shall govern in all instances of such conflict.
SECTION 8.11 TERM. The term of this Agreement shall be for such period
of time until the Loans and the Notes have been repaid in full, and all of the
other Obligations have been paid to the Bank
<PAGE> 25
in full.
SECTION 8.12 EXPENSES. The Borrower agrees to save the Bank harmless
against liability for the payment of, all out-of-pocket expenses arising in
connection with this transaction, all taxes, together in each case with interest
and penalties, if any, which may be payable in respect of the execution,
delivery and performance of this Agreement or the execution, delivery, and
performance of the Notes issued under or pursuant to this Agreement (excepting
only any tax on or measured by net income of the Bank determined substantially
in the same manner, other than the rate of tax, as net income is presently
determined under the IRS Code), the reasonable legal fees and expenses (whether
incurred at trial, in any bankruptcy or appellate proceeding or otherwise) of
counsel to the Bank in connection with enforcement of this Agreement following
an Event of Default, the Notes, the Security Agreement or any of the other Loan
Documents. The obligations of the Borrower hereunder shall survive the payment
of the Notes.
SECTION 8.13 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement contained by or on behalf of either of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not; provided, however, this clause shall
not by itself authorize any delegation of duties by the Borrower or any other
assignment which may be prohibited by the terms and conditions of this
Agreement.
SECTION 8.14 NO THIRD PARTY BENEFICIARIES. The parties intend that this
Agreement is solely for their benefit and no person not a party hereto shall
have any rights or privileges under this Agreement whatsoever either as the
third party beneficiary or otherwise.
SECTION 8.15 VENUE. Venue for any proceeding hereunder shall be when
the Borrower irrevocably and unconditionally (a) agrees that any suit, action,
or other legal proceeding arising out of or relating to this Agreement may be
brought, at the option of the Bank, in a court of record, of competent
jurisdiction in the State of Florida in Orange County; (b) consents to the
jurisdiction of each such court in any such suit, action, or proceeding; (c)
waives any objection which it may have to the laying of venue of any suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on Borrower by mail, addressed and mailed as
provided herein or in such other manner as may be provided under applicable laws
or court rules in said State.
SECTION 8.16 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT EITHER OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO
THIS AGREEMENT. FURTHER, THE BANK HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE BANK, NOR THE BANK'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT
OF THE BANK, NOR THE BANK'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR
MODIFY THIS PROVISION.
SECTION 8.17 ENTIRE AGREEMENT. Except as otherwise expressly provided,
this Agreement and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed, sealed and delivered, as applicable, by their duly
authorized officers on the day and year first above written.
<PAGE> 26
BORROWER:
THE COLONIAL BANCGROUP, INC.,
a Delaware corporation
By:
------------------------------------------
Robert E. Lowder, President
(CORPORATE SEAL)
BANK:
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION F/K/A SUN BANK, NATIONAL
ASSOCIATION, a national banking association
By:
------------------------------------------
Michael D. Reynolds, Vice President
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I HEREBY CERTIFY THAT on this ____ day of December, 1996, before me, an
officer authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, personally appeared Robert E. Lowder, as President of THE
COLONIAL BANCGROUP, INC., a Delaware corporation, to me known to be the person
who executed the attached Loan Agreement, dated December ____, 1996, on behalf
of THE COLONIAL BANCGROUP, INC., a Delaware corporation, and acknowledged before
me that he executed the same.
---------------------------------------------
Print Name:
----------------------------------
Notary Public
Serial Number
(NOTARIAL SEAL) My Commission Expires:
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I HEREBY CERTIFY THAT on this ____ day of December, 1996, before me, an
officer authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, personally appeared Michael D. Reynolds, as Vice President of
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, to me known to be the
person who executed the attached Loan Agreement, dated December ____, 1996, on
behalf of SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, and acknowledged
before me that he executed the same.
<PAGE> 27
---------------------------------------------
Print Name:
----------------------------------
Notary Public
Serial Number
(NOTARIAL SEAL) My Commission Expires:
<PAGE> 28
EXHIBIT "A"
List of Places of Business
250 Commerce Street, 2nd Floor
Montgomery, Alabama 36104
One Commerce Street
Montgomery, Alabama 36104
<PAGE> 29
EXHIBIT "B"
List of Representatives of Borrower
1. W. Flake Oakley
2. Young J. Boozer, III
3. Sheila Moody
4. Wayne Lambert
5. Walter Hargrove
or such other representatives as may be designated in writing by any of
the above.
<PAGE> 30
EXHIBIT "C"
List of Subsidiaries
COLONIAL BANK
COLONIAL BANCGROUP BUILDING CORPORATION
COLONIAL BANK, AN ALABAMA BANKING ASSOCIATION
COLONIAL BANK, A FLORIDA BANKING ASSOCIATION
COLONIAL BANK, A GEORGIA BANKING ASSOCIATION
COLONIAL BANK, A TENNESSEE BANKING ASSOCIATION
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF THE COLONIAL BANCGROUP, INC.
COLONIAL BANK, AN ALABAMA BANKING CORPORATION.
COLONIAL BANK, A TENNESSEE BANK.
