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Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-39277
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[UNITED AMERICAN BANK UNITED AMERICAN Corporate Office
(LETTERHEAD)] HOLDING CORPORATION (407) 648-0546
JAMES L. HEWITT
Chairman, President and CEO
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DECEMBER 30, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
(the "Special Meeting") of United American Holding Corporation ("United
American"), which will be held on February 2, 1998, at 10:00 a.m. local time.
The Special Meeting will be held at the main office of United American, located
at 105 West Colonial Drive, Orlando, Florida.
At the Special Meeting, shareholders of United American will be asked to
consider and vote on approval of an Agreement and Plan of Merger, dated as of
September 8, 1997, between United American and The Colonial BancGroup, Inc.
("BancGroup"), pursuant to which United American would be merged (the "Merger")
with BancGroup. In the Merger, United American shareholders will receive whole
shares of BancGroup Common Stock in exchange for shares of United American
Common Stock held by them. Each share of United American Common Stock
outstanding at the time of the effectiveness of the Merger will be converted
into the right to receive shares of BancGroup Common Stock (as calculated in
accordance with the terms of the Agreement). Cash will be paid for any
fractional shares. Please see the attached Proxy Statement and Prospectus for a
complete description of the terms of the Merger and the formula for converting
shares of United American Common Stock into shares of BancGroup Common Stock in
the Merger.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE
MERGER AS BEING IN THE BEST INTEREST OF UNITED AMERICAN SHAREHOLDERS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE AGREEMENT.
Additional information regarding the Agreement, the Merger, United American
and BancGroup is set forth in the attached Proxy Statement, which also serves as
the Prospectus for the shares of BancGroup Common Stock to be issued in
connection with the Merger. Please read these materials and carefully consider
the information contained in them.
The affirmative vote of the holders of a majority of the outstanding shares
of United American Common Stock is required to approve the Agreement.
Accordingly, your vote is important no matter how large or small your holdings
may be. Whether or not you plan to attend the Special Meeting, you are urged to
complete, sign and promptly return the enclosed Proxy Card to assure that your
shares will be voted at the Special Meeting. If you attend the Special Meeting,
you may vote in person if you wish and your proxy will not be used.
Sincerely,
/s/ JAMES L. HEWITT
James L. Hewitt
Chairman, President and Chief
Executive Officer
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UNITED AMERICAN HOLDING CORPORATION
105 WEST COLONIAL DRIVE
ORLANDO, FLORIDA 32801
(407) 648-0546
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 2, 1998, AT 10:00 A.M.
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NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of United American Holding Corporation ("United American") will be
held at the main office of United American, located at 105 West Colonial Drive,
Orlando, Florida, on February 2, 1998, at 10:00 a.m., local time, for the
following purposes:
1. Merger. To consider and vote upon the proposed merger (the
"Merger") of United American with and into The Colonial BancGroup, Inc.
("BancGroup"), in accordance with an Agreement and Plan of Merger, dated as
of September 8, 1997, between United American and BancGroup (the
"Agreement"). BancGroup will be the surviving corporation in the Merger.
Each share of common stock of United American outstanding at the time of
the Merger will be converted into the right to receive shares of BancGroup
Common Stock (as calculated in accordance with the terms of the Agreement),
with cash paid in lieu of fractional shares at the market value of such
fractional shares, as described more fully in the accompanying Proxy
Statement and Prospectus. The Agreement is attached to the Proxy Statement
and Prospectus as Appendix A.
2. Other Matters. To transact such other business as may properly
come before the Special Meeting or any adjournments or postponements
thereof.
The Board of Directors of United American has fixed the close of business
on December 23, 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 United American 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. United American shareholders are entitled
to assert dissenters' rights pursuant to the Florida Business Corporation Act. A
copy of the dissenters' rights provisions is attached to the enclosed Proxy
Statement and Prospectus as Appendix B.
You are cordially invited to attend the Special Meeting, but whether or not
you plan to attend, please complete and sign the enclosed form of proxy and mail
it promptly in the enclosed envelope. The proxy may be revoked at any time by
filing a written revocation with the Secretary of United American, by executing
a later dated proxy and delivering it to the Secretary of United American at or
prior to the Special Meeting, or by attending the Special Meeting and voting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JAMES L. HEWITT
James L. Hewitt
Chairman, President and Chief
Executive Officer
December 30, 1997
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PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
UNITED AMERICAN HOLDING CORPORATION
TO BE HELD ON FEBRUARY 2, 1998
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of United American Holding Corporation, a Florida
corporation ("United American"), with and into The Colonial BancGroup, Inc., a
Delaware corporation ("BancGroup"). This Prospectus is being furnished to the
shareholders of United American in connection with the solicitation of proxies
by the Board of Directors of United American for use at a special meeting of the
shareholders of United American to be held on February 2, 1998, at 10:00 a.m.,
local time, at the main office of United American, located at 105 West Colonial
Drive, Orlando, Florida (the "Special Meeting"), and any adjournments or
postponements thereof. At the Special Meeting, shareholders of United American
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 September 8, 1997 by and between BancGroup and
United American (the "Agreement"). The Agreement provides that, subject to the
approval of the Agreement by the shareholders of United American 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, United
American will be merged with and into BancGroup, and BancGroup will be the
surviving corporation. Each issued and outstanding share of common stock, par
value $.01 per share, of United American (the "United American Common Stock"),
shall be converted into a number of shares of the common stock, par value $2.50
per share, of BancGroup (the "BancGroup Common Stock") equal to $36.50 divided
by the Market Value. The Market Value will equal the average of the closing
prices of BancGroup Common Stock for the ten trading days ending on the trading
day that is five calendar days immediately preceding the Effective Date of the
Merger. However, the Market Value will not be less than $23.80 nor more than
$32.20. Assuming 1,779,600 shares of United American Common Stock outstanding as
of the Effective Date, the maximum number of shares of BancGroup Common Stock
that may be issued in the Merger will be 2,729,218 (based upon a minimum Market
Value of $23.80 and a resulting exchange ratio of 1.534 shares of BancGroup
Common Stock per share of United American Common Stock), and the minimum number
of shares of BancGroup Common Stock that may be issued in the Merger will be
2,017,248 (based upon a maximum Market Value of $32.20 and a resulting exchange
ratio of 1.1335 shares of BancGroup Common Stock per share of United American
Common Stock.) See "The Merger -- Conversion of United American Common Stock."
The shares of BancGroup Common Stock are listed on the New York Stock Exchange
("NYSE"). The closing price per share of the BancGroup Common Stock on the NYSE
on December 26, 1997 was $34.5625.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least a majority of the outstanding shares of United
American Common Stock.
BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), to register the shares of the
BancGroup Common Stock to be issued in connection with the Merger as well as to
register shares of BancGroup Common Stock to be issued upon the exercise of
stock options relating to United American Common Stock assumed by BancGroup as
part of the Merger. This document constitutes a Proxy Statement of United
American in connection with the solicitation of proxies by United American for
use at the Special Meeting, and any adjournments or postponements thereof, and a
Prospectus of BancGroup with respect to the BancGroup Common Stock to be issued
in the Merger and with respect to the BancGroup Common Stock to be issued upon
the exercise of stock options assumed in the Merger. This Prospectus and
accompanying form of proxy are first being mailed to shareholders of United
American on or about the date set forth below.
THE BOARD OF DIRECTORS OF UNITED AMERICAN UNANIMOUSLY RECOMMENDS
APPROVAL OF THE AGREEMENT.
---------------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE SHARES OF BANCGROUP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
The principal office and mailing address of United American are 105 West
Colonial Drive, Orlando, Florida 32801 (telephone (407)648-0546), and the
principal office and mailing address of BancGroup are Colonial Financial Center,
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101 (telephone
334-240-5000).
THE DATE OF THIS PROSPECTUS IS DECEMBER 29, 1997.
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AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by
BancGroup, including proxy and information statements, can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at certain
regional offices: 7 World Trade Center, 13th Floor, New York, New York 10048;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; 1801
California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as BancGroup, that file electronically with the Commission.
The BancGroup Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under the
Securities Act to register the shares of BancGroup Common Stock being issued in
connection with the Merger. This Prospectus omits certain information contained
in the Registration Statement and exhibits thereto. Such Registration Statement,
including the exhibits thereto, can be inspected at the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such Registration Statement can be obtained at prescribed rates from the
Commission at that address.
The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning
United American and its subsidiary has been furnished by United American.
This Prospectus contains certain forward-looking statements with respect to
the financial condition, results of operations, and business of BancGroup
following the consummation of the Merger and the proposed acquisition of other
banking institutions (the "Other Pending Acquisitions"), including statements
relating to the expected impact of the Merger and the Other Pending Acquisitions
on BancGroup's financial performance. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among other things, the following possibilities: (i) expected cost savings from
the Merger and the Other Pending Acquisitions, if any or all of such
transactions are consummated, cannot be fully realized; (ii) deposit attrition,
customer loss, or revenue loss following the Merger and the Other Pending
Acquisitions is greater than expected; (iii) competitive pressure in the banking
industry increases significantly; (iv) costs or difficulties related to the
integration of the businesses of BancGroup and the institutions to be acquired
are greater than expected; (v) changes in the interest rate environment reduce
margins; (vi) general economic conditions, either nationally or regionally, are
less favorable than expected, resulting in, among other things, a deterioration
in credit quality; (vii) changes occur in the regulatory environment; (viii)
changed occur in business conditions and the rate of inflation; and (ix) changes
occur in the securities markets. Forward-looking earnings estimates (if any)
included in this Prospectus have not been examined or compiled by the
independent public accountants of BancGroup and United American, nor have such
accountants applied any procedures thereto. Accordingly, such accountants do not
express an opinion or any other form of assurance on them. When used in this
Prospectus, the words "believes," "estimates," "plans," "expects," "should,"
"may," "might," "outlook," and "anticipates," and similar expressions as they
relate to BancGroup (including its subsidiaries), or its management are intended
to identify forward-looking statements. Further information on other factors
that could affect the financial results of BancGroup after the Merger and the
Other Pending Acquisitions is included in the filings with the Commission
incorporated by reference herein.
i
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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 UNITED
AMERICAN. 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 UNITED AMERICAN 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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DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS OF BANCGROUP BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE, WITHOUT CHARGE, UPON REQUEST FROM THE PERSONS SPECIFIED BELOW.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
RECEIVED BY BANCGROUP NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL
MEETING.
The following documents filed by BancGroup with the Commission are
hereby incorporated by reference into this Prospectus:
(1) BancGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) BancGroup's Report on Form 8-K dated January 3, 1997;
(4) BancGroup's Report on Form 8-K dated January 20, 1997;
(5) BancGroup's Report on Form 8-K dated March 10, 1997;
(6) BancGroup's Report on Form 8-K dated April 15, 1997;
(7) BancGroup's Report on Form 8-K dated June 11, 1997;
(8) BancGroup's Report on Form 8-K dated June 24, 1997;
(9) BancGroup's Report on Form 8-K/A dated August 13, 1997 (replacing
a Form 8-K filed on August 12, 1997);
(10) BancGroup's Report on Form 8-K dated October 30, 1997;
(11) BancGroup's Report on Form 8-K dated November 17, 1997;
(12) The description of the current management and Board of Directors
contained in the Proxy Statement distributed pursuant to Section 14(a) of
the Exchange Act for BancGroup's Annual Meeting of shareholders held on
April 16, 1997; and
(13) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting, or, in the case of the exercise of stock options that are being
assumed by BancGroup, prior to the exercise of such options, shall be deemed
incorporated by reference in this Prospectus and made a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed incorporated herein by reference will be deemed to be
modified or superseded for the purpose of this Prospectus to the extent that a
statement contained herein or in another subsequently filed document which also
is, or is deemed to be, incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
BancGroup has entered into the Agreement with United American 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).
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TABLE OF CONTENTS
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SUMMARY..................................................... 1
THE SPECIAL MEETING......................................... 11
General................................................... 11
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 11
Solicitation, Voting and Revocation of Proxies............ 11
Effect of Merger on Outstanding BancGroup Common Stock.... 12
THE MERGER.................................................. 13
General................................................... 13
Background of the Merger.................................. 13
United American's Board of Directors' Reasons for
Approving the Merger................................... 14
Recommendation of the Board of Directors of United
American............................................... 15
BancGroup's Reasons for the Merger........................ 15
Related Transactions -- Stock Option...................... 15
Interests of Certain Persons in the Merger................ 16
Conversion of United American Common Stock................ 17
Surrender of United American Common Stock Certificates.... 18
Certain Federal Income Tax Consequences................... 18
Other Possible Consequences............................... 20
Conditions to Consummation of the Merger.................. 20
Amendment or Termination of Agreement..................... 21
Regulatory Approvals...................................... 21
Conduct of Business Pending the Merger.................... 23
Commitments with Respect to Other Offers.................. 24
Indemnification........................................... 25
Rights of Dissenting Shareholders......................... 25
Resale of BancGroup Common Stock Issued in the Merger..... 27
Accounting Treatment...................................... 27
NYSE Reporting of BancGroup Common Stock Issued in the
Merger................................................. 28
Treatment of United American Options...................... 28
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 31
BancGroup................................................. 31
United American........................................... 32
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 32
BancGroup Common Stock.................................... 33
Preference Stock.......................................... 33
1986 Debentures........................................... 33
Other Indebtedness........................................ 34
Changes in Control........................................ 34
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 37
Director Elections........................................ 37
Removal of Directors...................................... 37
Voting.................................................... 37
Preemptive Rights......................................... 37
Directors' Liability...................................... 37
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Indemnification........................................... 38
Special Meetings of Shareholders; Action Without a
Meeting................................................ 39
Mergers, Share Exchanges and Sales of Assets.............. 39
Amendment of Certificate of Incorporation and Bylaws...... 40
Rights of Dissenting Stockholders......................... 40
Preferred Stock........................................... 40
Effect of the Merger on United American Shareholders...... 41
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES............... 42
Condensed Pro Forma Statements of Condition (Unaudited)... 42
Condensed Pro Forma Statements of Income (Unaudited)...... 47
Selected Financial and Operating Information.............. 54
UNITED AMERICAN HOLDING CORPORATION......................... 57
Selected Financial Data................................... 57
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Nine Months
Ended September 30, 1997 and 1996, the for the Fiscal
Years Ended December 31, 1996, 1995 and 1994........... 58
BUSINESS OF BANCGROUP....................................... 75
General................................................... 75
Recently Completed and Other Proposed Business
Combinations........................................... 75
Year 2000 Compliance...................................... 75
Voting Securities and Principal Stockholders.............. 76
Security Ownership of Management.......................... 77
Management Information.................................... 78
BUSINESS OF UNITED AMERICAN................................. 79
General................................................... 79
Deposit Activities........................................ 79
Lending Activities........................................ 79
Investments............................................... 80
Employees................................................. 80
Properties................................................ 80
Legal Proceedings......................................... 81
Principal Holders of Common Stock......................... 82
ADJOURNMENT OF SPECIAL MEETING.............................. 82
OTHER MATTERS............................................... 83
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS...... 83
LEGAL MATTERS............................................... 83
EXPERTS..................................................... 83
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Sections 607.1301, 607.1302 and 607.1320 of
the Florida Business Corporation Act Regarding Dissenter's
Rights.................................................... B-1
APPENDIX C -- Stock Option Agreement........................ C-1
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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 United American are urged to
read this Prospectus, including the Appendices, in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of United American with and into
BancGroup.
THE SPECIAL MEETING
This Prospectus is being furnished to the holders of United American Common
Stock in connection with the solicitation by the United American Board of
Directors of proxies for use at the Special Meeting and at any and all
adjournments and postponements thereof at which United American shareholders
will be asked to vote upon (i) a proposal to approve the Agreement; and (ii)
such other business as may properly come before the meeting. The Special Meeting
will be held at the main office of United American, located at 105 West Colonial
Drive, Orlando, Florida on Monday, February 2, 1998, at 10:00 a.m., local time,
for the purpose of considering and voting upon the Merger and the Agreement.
Only holders of record of United American Common Stock at the close of business
on Tuesday, December 23, 1997 (the "Record Date") are entitled to the notice of
and to vote at the Special Meeting. As of the Record Date, 1,779,600 shares of
United American Common Stock were issued and outstanding. See "The Special
Meeting."
THE COMPANIES
BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974 and has operated under its current name and management since
1981. BancGroup operates a wholly owned commercial banking subsidiary, Colonial
Bank, in the states of Alabama, Florida, Georgia and Tennessee. Colonial Bank
conducts a full service commercial banking business through 119 branches in
Alabama, five branches in Tennessee, 14 branches in Georgia and 56 branches in
Florida. BancGroup has also entered into agreements to acquire four additional
banks. Colonial Mortgage Company, a subsidiary of the Colonial Bank in Alabama,
is a mortgage banking company which services approximately $12.5 billion in
residential loans and which originates residential mortgages in 37 states
through four divisional offices. At September 30, 1997, BancGroup had
consolidated total assets of $6.6 billion and consolidated stockholders' equity
of $472.4 million. Since September 30, 1997, BancGroup has acquired one bank
with aggregate assets of $65.0 million and aggregate stockholders' equity of
$6.3 million. This acquisition is included in the pro forma statements included
herein. See "Business of BancGroup."
United American. United American is a bank holding company within the
meaning of the BHCA and was incorporated on September 12, 1988. United American
owns all of the outstanding shares of United American Bank of Central Florida, a
Florida banking corporation (the "Bank"), which is headquartered in Orlando,
Florida. Currently, the Bank operates nine banking offices in Orange, Seminole,
and Osceola Counties, Florida. At September 30, 1997, United American had total
consolidated assets of approximately $260.8 million, total consolidated deposits
of approximately $227.5 million, and total consolidated shareholders' equity of
approximately $21.5 million. See "Business of United American."
THE MERGER
The Agreement provides for the Merger of United American 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
United American Common Stock (except shares as to which dissenters' rights are
perfected) shall be converted by operation of law and without any action by any
holder thereof into shares of BancGroup Common Stock. The number of shares of
BancGroup Common Stock into which each
1
<PAGE> 10
outstanding share of United American Common Stock shall be converted on the
Effective Date shall be equal to $36.50 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 ten trading days ending on the trading day
five calendar days immediately preceding the Effective Date, provided that the
Market Value shall not be less than $23.80 nor more than $32.20, regardless of
the actual Market Value as calculated. Accordingly, assuming 1,779,600 shares of
United American Common Stock are outstanding on the Effective Date, the maximum
number of shares of BancGroup Common Stock to be issued in the Merger shall be
2,729,218 (based upon a minimum Market Value of $23.80), and the minimum number
of shares of BancGroup Common Stock to be issued in the Merger shall be
2,017,248 (based upon a maximum Market Value of $32.20). The number of shares of
BancGroup Common Stock to be issued in the Merger will increase proportionally
with each share of United American Common Stock issued pursuant to the exercise,
before the Effective Date, of certain options to acquire United American Common
Stock.
The closing sales price on the NYSE of the BancGroup Common Stock on
December 26, 1997 was $34.5625 per share, which was above the maximum Market
Value of $32.20. Accordingly, had the Effective Date occurred on December 26,
1997, United American shareholders would have received 1.1335 shares of
BancGroup Common Stock for each share of United American Common Stock.
Shareholders are advised to obtain current market quotations for BancGroup
Common Stock. The market price of BancGroup Common Stock at the Effective Date,
or on the date on which certificates representing such shares are received by
United American shareholders, may be higher or lower than the market price of
BancGroup Common Stock as of the Record Date or at the time of the Special
Meeting.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. Each shareholder of United American otherwise entitled to
receive a fractional share of BancGroup Common Stock will receive instead a cash
payment (without interest) equal to such fractional share multiplied by the
Market Value.
As of the date of this Prospectus, United American had granted options (the
"United American Options") which entitle the holders thereof to acquire up to
190,500 shares of United American Common Stock. Subject to terms of the United
American stock option plan under which such options were issued, the Agreement
provides that, no later than five days prior to the Effective Date, the holders
of United American Options that have vested for such holders may provide written
notice to United American (in form and substance reasonably satisfactory to
BancGroup) that they wish to surrender their United American Options to
BancGroup, effective at the Effective Date, and, in lieu of having their United
American Options being assumed by BancGroup as detailed in the immediately
following paragraph, to receive an amount of BancGroup Common Stock in exchange
therefor equal to the difference between the total value of the shares of
BancGroup Common Stock to be issued pursuant to such United American Options
(based upon the number of shares of BancGroup Common Stock to be issued pursuant
to the United American Options multiplied by the Market Value) less the
aggregate exercise price of such United American Options at the Effective Date,
divided by the Market Value (the "Cashless Exchange"). No fractions of shares
shall be issued and fractions shall be paid in cash at the Market Value. Any
United American Options that have not vested at the Effective Date shall be
assumed by BancGroup in accordance with the immediately following paragraph. See
"The Merger -- Cashless Exchange of Options."
On the Effective Date, BancGroup shall assume all United American Options
outstanding which have not been exercised or terminated prior to the Effective
Date or converted to BancGroup Common Stock in accordance with the immediately
preceding paragraph, and each such option shall represent the right to acquire
BancGroup Common Stock on substantially the same terms applicable to the United
American Options. The number of shares of BancGroup Common Stock to be issued
pursuant to such options shall equal the number of shares of United American
Common Stock subject to such United American 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 United American Options, if a fractional share
exists, shall equal the number of whole shares
2
<PAGE> 11
obtained by rounding to the nearest whole number, giving account to such
fraction, or by paying for such fraction in cash. The exercise price for the
acquisition of BancGroup Common Stock shall be the exercise price for each share
of United American Common Stock subject to such options divided by the Exchange
Ratio, adjusted appropriately for any rounding to whole shares that may be
required. The "Exchange Ratio" shall mean the result obtained by dividing $36.50
by the Market Value.
Promptly after the Effective Date, United American shareholders will be
given notice of the consummation of the Merger and instructions for the exchange
of such shareholders' certificates representing shares of United American Common
Stock for certificates representing shares of BancGroup Common Stock.
Certificates for the shares of BancGroup Common Stock issued will not be
distributed or dividends paid on such shares until shareholders surrender their
certificates representing their shares of United American Common Stock in
accordance with those instructions. UNITED AMERICAN SHAREHOLDERS SHOULD NOT SEND
IN THEIR UNITED AMERICAN STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED THE
INSTRUCTIONS.
See "The Merger -- Conversion of United American Common Stock,"
"-- Surrender of United American Common Stock Certificates," "-- Treatment of
United American Options" and "-- Cashless Exchange of Options."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and United American, see "The
Merger -- Rights of Dissenting Shareholders," "-- Conversion of United American
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 Shareholders," "-- Security
Ownership of Management," and "Business of United American -- Principal Holders
of Common Stock."
RECOMMENDATION OF UNITED AMERICAN'S BOARD OF DIRECTORS
The Board of Directors of United American has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF UNITED AMERICAN BELIEVES THAT THE MERGER IS
IN THE BEST INTEREST OF THE SHAREHOLDERS OF UNITED AMERICAN 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 "The Merger -- United American's
Board of Directors' Reasons for Approving the Merger."
RELATED TRANSACTIONS -- STOCK OPTION
In connection with the Agreement, United American has granted to BancGroup
an option to purchase up to 19% of the United American Common Stock at a
purchase price of $36.50 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of United American by another party. The option was granted by
United American as a condition of, and in consideration for, BancGroup's
entering into the Agreement; and, the option is intended to increase the
likelihood that the Merger will be consummated by making it more difficult and
expensive for any third party to acquire control of United American while
BancGroup is seeking to consummate the Merger. See "The Merger -- Related
Transactions -- Stock Option."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of the directors and executive officers of United American hold
United American Options which entitle them to purchase, in the aggregate, up to
190,500 shares of United American Common Stock. Under the terms of the
Agreement, any United American Options which are not exercised or terminated
prior to the Effective Date or exchanged for BancGroup Common Stock in the
Cashless Exchange will be assumed by BancGroup. See "The Merger -- Conversion of
United American Common Stock," "-- Treatment of United American Options," and
"-- Cashless Exchange of Options."
BancGroup has agreed that each of James L. Hewitt, David G. Powers, David
M. McLeod and Russell Salerno, executive officers of United American or the
Bank, will enter into an employment agreement with
3
<PAGE> 12
Colonial Bank, which will provide for (i) terms of one year, (ii) annual
salaries for Messrs. Hewitt, Powers, McLeod and Salerno of $250,000, $130,000,
$114,000 and $85,000, respectively, which amounts are equal to their respective
current salaries, (iii) the grant of options to buy 10,000 and 5,000 shares of
BancGroup Common Stock at a per share exercise price equal to the market value
as of the Effective Date to Messrs. Powers and McLeod, respectively, such
options vesting ratably over a five year period, and (iv) non-competition
agreements to run concurrently with the one year terms. M. Alan Rowe, an officer
of the Bank, will receive a lump sum severance payment of $130,000, if his
employment is terminated. BancGroup has also agreed to consider making lump sum
severance payments equal to three months to six months salary for certain key
employees.
On the Effective Date, and subject to the employment agreements described
above, all employees of United American will, at BancGroup's option, either
become employees of BancGroup or its subsidiaries or be entitled to severance
benefits in accordance with Colonial Bank's severance policy as of the date of
the Agreement. All employees of United American who become employees of
BancGroup or its subsidiaries on the Effective Date will be entitled, to the
extent permitted by applicable law, to participate in all benefit plans of
BancGroup to the same extent as BancGroup's employees.
On January 9, 1995, the Bank and Messrs. Hewitt, Powers, McLeod, Rowe and
Charles W. Hall (Executive Vice President and Chief Financial Officer of United
American) entered into Indexed Executive Salary Continuation Agreements ("Salary
Continuation Agreement"), which will grant them certain rights to payments upon
retirement or to their beneficiaries upon their earlier death. The amounts
payable are subject to a vesting schedule which provides that the executive is
deemed 100% vested as to benefits upon a change of control. The closing of the
Merger will constitute a change of control under the Salary Continuation
Agreements entitling each executive to receive, if his employment is
subsequently terminated, 100% of the benefits thereunder upon obtaining Normal
Retirement Age (as defined in such agreement), as if the executive had been
continuously employed by the Bank until Normal Retirement Age.
James L. Hewitt will be nominated to the BancGroup Board of Directors and
will be offered the positions of Chairman and Chief Executive Officer of
Colonial Bank's Central Florida Regional Board of Directors, Chairman of the
Central Florida Region Loan Committee, Chairman of any Executive Committee that
may be established for the Central Florida Region, and will be added as a member
of Colonial Bank's Executive Committee for the State of Florida.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of United American 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 United American would have been authorized
under Florida law, or under its Articles of Incorporation or Bylaws, to
indemnify such persons.
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 United
American Common Stock. Each share of United American Common Stock is entitled to
one vote on the Agreement. Approval of the Agreement and the Merger by BancGroup
shareholders 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 United American 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, 1,779,600 shares of United American Common Stock were
issued and outstanding. As of the Record Date, the directors and executive
officers of United American and the Bank held approximately 39% of the
outstanding shares of United American Common Stock. As of the same date, the
directors, executive officers and affiliates of BancGroup held no shares of
United American Common Stock. See "The Special Meeting."
As of the Record Date, the directors of United American owned 678,078
shares of United American Common Stock representing approximately 38% of the
outstanding shares and have agreed with BancGroup
4
<PAGE> 13
to vote their shares in favor of the Agreement. See "The Special Meeting." As of
April 30, 1997, Directors and executive officers of BancGroup beneficially owned
in the aggregate 4,574,597 shares of BancGroup Common Stock representing
approximately 10.64% of BancGroup's outstanding shares.
Proxies should be returned to United American in the envelope enclosed
herewith. Shareholders of United American submitting proxies may revoke their
proxies by (i) giving notice of such revocation in writing to the Secretary of
United American at or prior to the Special Meeting, (ii) executing and
delivering a proxy bearing a later date to the Secretary of United American at
or prior to the Special Meeting, or (iii) attending the Special Meeting and
voting in person. Because approval of the Agreement requires the approval of at
least a majority of the outstanding shares of United American 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 United American 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 Florida Business Corporation Act (the "FBCA"). The FBCA, as
described in greater detail in "The Merger -- Rights of Dissenting
Shareholders," 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. Shareholders
wishing to exercise dissenters' rights must follow strictly all requirements for
the exercise of such rights as set forth in Sections 607.1301, 607.1302 and
607.1320 of the FBCA, a copy of which is attached as Appendix B to this
Prospectus. See "The Merger -- Rights of Dissenting Shareholders." Any
shareholder who properly exercises dissenters' rights and receives cash for his
or her shares will encounter income tax treatment different from the tax
treatment of shareholders who do not exercise dissenters' rights. See "The
Merger -- Rights of Dissenting Shareholders."
CONDITIONS TO THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The 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 United American
Common Stock; (ii) the notification to, or approval of the Merger by, the Board
of Governors of the Federal Reserve System (the "Federal Reserve") and the
Florida Department of Banking and Finance (the "Florida Department") and the
approval of the merger of the Bank with Colonial Bank (the "Bank Merger") by the
Alabama Banking Department (the "Alabama Department") and the Federal Reserve;
(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 April 15, 1998; (v) receipt of opinions of counsel as to certain matters;
and (vi) receipt of an opinion from Coopers & Lybrand L.L.P. as to certain tax
matters.
The obligation of United American 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 having 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 United American; (ii) the number of shares
as to which holders of United America Common Stock exercise dissenters' rights
not exceeding 10% of the outstanding shares of United American Common Stock; and
(iii) the receipt of a letter from Coopers & Lybrand L.L.P., BancGroup's
independent accountants, to the effect that the independent accountants concur
with the conclusions of BancGroup's and United American's respective managements
that no conditions exist with respect to each company which would preclude
accounting for the Merger as a pooling of interests.
5
<PAGE> 14
Applications for appropriate regulatory approvals by the Federal Reserve,
the Florida Department and the Alabama Department were filed with such agencies
on November 6, 1997. The Federal Reserve approved the Merger as of December 11,
1997, and the Florida Department approved the Merger as of December 23, 1997. NO
ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND REGULATORY
APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER
CAN OR WILL BE SATISFIED. BANCGROUP AND UNITED AMERICAN ANTICIPATE THAT THE
MERGER WILL BE CONSUMMATED DURING THE FIRST QUARTER OF 1998. HOWEVER, DELAYS IN
THE CONSUMMATION OF THE MERGER COULD OCCUR.
See "The Merger -- Conditions to Consummation of the Merger" and
"Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and approval of the Merger by the holders of United American Common Stock, no
amendment decreasing the consideration to be received by United American
shareholders may be made without the further approval of such shareholders. Such
amendments may require the filing with the Commission of an amendment of the
Registration Statement, of which this Prospectus forms a part. The Agreement may
be terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the shareholders of United American, by the
mutual consent of the respective Boards of Directors of United American and
BancGroup, or by the Board of Directors of either BancGroup or United American
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
April 15, 1998, if such failure to consummate is not caused by any breach of the
Agreement by the party electing to terminate. See "The Merger -- Amendment or
Termination of Agreement."
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of the holders of the United American Common Stock may be
different from the rights of the holders of the BancGroup Common Stock. A
discussion of these rights and a comparison thereof is set forth at "Comparative
Rights of Shareholders."
FEDERAL INCOME TAX CONSEQUENCES
No ruling with respect to the federal income tax consequences of the Merger
to United American's shareholders will be requested from the Internal Revenue
Service (the "IRS"). United American has received an opinion from Coopers &
Lybrand L.L.P., that, among other things, a shareholder of United American who
exchanges shares of United American Common Stock for BancGroup Common Stock will
not recognize gain except that, shareholders of United American will recognize
gain to the extent such shareholders receive cash in lieu of fractional shares
of BancGroup Common Stock. Shareholders who receive cash for their shares of
United American Common Stock upon perfection of dissenters' rights will realize
gain or loss for federal income tax purposes with respect to such shares. See
"Approval of the Merger -- Certain Federal Income Tax Consequences." United
American shareholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the Merger.
ACCOUNTING TREATMENT
The merger of United American into BancGroup will be treated as a
"pooling-of-interests" transaction by BancGroup for accounting purposes. See
"The Merger -- Accounting Treatment."
6
<PAGE> 15
RECENT PER SHARE MARKET PRICES
United American. There is no established public trading market for the
United American Common Stock. The shares of United American Common Stock are not
actively traded, and such trading activity, as it occurs, takes place in
privately negotiated transactions. Management of United American is aware of
certain transactions in shares of United American that have occurred since
January 1, 1995, although the trading prices of all stock transactions are not
known. The following table sets forth the trading prices for the shares of
United American Common Stock that have occurred since January 1, 1995 for
transactions in which the trading prices are known to management of United
American:
<TABLE>
<CAPTION>
PRICE PER SHARE
OF COMMON STOCK DIVIDENDS
------------------ PER
HIGH LOW SHARE
------ ------ ---------
<S> <C> <C> <C>
1995
First Quarter....................................... -- -- --
Second Quarter...................................... $10.00 $10.00 --
Third Quarter....................................... -- -- --
Fourth Quarter...................................... 10.00 10.00 --
1996
First Quarter....................................... 10.00 10.00 $.50
Second Quarter...................................... -- -- --
Third Quarter....................................... -- -- --
Fourth Quarter...................................... -- -- --
1997
First Quarter....................................... 10.00 10.00 .50
Second Quarter...................................... 15.00 10.00 --
Third Quarter....................................... 20.00 10.00 --
Fourth Quarter (through December 24, 1997).......... -- -- --
</TABLE>
In March, 1995, United American sold 659,200 shares of United American
Common Stock in a private placement transaction at $10.00 per share. Each United
American shareholder of record on January 31, 1995 who purchased shares of
United American Common Stock in the offering, also was issued a nontransferable
stock purchase warrant entitling the shareholder to purchase for each two shares
of United American Common Stock purchased in the offering an additional share of
United American Common Stock on or before July 1, 1997 at a per share amount
equal to $10.00. An aggregate of 220,100 stock purchase warrants were issued in
the offering, all of which were exercised for shares of United American Common
Stock before July 1, 1997. On August 22, 1997, United American issued an
aggregate of 59,500 shares of United American Common Stock, valued at $20.00 per
share, to acquire an entity (owned in part by certain directors of United
American) which owned United American's main office and certain property
adjacent to the office. See "Business of United American -- Properties."
7
<PAGE> 16
BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." The following table indicates the high and low closing prices
of the BancGroup Class A Common Stock and the BancGroup Common Stock as reported
on the Nasdaq National Market System ("the Nasdaq NMS") and the NYSE,
respectively, for the last two full fiscal years. Prior to February 21, 1995,
BancGroup had two classes of Common Stock outstanding, Class A and Class B.
Class B was not publicly traded. Class A was traded on the Nasdaq NMS under the
symbol "CLBGA" until February 24, 1995. On February 21, 1995, the BancGroup
Class A and Class B Common Stock were reclassified into BancGroup Common Stock.
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK(1)
--------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1995
First Quarter(2)............................................ $11 13/16 $ 9 3/4
Second Quarter.............................................. 13 5/8 11 9/16
Third Quarter............................................... 14 15/16 13 3/4
Fourth Quarter.............................................. 16 7/16 14 1/4
1996
First Quarter............................................... 18 1/4 15
Second Quarter.............................................. 18 1/16 15 5/8
Third Quarter............................................... 17 15/16 15 5/8
Fourth Quarter.............................................. 20 1/8 17 3/8
1997
First Quarter............................................... 24 18 2/3
Second Quarter.............................................. 24 7/8 22
Third Quarter............................................... 29 3/16 24 1/4
Fourth Quarter (through December 26, 1997).................. 35 1/16 28 15/16
</TABLE>
- ---------------
(1) Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
(2) Trading on the NYSE commenced on February 24, 1995.
On September 8, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $27.9375 per share. The following table presents the market value
per share of BancGroup Common Stock on that date, and the market value and
equivalent per share value of United American Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP UNITED AMERICAN PRICE PER
COMMON STOCK COMMON STOCK UNITED AMERICAN
(1) (2) SHARE(3)
------------ --------------- ---------------
<S> <C> <C> <C>
Comparative Market Value................ $27.9375 $20.00 $36.50
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on September 8, 1997.
(2) There is no established public trading market for the shares of United
American Common Stock. The value shown is the price at which shares of
United American Common Stock were issued on August 22, 1997, and was the
last sale price prior to the public announcement of the Merger on September
9, 1997, of which management of United American is aware.
(3) If the Merger had closed on September 8, 1997, assuming the Market Value had
also been $27.9375, 1.306 (36.50 divided by 27.9375) shares of BancGroup
Common Stock would have been exchanged for each share of United American
Common Stock.
See "Comparative Market Prices and Dividends."
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup Common Stock from engaging in a "business
combination" with BancGroup unless certain
8
<PAGE> 17
conditions are satisfied. Also, the Change in Bank Control Act of 1978 prohibits
a person from acquiring "control" of BancGroup unless certain notice
requirements of the Federal Reserve have been satisfied.
BancGroup's Restated Certificate of Incorporation (the "BancGroup
Certificate") and its 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 shareholders to call special meetings and act by written
consent, and (5) certain advance notice provisions for the conduct of business
at shareholder meetings.
See "BancGroup Capital Stock and Debentures" and "Comparative Rights of
Shareholders."
PER SHARE DATA
The table below presents on a per share basis the book value, cash
dividends and income from continuing operations of BancGroup and United American
on a historical basis and on a pro forma equivalent basis assuming consummation
of the Merger. Certain information from the table has been taken from the
condensed pro forma statements of condition and income included elsewhere in
this document. The table should be read in conjunction with those pro forma
statements.
PER SHARE DATA
<TABLE>
<CAPTION>
YEAR YEAR YEAR
NINE MONTHS NINE MONTHS ENDED ENDED ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 1996 1995 1994
------------------ ------------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- HISTORICAL (AS
RESTATED):
Net income
Primary*....................... $ 1.32 $ 1.11 $ 1.26 $ 1.23 $0.96
Fully diluted*................. 1.31 1.10 1.25 1.19 0.95
Book value at end of period*..... 11.26 10.11 10.29 9.43 7.93
Dividends per share:
Common Stock*.................. 0.45 0.405 0.54 0.3375
Common A*...................... 0.1125 0.40
Common B*...................... 0.0625 0.20
UNITED AMERICAN
Net income
Historical:
Primary...................... 1.16 1.16 1.66 1.24 0.94
Fully diluted................ 1.16 1.16 1.66 1.24 0.94
Pro forma equivalent assuming
combination with United
American and completed
business combination(a):
Primary...................... 1.48 1.25 1.44 1.35 1.07
Fully diluted................ 1.46 1.24 1.42 1.32 1.06
Pro forma equivalent assuming
combination with United
American, completed business
combination and other
proposed business
combinations(a):
Primary...................... 1.45 1.24 1.43 1.34 1.08
Fully diluted................ 1.44 1.22 1.42 1.30 1.08
Book value at end of period
Historical..................... 12.07 10.40 10.93 9.79 7.42
Pro forma equivalent assuming
combination with United
American and completed
business combination(a)...... 12.74 N/A N/A N/A N/A
Pro forma equivalent assuming
combination with United
American, completed business
combination and other
proposed business
combinations(a):............. 12.83 N/A N/A N/A N/A
</TABLE>
9
<PAGE> 18
<TABLE>
<CAPTION>
YEAR YEAR YEAR
NINE MONTHS NINE MONTHS ENDED ENDED ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 1996 1995 1994
------------------ ------------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Dividends per share
Historical..................... 0.50 0.50 0.50 -- --
Pro forma equivalent assuming
combination with United
American and completed
business combination(b)...... 0.51 0.46 0.61 0.51 0.45
Pro forma equivalent assuming
combination with United
American, completed business
combination and other
proposed business
combinations(b):............. 0.51 0.46 0.61 0.51 0.45
BANCGROUP -- PRO FORMA COMBINED
(UNITED AMERICAN AND COMPLETED
BUSINESS COMBINATION):
Net income
Primary........................ 1.31 1.10 1.27 1.19 0.95
Fully diluted.................. 1.29 1.09 1.25 1.16 0.94
Book value at end of period...... 11.24 N/A N/A N/A N/A
BANCGROUP -- PRO FORMA COMBINED
(UNITED AMERICAN, COMPLETED
BUSINESS COMBINATION AND OTHER
PROPOSED BUSINESS
COMBINATIONS):
Net income
Primary........................ 1.28 1.09 1.26 1.18 0.95
Fully diluted.................. 1.27 1.08 1.25 1.15 0.95
Book value at end of period...... 11.34 N/A N/A N/A N/A
</TABLE>
- ---------------
* Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
N/A Not applicable due to pro forma balance sheet being presented only at
September 30, 1997 which assumes the transaction was consummated on the
latest balance sheet date in accordance with Rule 11.02(b) of Regulation
S-X.
(a) Pro forma equivalent per share amounts are calculated by multiplying the
pro forma combined total income per share and the pro forma combined total
book value per share of BancGroup by the conversion ratio so that the per
share amounts are equated to the respective values for one share of United
American. For the purposes of these pro forma equivalent per share amounts,
a 1.1335 BancGroup common stock share conversion ratio is utilized. The
ratio is based on the maximum Market Value of $32.20 ($36.50/32.20 =
1.1335). As of December 26, 1997, the Market Value exceeded the maximum
Market Value allowed under the Agreement.
(b) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the 1.1335 conversion ratio per
share of United American common stock (see note (a)). BancGroup presently
contemplates that dividends will be declared in the future. However, the
payment of cash dividends is subject to BancGroup's actual results of
operations as well as certain other internal and external factors.
Accordingly, there is no assurance that cash dividends will either be
declared and paid in the future, or, if declared and paid, that such
dividends will approximate the pro forma amounts indicated.
10
<PAGE> 19
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of United American
in connection with the solicitation of proxies by the Board of Directors of
United American for use at the Special Meeting and at any adjournments or
postponements thereof. The purpose of the Special Meeting is to consider and
vote upon the Agreement which provides for the proposed Merger of United
American with and into BancGroup. BancGroup will be the surviving corporation in
the Merger.
THE BOARD OF DIRECTORS OF UNITED AMERICAN BELIEVES THAT THE MERGER IS IN
THE BEST INTERESTS OF UNITED AMERICAN SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE AGREEMENT (ITEM 1 ON THE PROXY CARD).
This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. No vote of
BancGroup shareholders is required to approve the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of United American has fixed the close of business
on December 23, 1997, as the Record Date for determination of shareholders
entitled to vote at the Special Meeting. There were 218 record holders of United
American Common Stock and 1,779,600 shares of United American Common Stock
outstanding, each entitled to one vote per share, as of the Record Date. United
American is obligated to issue an additional 190,500 shares of United American
Common Stock upon the exercise of outstanding United American Options.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of United American Common Stock on the
Record Date is necessary to constitute a quorum for the transaction of business
at the Special Meeting. In the absence of a quorum, the Special Meeting may be
postponed from time to time until United American shareholders holding the
requisite number of shares of United American Common Stock are represented in
person or by proxy. If a quorum is present, the affirmative vote of the holders
of at least a majority of the outstanding shares of United American Common
Stock, whether or not present or represented at the Special Meeting, is required
to approve the Agreement. Broker non-votes 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 United American 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 of United American owned 678,078 shares of
United American Common Stock representing approximately 38% of the outstanding
shares. These individuals have agreed with BancGroup to vote their shares in
favor of the Merger.
If the Agreement is approved at the Special Meeting, United American 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 UNITED AMERICAN URGES THE SHAREHOLDERS OF UNITED
AMERICAN TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND
UNANIMOUSLY RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE VOTED IN
FAVOR OF THE AGREEMENT.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of United American, without receiving special compensation therefor,
may solicit proxies from United American's shareholders by
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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 United
American Common Stock.
United American will bear the cost of assembling and mailing this
Prospectus and other materials furnished to shareholders of United American. It
will also pay all other expenses of solicitation, including the expenses of
brokers, custodians, nominees, and other fiduciaries who, at the request of
United American, mail material to, or otherwise communicate with, beneficial
owners of the shares held by them. BancGroup will pay all expenses incident to
the registration of the BancGroup Common Stock to be issued in connection with
the Merger.
Shares of United American 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 United American
Common Stock represented by the proxy will be voted "FOR" the proposal to
approve the Agreement and in accordance with the determination of the majority
of the Board of Directors of United American as to any other matter which may
properly come before the Special Meeting, including any adjournment or
postponement thereof. A shareholder may revoke any proxy given pursuant to this
solicitation by: (i) delivering to the Secretary of United American, prior to or
at the Special Meeting, a written notice revoking the proxy; (ii) delivering to
the Secretary of United American, at or prior to the Special Meeting, a duly
executed proxy relating to the same shares and bearing a later date; or (iii)
voting in person at the Special Meeting. Attendance at the Special Meeting will
not, in and of itself, constitute a revocation of a proxy. All written notices
of revocation and other communications with respect to the revocation of United
American's proxies should be addressed to:
United American Holding Corporation
105 West Colonial Drive
Orlando, Florida 32801
Attention: James L. Hewitt, Chairman, President and Chief Executive Officer
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 United American is not aware of any business to
be acted upon at the Special Meeting other than consideration of the Agreement
and the Merger described herein. If, however, other matters are properly brought
before the Special Meeting, or any adjournments or postponements thereof, the
persons appointed as proxies will have the discretion to vote or act on such
matters according to their best judgment. Proxies voted in favor of the approval
of the Agreement, or proxies as to which no voting instructions are given, will
be voted to adjourn the Special Meeting, if necessary, in order to solicit
additional proxies in favor of the approval of the Agreement. Proxies voted
against the approval of the Agreement and abstentions will not be voted for an
adjournment. See "Adjournment of the Special Meeting."
EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, that 90,500 United American Options are exercised prior to the Effective
Date, that no United American Options are exchanged in the Cashless Exchange,
and the Market Value of BancGroup Common Stock is $32.20 (the maximum Market
Value allowable under the Agreement) on the Effective Date (as of December 26,
1997, the Market Value exceeded the maximum Market Value allowed under the
Agreement), BancGroup will issue 2,017,177 shares of BancGroup Common Stock to
the shareholders of United American pursuant to the Merger. Based on those
assumptions, the 2,017,177 shares of BancGroup Common Stock will represent
approximately 4.59% of the total number of shares of BancGroup Common Stock
outstanding following the Merger, not counting any additional shares BancGroup
may issue, including shares to be issued pursuant to other pending acquisitions.
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THE MERGER
The following sets forth a summary of the material provisions of the
Agreement and the Option Agreement and the transactions contemplated thereby.
The description does not purport to be complete and is qualified in its entirety
by reference to each of the Agreement and the Option Agreement attached hereto
as Appendix A and Appendix C, respectively, and certain provisions of Florida
law relating to the rights of dissenting shareholders, a copy of which is
attached hereto as Appendix B. All United American shareholders are urged to
read the Agreement, the Option Agreement and the Appendices in their entirety.
GENERAL
The Agreement provides that, subject to approval by the shareholders of
United American, receipt of necessary regulatory approvals and satisfaction of
certain other conditions described below at "Conditions to Consummation of the
Merger," United American will merge with and into BancGroup. Upon completion of
the Merger, the corporate existence of United American will cease, and BancGroup
will succeed to the business formerly conducted by United American.
BACKGROUND OF THE MERGER
On November 21, 1996, James L. Hewitt (the Chairman, Chief Executive
Officer and President of United American) met with Robert E. Lowder (the
Chairman, Chief Executive Officer and President of BancGroup). Mr. Hewitt had
been contacted by a BancGroup representative to arrange a meeting with Mr.
Lowder to discuss United American's possible interest in pursuing a merger with
BancGroup. Messrs. Lowder and Hewitt discussed the philosophies and directions
of their respective organizations. Among other things, Mr. Hewitt indicated that
United American was interested in pursuing a possible public offering for its
shares during the next several years, unless an alternative was presented that
would bring greater value to United American shareholders. The meeting did not
lead to any further discussions or exchange of information between the two
organizations.
During the last week of July, 1997, a BancGroup representative contacted
Mr. Hewitt and indicated that Mr. Lowder would be in the Orlando area during
that week and was interested in further discussions regarding a possible merger
between BancGroup and United American. On July 27, 1997, Messrs. Lowder and
Hewitt met. During the meeting, Mr. Lowder discussed BancGroup's history and
prospects and its interest in acquiring United American. Mr. Hewitt similarly
reviewed United American's progress since the prior meeting with Mr. Lowder in
November, 1996, including the growth of United American's assets and its opening
of new offices. They also discussed the benefits of a transaction to their
respective organizations, including the possible value to United American
shareholders and the strategic advantage of a merger due to the lack of overlap
between the BancGroup and United American banking offices in the Central Florida
area. The parties discussed pricing issues related to a possible transaction,
and agreed that certain information regarding United American would be forwarded
to BancGroup for its review. Mr. Lowder also delivered to Mr. Hewitt copies of
certain BancGroup filings with the Commission during the prior 12 months.
Following the meeting, United American sent information regarding its financial
condition and operations to BancGroup.
On August 7, 1997, Mr. Hewitt traveled to BancGroup's executive offices in
Montgomery, Alabama, and met with Mr. Lowder and W. Flake Oakley, IV, the Chief
Financial Officer of BancGroup. The representatives discussed information
regarding BancGroup and United American and reviewed pricing and related issues.
During the meeting, the parties agreed in principal to the terms and conditions
of a possible transaction, including the receipt by United American shareholders
of $36.50 in value per share in an exchange of BancGroup Common Stock, subject a
minimum and maximum number of BancGroup shares to be issued and BancGroup's due
diligence review of United American. On August 8, 1997, Mr. Hewitt met with the
outside directors of United American to review certain information regarding
BancGroup and the terms of a proposed transaction. The directors concurred that
United American should continue negotiation of a merger transaction with
BancGroup in accordance with the terms proposed at the August 7 meeting.
On August 11, 1997, BancGroup and United American entered into a
Confidentiality Agreement. During mid to late August, BancGroup performed a due
diligence review of United American. On August 25, 1997,
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BancGroup forwarded to United American a draft definitive agreement and a
related stock option agreement pursuant to which BancGroup would be granted an
option to acquire at an exercise price of $36.50 per share up to 19% of the
outstanding shares of United American Common Stock under certain circumstances.
From August 25, 1997 to September 8, 1997, representatives of BancGroup and
representatives of United American negotiated the terms of the definitive
agreement and the stock option agreement. On September 8, 1997, a special
meeting of the United American Board of Directors was held in which United
American's legal counsel participated. During this meeting, legal counsel
reviewed generally for United American's Board of Directors the fiduciary
obligations of directors in mergers of financial institutions. Following
discussion and review by the United American Board of Directors of the terms and
conditions of the Agreement and the stock option agreement (the "Option
Agreement"), the Merger and related information and issues, the Board of
Directors unanimously approved the Agreement and the Option Agreement and the
transactions contemplated thereby. BancGroup and United American signed the
Agreement and the Option Agreement as of September 8, 1997.
UNITED AMERICAN'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
United American's Board of Directors believes that the Merger is in the
best interests of United American and its shareholders. The Board of Directors
of United American considered a number of factors in deciding to approve and
recommend the terms of the Agreement to United American shareholders, including,
among other things, (i) the terms of the proposed transaction (including, as
discussed below, the premium to be paid to United American shareholders as a
result of the transaction); (ii) the financial condition, results of operations,
and future prospects of United American (including the belief by the United
American Board that an alternative transaction of pursuing an initial public
offering for shares of United American Common Stock had United American not
entered into the Agreement would not afford United American shareholders values
in excess of that provided by the Agreement); (iii) as discussed below, the
value of the consideration to be received by United American shareholders
relative to the book value and earnings per share of United American Common
Stock; (iv) the competitive and regulatory environment for financial
institutions generally (and the expenditures that United American might need to
incur in the future in order to remain competitive in the offering of bank
products and current in technology developments); (v) the fact that the Merger
will enable United American shareholders to exchange their shares of United
American Common Stock (for which there is no established public trading market)
for shares of common stock of a larger and more diversified entity, the stock of
which is more widely held and more actively traded; (vi) that the Merger will
enable United American shareholders to hold stock in a financial institution
that has historically paid higher cash dividends for a longer term to its
shareholders as compared to United American; (vii) the likelihood of receiving
the requisite regulatory approvals; (viii) that it is expected that the Merger
will be a tax-free transaction (except in respect of cash received for United
American Common Stock) for federal income tax purposes; (ix) that the Merger
affords an opportunity to minimize the potential displacement of United American
employees due to the lack of overlap in the banking offices of BancGroup and
United American; and (x) other information. In determining that the Merger is in
the best interests of United American shareholders, the Board of Directors of
United American also considered that the consideration to be paid by BancGroup
to United American shareholders in the Merger as a multiple of United American
book value, tangible book value, deposits, and assets was in excess of the
multiples paid in any of the 20 acquisition transactions of Florida banks with
asset size of less than $2.0 billion announced from January 1, 1997 (the
"Florida Bank Acquisitions"). In particular, at the time the Agreement was
approved by the United American Board in early September 1997, the consideration
to be received by United American shareholders in the Merger as a ratio of
United American's book value was approximately 359% (compared to a median of
247% for the Florida Bank Acquisitions), as a ratio of United American's
tangible book value was approximately 402% (compared to a median of 247% for the
Florida Bank Acquisitions), as a ratio of United American's deposits was
approximately 35% (compared to a median of 24% for the Florida Bank
Acquisitions), and as a ratio of United American's assets was approximately 30%
(compared to a median of 21% for the Florida Bank Acquisitions). The Board
concluded, based on these comparisons and the foregoing factors, that the Merger
is in the best interests of United American and its shareholders. The foregoing
discussion of the information and factors considered by the Board of Directors
is a summary and is not intended to be complete. The United
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American Board of Directors did not assign any relative or specific weights to
the foregoing factors, and individual directors may have given different weights
to different factors.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF UNITED AMERICAN
The Board of Directors of United American has determined that the Merger is
in the best interest of United American shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF UNITED AMERICAN 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 with
branches in the Orlando, Ormond Beach, Tampa, Ft. Myers, Winter Haven, West Palm
Beach, Miami and the Miami Beach areas, with acquisitions pending in the Bonita
Springs and St. Petersburg areas. The Board of Directors of BancGroup believes
that the combination with United American and the Bank is consistent with that
expansion strategy.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account: (i) the financial performance and condition of
United American, including its capital and asset quality; (ii) similarities in
the philosophies of BancGroup and United American, including United American's
commitment to delivering high quality personalized financial services to its
customers; and (iii) United American's management's knowledge of, and experience
in, the Central Florida market.
RELATED TRANSACTIONS -- STOCK OPTION
United American and BancGroup have entered into the Option Agreement
whereby United American has granted to BancGroup an option to purchase up to
338,124 shares of United American Common Stock at a purchase price of $36.50 per
share. The Option Agreement is attached hereto as Appendix C. See "-- Background
of the Merger." Both the number of shares subject to the option and the purchase
price per option share are subject to adjustment in certain circumstances. The
Option Agreement was entered into as an inducement for, and as a condition to,
BancGroup's execution of the Agreement. The Option Agreement is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for a third party to acquire control of United American
while BancGroup is seeking to consummate the Merger.
The option granted under the Option Agreement may be exercised by
BancGroup, in whole or in part, in the event a "Purchase Event" precedes the
termination of the Agreement. If the option becomes exercisable, United American
may be required to repurchase the option or any shares issued thereunder at a
price calculated in accordance with the Option Agreement. In addition, under
certain circumstances, the option may be converted into a similar option to
acquire shares of an entity engaging in certain transactions with United
American.
The term "Purchase Event" is defined to include: (i) United American's
agreement, without BancGroup's prior written consent, to effect an "Acquisition
Transaction" with any person other than BancGroup, or United American's
authorization, recommendation, or public proposal of (or public announcement of
its intention to authorize, recommend, or propose) such an agreement; or (ii)
the acquisition by any person of beneficial ownership of 25% or more of the
outstanding shares of United American Common Stock. The term "Acquisition
Transaction" is defined to include: (i) a merger, consolidation, or other
business combination involving United American; (ii) the disposition, by sale,
exchange, lease, or otherwise, of substantially all of the consolidated assets
of United American; or (iii) the issuance of securities representing 25% or more
of the voting power of United American.
The Option Agreement and the option granted thereunder terminate upon the
earliest to occur of: (i) the Effective Date; (ii) termination of the Agreement
in accordance with its terms prior to the occurrence of a
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Purchase Event or a "Preliminary Purchase Event" (generally, a tender offer or
exchange offer by a third party to acquire more than 25% of the outstanding
shares of United American Common Stock or the failure of United American's
shareholders to approve the Merger following the public announcement of a
proposed Acquisition Transaction or tender offer); (iii) termination of the
Agreement by BancGroup prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event for reasons other than a breach of the Agreement by
United American or the failure to occur of certain conditions precedent to the
Merger; or (iv) the passage of eighteen months after termination of the
Agreement by BancGroup because of a material breach of the Agreement by United
American, or the failure to occur of certain conditions precedent to the
consummation of the Merger.
To the knowledge of United American, no event that would permit the
exercise of the option has occurred as of the date hereof. The rights and
obligations of United American and BancGroup under the Option Agreement are
subject to receipt of any required regulatory approval, including approval by
the Federal Reserve under the BHCA.
The Option Agreement, together with United American's agreement not to
negotiate or entertain any proposals for the sale of United American or its
subsidiaries to another party (see "-- Commitments with Respect to Other
Offers"), have the effect of discouraging persons who might now, or prior to the
Effective Date, be interested in acquiring all or a significant interest in
United American from considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for the United American
Common Stock than the price per share to be paid by Bancgroup in the Merger. The
option granted to BancGroup under the Option Agreement will become exercisable
in the event of the occurrence of certain proposals to acquire United American
or the Bank. The possibility that BancGroup might exercise the option, and thus
acquire a substantial block of United American Common Stock, might deter offers
of other bidders interested in such an acquisition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of the directors and executive officers of United American hold
United American Options which entitle them to purchase, in the aggregate, up to
190,500 shares of United American Common Stock. Under the terms of the
Agreement, any United American Options which are not exercised or terminated
prior to the Effective Date or exchanged for BancGroup Common Stock in the
Cashless Exchange will be assumed by BancGroup. See "-- Conversion of United
American Common Stock," "-- Treatment of United American Options," and
"-- Cashless Exchange of Options."
BancGroup has agreed that each of James L. Hewitt, David G. Powers, David
M. McLeod and Russell Salerno, executive officers of United American or the
Bank, will enter into an employment agreement with Colonial Bank, which will
provide for (i) terms of one year, (ii) annual salaries for Messrs. Hewitt,
Powers, McLeod and Salerno of $250,000, $130,000, $114,000 and $85,000,
respectively, which amounts are equal to their respective current salaries,
(iii) the grant of options to buy 10,000 and 5,000 shares of BancGroup Common
Stock at a per share exercise price equal to the market value as of the
Effective Date to Messrs. Powers and McLeod, respectively, such options vesting
ratably over a five year period, and (iv) non-competition agreements to run
concurrently with the one year terms. M. Alan Rowe, an officer of the Bank, will
receive a lump sum severance payment of $130,000 if his employment is
terminated. BancGroup has also agreed to consider making lump sum severance
payments equal to three months to six months salary for certain key employees.
On the Effective Date, and subject to the employment agreements described
above, all employees of United American will, at BancGroup's option, either
become employees of BancGroup or its subsidiaries or be entitled to severance
benefits in accordance with Colonial Bank's severance policy as of the date of
the Agreement. All employees of United American who become employees of
BancGroup or its subsidiaries on the Effective Date will be entitled, to the
extent permitted by applicable law, to participate in all benefit plans of
BancGroup to the same extent as BancGroup's employees.
On January 9, 1995, the Bank and Messrs. Hewitt, Powers, McLeod, Rowe and
Charles W. Hall (Executive Vice President and Chief Financial Officer of United
American) entered into Indexed Executive
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Salary Continuation Agreements ("Salary Continuation Agreement"), which will
grant them certain rights to payments upon retirement or to their beneficiaries
upon their earlier death. The amounts payable are subject to a vesting schedule
which provides that the executive is deemed 100% vested as to benefits upon a
change of control. The closing of the Merger will constitute a change of control
under the Salary Continuation Agreements entitling each executive to receive, if
his employment is subsequently terminated, 100% of the benefits thereunder upon
obtaining Normal Retirement Age (as defined in such agreement), as if the
executive had been continuously employed by the Bank until Normal Retirement
Age.
James L. Hewitt will be nominated to the BancGroup Board of Directors and
will be offered the positions of Chairman and Chief Executive Officer of
Colonial Bank's Central Florida Regional Board of Directors, Chairman of the
Central Florida Region Loan Committee, Chairman of any Executive Committee that
may be established for the Central Florida Region and will be added as a member
of the Colonial Bank's Executive Committee for the State of Florida.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of United American 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 United American would have been authorized
under Florida law, or under its Articles of Incorporation or Bylaws, to
indemnify such persons.
CONVERSION OF UNITED AMERICAN COMMON STOCK
On the Effective Date, each share of United American Common Stock
outstanding and held by United American's shareholders (except shares as to
which dissenters' rights are perfected) will be converted by operation of law
and without any action by any holder thereof into shares of BancGroup Common
Stock. The number of shares or fractions of a share of BancGroup Common Stock
into which each outstanding share of United American Common Stock on the
Effective Date will be converted, will be equal to $36.50 divided by the Market
Value. The Market Value will be the average of the closing prices of the
BancGroup Common Stock as reported by the NYSE on each of the ten consecutive
trading days ending on the trading day five calendar days immediately preceding
the Effective Date, provided that the Market Value will not be less than $23.80
nor more than $32.20, regardless of the actual market value as calculated.
Accordingly, based upon the 1,779,600 shares of United American Common Stock
outstanding as of the September 8, 1997 date of the Agreement the maximum number
of shares of BancGroup Common Stock that may be issued in the Merger will be
2,729,218 (based upon a minimum Market Value of $23.80) and the minimum number
of shares of BancGroup Common Stock that may be issued in the Merger will be
2,017,248 (based upon a maximum Market Value of $32.20). The number of shares of
BancGroup Common Stock to be issued in the Merger will increase proportionally
with each share of United American Common Stock issued pursuant to the exercise,
before the Effective Date, of the United American Options.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. Each shareholder of United American otherwise entitled to
receive a fractional share of BancGroup Common Stock will receive instead a cash
payment (without interest) equal to such fractional interest multiplied by the
Market Value.
As of December 26, 1997, the Market Value exceeded the maximum Market Value
of $32.20 permitted under the Agreement. If on the Effective Date, the Market
Value exceeds the maximum, then each share of United American Common Stock will
be converted into 1.1335 shares of BancGroup Common Stock ($36.50 divided by
$32.20). As a result, a shareholder of United American who owns 500 shares of
United American Common Stock would be entitled to receive 566.75 shares of
BancGroup Common Stock ($36.50/32.20 multiplied by 500), with the .75 share paid
in cash (without interest) equal to $24.15 (.75 X $32.20). Subject to the
maximum and minimum Market Values of $32.20 and $23.80, as the Market Value of
the BancGroup Common Stock rises, the number of shares of BancGroup Common Stock
to be issued in the Merger will decrease, and as the Market Value falls, the
number of such shares to be issued will increase.
The closing sales price on the NYSE of the BancGroup Common Stock on
December 26, 1997 was $34.5625 per share. Shareholders are advised to obtain
current market quotations for BancGroup Common Stock. The market price of
BancGroup Common Stock at the Effective Date, or on the date on which
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certificates representing such shares are received by United American
shareholders, may be higher or lower than the market price of BancGroup Common
Stock as of the Record Date or at the time of the Special Meeting.
The Agreement provides that if, prior to the Effective Date, BancGroup
Common Stock is changed into a different number of shares or a different class
of shares by reason of any recapitalization or reclassification, stock dividend,
combination, stock split, or reverse stock split of the BancGroup Common Stock,
an appropriate and proportionate adjustment will be made in the number of shares
of BancGroup Common Stock into which the United American Common Stock will be
converted in the Merger.
For a description of the assumption or exchange of United American Options,
see "Treatment of United American Options."
SURRENDER OF UNITED AMERICAN COMMON STOCK CERTIFICATES
On the Effective Date and subject to the conditions described at
"Conditions to Consummation of the Merger," United American's shareholders
(except those shareholders perfect dissenters' rights under applicable law) 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 United American Common Stock will
represent shares of BancGroup Common Stock. Thereafter, upon surrender of the
certificates formerly representing shares of United American 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 United
American unless and until such shareholder surrenders for cancellation his
certificate for United American Common Stock. SunTrust Bank, Atlanta, Atlanta,
Georgia, transfer agent for BancGroup Common Stock, will act as the Exchange
Agent with respect to the shares of United American Common Stock surrendered in
connection with the Merger. A detailed explanation of these arrangements will be
mailed to United American 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 each of United American and BancGroup to
consummate the Merger is conditioned on the receipt of an opinion from Coopers &
Lybrand L.L.P., BancGroup's independent public accountant, to the effect that
the Merger will constitute such a reorganization. The opinion has been delivered
to BancGroup. In delivering its opinion, Coopers & Lybrand L.L.P., has received
and relied upon certain representations contained in certificates of officers of
BancGroup and United American 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 United
American has no knowledge of any plan or intention on the part of the United
American shareholders to sell or dispose of BancGroup Common Stock that would
reduce their holdings to the number of shares having in the aggregate a fair
market value of less than 50% of the total fair market value of the United
American Common Stock outstanding immediately upon consummation of the Merger.
Neither United American nor BancGroup intends to seek a ruling from the IRS
as to the federal income tax consequences of the Merger. United American's
shareholders should be aware that the opinion will not be binding on the IRS or
the courts. United American's shareholders also should be aware that some of the
tax consequences of the Merger are governed by provisions of the Code as to
which there are no final regulations and little or no judicial or administrative
guidance. There can be no assurance that future legislation, administrative
rulings, or court decisions will not adversely affect the accuracy of the
statements contained herein.
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The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code, and the following federal income tax consequences will
result to United American's shareholders who exchange their shares of United
American Common Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by United American's
shareholders on the exchange of shares of United American Common Stock for
shares of BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
United American 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 United American Common Stock
surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each United American shareholder will include the period during
which the shares of United American Common Stock exchanged therefor were
held, provided that the shares of United American Common Stock were a
capital asset in the holder's hands as of the Effective Date;
(iv) Cash payments received by each United American 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 United American Common Stock is a capital asset
in the hands of the holder;
(vi) No gain or loss will be recognized by United American 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 United American;
(vii) The basis of the assets of United American acquired by BancGroup
will be the same as the basis of the assets in the hands of United American
immediately prior to the Merger;
(viii) The holding period of the assets of United American in the
hands of BancGroup will include the period during which such assets were
held by United American;
(ix) No gain or loss will be recognized by United American's
shareholders on the assumption and conversion of United American Options
into options to acquire BancGroup Common Stock;
(x) The Cashless Exchange will result in the United American Option
holders recognizing ordinary income equal to the fair market value of
BancGroup stock received in the exchange; and
(xi) A United American 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 United American Common Stock converted, if the shares of United
American Common Stock were held as capital assets. However, a United
American 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 United American shareholder will be required to report on such
shareholder's federal income tax return for the fiscal year of such shareholder
in which the Merger occurs that such shareholder has received BancGroup Common
Stock in a reorganization.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF UNITED AMERICAN, TO
UNITED AMERICAN AND TO BANCGROUP AND DOES NOT PURPORT TO BE A COMPLETE
DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. THE DISCUSSION DOES NOT
ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR SHAREHOLDER
SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS
DEALERS IN SECURITIES,
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BANKS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS,
STOCKHOLDERS WHO DO NOT HOLD THEIR SHARES OF UNITED AMERICAN COMMON STOCK AS
"CAPITAL ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE, AND
SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF UNITED AMERICAN 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 UNITED AMERICAN 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. UNITED AMERICAN 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 United American, 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 United American Common Stock as
compared with BancGroup Common Stock, see "Comparative Rights of Stockholders."
CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The obligations of United American 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 United American
Common Stock; (ii) the notification to, or approval of the Merger by, the
Federal Reserve and the Florida Department and approval of the Bank Merger by
the Alabama Department and the Federal Reserve; (iii) the absence of pending or
threatened litigation with a view to restraining or prohibiting consummation of
the Merger or 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 April 15, 1998; and (vi) receipt of opinions of counsel regarding
certain matters.
The obligation of United American 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 United American; (ii) the number of shares
as to which holders of United American Common Stock exercise dissenters' rights
not exceeding 10% of the outstanding shares of United American Common Stock;
(iii) the receipt of a letter from Coopers & Lybrand L.L.P. concurring with the
conclusions of BancGroup's and United American's management that no conditions
exist with respect to each company which would preclude accounting for the
Merger as a pooling of interests; (iv) the accuracy in all material respects of
the representations and warranties of United American contained in the
Agreement, and the performance by United American of all of its covenants and
agreements under the Agreement; and (v) the receipt by BancGroup of certain
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undertakings from holders of United American Common Stock who may be deemed to
be "affiliates" of United American 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 each of United American and BancGroup may waive all
conditions to its respective obligation to consummate the Merger, other than the
receipt of the requisite approvals of regulatory authorities and approval of the
Agreement by the shareholders of United American. 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 United American 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 OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and approval of the Merger by the holders of United American Common Stock, no
amendment decreasing the consideration to be received by United American
shareholders may be made without the further approval of such shareholders. Such
amendments may require the filing with the Commission of an amendment of the
Registration Statement, of which this Prospectus forms a part. The Agreement may
be terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the shareholders of United American, by the
mutual consent of the respective Boards of Directors of United American and
BancGroup, or by the Board of Directors of either BancGroup or United American
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
April 15, 1998, if such failure to consummate is not caused by any breach of the
Agreement by the party electing to terminate. See "-- Conditions to Consummation
of the Merger."
REGULATORY APPROVALS
The Merger is subject to prior approval of the Federal Reserve under the
BHCA and by the Florida Department pursuant to applicable provisions of the
Florida Banking Code. It is contemplated that the Bank Merger will occur after
the Merger. The approval of the Federal Reserve and the Alabama Department must
be obtained prior to the Bank Merger. In addition, notification of the Bank
Merger must be filed with the Florida Department. Applications for appropriate
regulatory approvals by the Federal Reserve, the Florida Department and the
Alabama Department were filed with such agencies on November 6, 1997. The
Federal Reserve approved the Merger as of December 11, 1997, and the Florida
Department approved the Merger as of December 23, 1997.
Federal Reserve Approval. Pursuant to Section 3 of the BHCA, and the
regulations promulgated pursuant thereto, the approval of the Federal Reserve
must be obtained prior to the Merger. 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 part of the United States. In
addition, the Federal Reserve may not approve the Merger if it finds that the
effect thereof may be substantially to lessen competition in any section of the
country, 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 condition and managerial
resources of BancGroup, its subsidiaries, any banks related to BancGroup through
common ownership or management, and the Bank. Finally, the Federal Reserve will
consider the compliance records of BancGroup's subsidiaries under the Community
Reinvestment Act.
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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 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 to 30 days following the Federal Reserve's approval of the Merger.
During such period, the United States Department of Justice, should it object to
the Merger for antitrust reasons, may challenge the consummation of the Merger.
Pursuant to Section 18(c) of the Federal Deposit Insurance Act (the "Bank
Merger Act"), the Federal Reserve's approval also must be obtained prior to the
Bank Merger. The Federal Reserve 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 Federal Reserve 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 outweighed 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 Federal Reserve is
required to take into consideration the financial and managerial resources and
future prospects of the existing and proposed institutions, and the convenience
and needs of the community to be served.
In that the Bank Merger constitutes an interstate bank merger, certain
additional requirements are applicable to the Bank Merger. For example, subject
to certain exceptions, the Federal Reserve is prohibited from approving the Bank
Merger if Colonial Bank materially fails to comply with filing requirements
imposed by the Florida Department of Banking and Finance for interstate bank
merger transactions. In addition, the Federal Reserve is prohibited from
approving the Bank Merger if the bank resulting from the Bank Merger, including
all insured depository institutions which are affiliates of such resulting bank,
upon consummation of the transaction, would control more than 10% of the total
amount of deposits of insured depository institutions in the United States. The
Federal Reserve is also prohibited from approving the Bank Merger if either
party to the Bank Merger has a branch in any state in which any other bank
involved in the Bank Merger has a branch, and the resulting bank, upon
consummation of the Bank Merger, would control 30% or more of the total amount
of deposits of insured depository institutions in any such state. Finally, the
Federal Reserve may approve the interstate bank merger only if each bank
involved in the transaction is adequately capitalized as of the date the
application is filed, and the Federal Reserve determines that the resulting bank
will continue to be adequately capitalized and adequately managed upon
consummation of the Bank Merger.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15 to
30 days following the Federal Reserve's approval of
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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.
Florida Department Approval. The Florida Department must approve the
change of control of the Bank which would be effected by the Merger. Under
Section 658.28 of the Florida Banking Code, the Florida Department shall issue a
Certificate of Approval for a change of control of a Florida state bank only
after it has made an investigation and has determined that the proposed new
owner of a controlling interest is qualified by reputation, character,
experience and financial responsibility to control and operate the bank in a
legal and proper manner and that the interest of the other shareholders, if any,
and the depositors and creditors of the bank and the interest of the public
generally will not be jeopardized by the proposed change in ownership,
controlling interest or management.
In addition, pursuant to Section 658.295 of the Florida Banking Code, the
Florida Department shall not permit the Merger unless the bank has been in
existence and continuously operating, on the date of its acquisition, for more
than three years. Also, the Florida Department shall not permit the Merger if,
upon consummation of the transaction, BancGroup, including all of its insured
depository institutions that would be "affiliates," as defined in 12 U.S.C.
sec. 1841(k), would control 30% or more of the total amount of deposits held by
all insured depository institutions in the State of Florida.
Alabama Department Approval. The Bank Merger must be approved by the
Alabama Department pursuant to applicable provisions of the Alabama Banking
Code. If the Superintendent of the Alabama Department finds that (1) the
proposed transaction will not be detrimental to the safety and soundness of the
bank resulting from the Bank Merger, (2) any new officers and directors of the
resulting bank are qualified by character, experience, and financial
responsibility to direct and manage the resulting bank, and (3) the proposed
Bank Merger is consistent with the convenience and needs of the communities to
be served by the resulting bank in the State of Alabama and is otherwise in the
public interest, the Bank Merger shall be approved by the Superintendent.
The Agreement provides that the obligation of each of BancGroup and United
American to consummate the Merger is conditioned upon the receipt of all
necessary regulatory approvals. There can be no assurance that the applications
necessary for BancGroup to consummate the Merger with United American will be
approved, and, if such approvals are received, that such approvals will not be
conditioned upon terms and conditions that would cause the parties to abandon
the Merger.
Any approval received from bank regulatory agencies reflects only their
view that the Merger does not contravene applicable competitive standards
imposed by law, and that the Merger is consistent with regulatory policies
relating to safety and soundness. THE APPROVAL OF THE BANK REGULATORY AGENCIES
IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE MERGER.
BancGroup is not aware of any governmental approvals or actions that may be
required for consummation of the Merger except for the Federal Reserve, Alabama
Department and Florida Department approvals described above. Should any such
approval or action be required, it is presently contemplated that such approval
or action would be sought.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the business
of United American pending consummation of the Merger. The Agreement prohibits
United American from taking, without the prior written consent of BancGroup, any
of the following actions, prior to the Effective Date, subject to certain
limited exceptions previously agreed to by BancGroup and United American:
(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 United American Common Stock issued
upon the exercise of United American Options;
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(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;
(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 United American 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 United American or its subsidiaries.
The Agreement also provides that (i) at the request of BancGroup, United
American will consult with BancGroup and advise BancGroup in advance of all loan
requests outside the ordinary course of business or in excess of $500,000 that
are not single-family residential loan requests; and (ii) United American will
consult with BancGroup respecting business issues that United American believes
should be brought to the attention of BancGroup.
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, and except for the Merger, neither
United American 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,
United American or any business combination involving United American
(collectively, an "Acquisition Proposal") other than as contemplated by the
Agreement. United American is required to notify
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BancGroup immediately if any such inquiries or proposals are received by United
American, if any such information is requested from United American, or if any
such negotiations or discussions are sought to be initiated with United
American. United American is required to instruct its officers, directors,
agents or affiliates or their subsidiaries to refrain from doing any of the
above. United American may communicate information about an Acquisition Proposal
to its shareholders if and to the extent that legal counsel provides a written
opinion to United American that it is required to do so in order to comply with
its legal obligations.
In connection with the Agreement, United American has granted to BancGroup
the option to purchase up to 19% of the United American Common Stock at a
purchase price of $36.50 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of United American by another party. The option is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for any third party to acquire control of United
American while BancGroup is seeking to consummate the Merger. See "-- Related
Transactions -- Stock Option."
INDEMNIFICATION
BancGroup has agreed to indemnify present and former directors and officers
of United American 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 United American's Articles of
Incorporation and Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of United American Common Stock as of the Record Date are entitled
to dissenters' rights of appraisal under Florida law. Consummation of the Merger
is subject to, among other things, the holders of no more than 10% of the
outstanding United American Common Stock electing to exercise their dissenters'
rights. PURSUANT TO SECTION 607.1320 OF THE FBCA, A UNITED AMERICAN 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 UNITED AMERICAN SHAREHOLDERS. SUCH FAIR VALUE IS EXCLUSIVE OF ANY
APPRECIATION OR DEPRECIATION IN ANTICIPATION OF THE MERGER, UNLESS EXCLUSION
WOULD BE INEQUITABLE.
In order to exercise appraisal rights, a dissenting shareholder of United
American (a "Dissenting Shareholder") must strictly comply with the statutory
procedures of Sections 607.1320, 607.1301 and 607.1302 of the FBCA, which are
summarized below. A copy of the full text of those Sections is attached hereto
as Appendix B. SHAREHOLDERS OF UNITED AMERICAN ARE URGED TO READ APPENDIX B IN
ITS ENTIRETY AND TO CONSULT WITH THEIR LEGAL ADVISORS. EACH SHAREHOLDER OF
UNITED AMERICAN 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 WILL CAUSE A FORFEITURE OF ANY APPRAISAL RIGHTS.
Procedures for Exercising Dissenters' Rights of Appraisal. The following
summary of Florida law is qualified in its entirety by reference to the full
text of the provisions of the FBCA attached hereto as Appendix B.
1. A Dissenting Shareholder must file with United American, 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, United
American must give written notice of the authorization of the Merger, if
obtained, to each United American shareholder who filed notice of intent to
demand payment for his shares. WITHIN TWENTY DAYS AFTER THE GIVING OF THE
FOREGOING NOTICE BY UNITED AMERICAN, EACH DISSENTING SHAREHOLDER MUST FILE
WITH UNITED AMERICAN A NOTICE OF ELECTION TO DISSENT, STATING HIS OR HER
NAME AND ADDRESS, THE NUMBER OF SHARES AS TO WHICH HE
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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 AGREEMENT. A Dissenting Shareholder filing an election to dissent must
also deposit the certificate(s) representing his or her shares with United
American 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 United American to pay for 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), United
American (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 United American 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 United American (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 United American, 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 Orange County requesting that the fair value of such shares
be determined by the Court.
7. If United American fails to institute such proceeding within the
above-prescribed period, any Dissenting Shareholder may do so in the name
of United American. A copy of the initial pleading will be served on each
Dissenting Shareholder. United American 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 United American 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 United American (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 United American 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 United American 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.
Any Dissenting Shareholder who perfects his or her right to be paid the
value of his or her shares will recognize gain or loss, if any, for federal
income tax purposes upon the receipt of cash for such shares. The
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<PAGE> 35
amount of gain or loss and its character as ordinary or capital gain or loss
will be determined in accordance with applicable provisions of the Code. See
"-- Certain Federal Income Tax Consequences."
BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE FLORIDA LAW RELATING TO
DISSENTERS' APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM
THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISERS.
RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
The issuance of the shares of BancGroup Common Stock pursuant to the Merger
(including any shares to be issued pursuant to United American Options) has been
registered under the Securities Act of 1933 (the "Securities Act"). As a result,
shareholders of United American who are not "affiliates" of United American (as
such term is defined under the Securities Act) may resell, without restriction,
all shares of BancGroup Common Stock which they receive in connection with the
Merger. Under the Securities Act, only affiliates of United American are subject
to restrictions on the resale of the BancGroup Common Stock which they receive
in the Merger.
The BancGroup Common Stock received by affiliates of United American who do
not also become affiliates of BancGroup after the consummation of the Merger may
not be sold except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such shareholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers or certain other
transactions within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of BancGroup Common
Stock or the average weekly trading volume in BancGroup Common Stock reported on
the NYSE during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to the availability of current public information about
BancGroup. The restrictions on sales will cease to apply under most
circumstances once the former United American affiliate has held the BancGroup
Common Stock for at least one year. BancGroup Common Stock held by affiliates of
United American who become affiliates of BancGroup, if any, will be subject to
additional restrictions on the ability of such persons to resell such shares.
United American 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 United American. United American will also obtain from each such
person a written undertaking to the effect that no sale or transfer will be made
of any shares of BancGroup Common Stock by such person except pursuant to Rule
145 or pursuant to an effective registration statement or an exemption from
registration under the Securities Act. Receipt of such an undertaking is a
condition to BancGroup's obligation to close the Merger. The undertaking also
will require each affiliate to agree that such person will not sell or otherwise
reduce risk relative to any shares of BancGroup Common Stock received in the
Merger until financial results concerning at least 30 days of post-Merger
combined operations have been published by BancGroup within the meaning of
Section 201.01 of the Commission's Codification of Financial Reporting Policies.
If such undertakings are not received and BancGroup waives receipt of such
condition, the certificates for the shares 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 United American 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 United American
Common Stock. Under this accounting treatment, assets and liabilities of United
American 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
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<PAGE> 36
consolidated balance sheet. Financial statements of BancGroup issued after the
Effective Date of the Merger may be restated to reflect the consolidated
operations of BancGroup and United American 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
United American Common Stock will be reported on the NYSE.
TREATMENT OF UNITED AMERICAN OPTIONS
Cashless Exchange of Options. As of the date of this Prospectus, United
American had granted options (the "United American Options"), which entitle the
holders thereof to acquire up to 190,500 shares of United American Common Stock.
Subject to the terms of the United American stock option plan under which such
options were issued the Agreement provides that, no later than five days prior
to the Effective Date, the holders of United American