COLONIAL BANK, LAWRENCEVILLE, GEORGIA, A GEORGIA STATE BANK
COLONIAL BANK, ORLANDO, FLORIDA, A FLORIDA BANK
COLONIAL BANK OF SOUTH FLORIDA, A FLORIDA BANK
COLONIAL BANK, FSB, A FEDERAL SAVINGS BANK, EUSTIS, FLORIDA
THE COLONIAL BANCGROUP BUILDING CORPORATION, AN ALABAMA
CORPORATION.
<PAGE> 1
EXHIBIT 23(A)
CONSENTS OF COOPERS & LYBRAND, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE INCORPORATION BY REFERENCE IN THIS REGISTRATION STATEMENT ON
FORM S-4 OF OUR REPORT DATED FEBRUARY 23, 1996, ON OUR AUDITS OF THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COLONIAL BANCGROUP, INC., AS OF
DECEMBER 31, 1995 AND 1994 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1995 AND OUR REPORT DATED FEBRUARY 23,1996, EXCEPT NOTES 1 AND 2
AS TO WHICH THE DATE IS JULY 3, 1996, ON OUR AUDITS OF THE SUPPLEMENTAL
CONSOLIDATED FINANCIAL STATEMENTS OF THE COLONIAL BANCGROUP INC., AS OF
DECEMBER 31, 1995 AND 1994, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1995. WE ALSO CONSENT TO THE REFERENCE TO OUR FIRM UNDER THE
CAPTION "EXPERTS."
/S/ COOPERS & LYBRAND L.L.P.
MONTGOMERY, ALABAMA
JANUARY 22, 1997
CONSENT OF TAX ACCOUNTANTS
We consent to the 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 of the registration statement.
/S/ COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
January 22, 1997
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
CONSENT OF COUNSEL
THE COLONIAL BANCGROUP, INC.
WE HEREBY CONSENT TO USE IN THIS FORM S-4 REGISTRATION STATEMENT OF
THE COLONIAL BANCGROUP, INC., OF OUR NAME IN THE PROSPECTUS, WHICH IS A PART OF
SUCH REGISTRATION STATEMENT, UNDER THE HEADING "LEGAL MATTERS," TO THE
SUMMARIZATION OF OUR OPINION REFERENCED THEREIN, AND TO THE INCLUSION OF OUR
OPINION AT EXHIBIT 5 OF THE REGISTRATION STATEMENT.
/S/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
JANUARY 22, 1997
<PAGE> 1
EXHIBIT 23(C)
CONSENT OF HACKER, JOHNSON, COHEN & GRIEB
ACCOUNTANTS' CONSENT
The Board of Directors
Colonial BancGroup, and
The Board of Directors
Fort Brooke Bancorporation:
We consent to the use of our report dated February 9, 1996, relating to the
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the years in the three-year period ended December 31, 1995 of Fort Brooke
Bank and subsidiary and to the use of our name under the caption of "Experts",
both in the Form S-4 Joint Proxy Statement and Prospectus of Colonial BancGroup
and Fort Brooke Bancorporation.
/S/ HACKER, JOHNSON, COHEN & GRIEB
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
January 23, 1997
<PAGE> 1
EXHIBIT 23(D)
CONSENT OF THE CARSON MEDLIN COMPANY
CONSENT
We hereby consent to the use in this Registration Statement on Form S-4 of our
letter to the Board of Directors of Fort Brooke Bancorporation included as
Appendix B to the Proxy Statement/Prospectus that is part of the Registration
Statement, and to the references to such letter and to our firm in such Proxy
Statement/Prospectus. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the rules and regulations of the Securities
and Exchange Commission thereunder.
/s/ THE CARSON MEDLIN COMPANY
Tampa, Florida
January 7, 1997
<PAGE> 1
EXHIBIT 24
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 Oakley, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and re-substitution, 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"), during the term of this power
of attorney; 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; 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, 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 supersedes and revokes any previous power of
attorney of the Registrant relating to the forgoing matters and shall terminate
at the conclusion of the regular board meeting of the Registrant in January
1998.
Done this 15th day of January, 1997, in the City of Montgomery,
Alabama.
/s/ Robert E. Lowder Chairman of the Board,
- ------------------------------- President and Chief
Robert E. Lowder Executive Officer
/s/ Young J. Boozer Director
- -------------------------------
Young J. Boozer
/s/ William Britton Director
- -------------------------------
William Britton
/s/ Jerry J. Chesser Director
- -------------------------------
Jerry J. Chesser
/s/ Augustus K. Clements, III Director
- -------------------------------
Augustus K. Clements, III
<PAGE> 2
/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/ Donald J. Prewitt Director
- -------------------------------
Donald J. Prewitt
/s/ Jack H. Rainer Director
- -------------------------------
Jack H. Rainer
/s/ Frances E. Roper Director
- -------------------------------
Frances E. Roper
/s/ Ed V. Welch Director
- -------------------------------
Ed V. Welch
2
<PAGE> 1
EXHIBIT 99(A)
FORM OF PROXY OF FORT BROOKE BANCORPORATION
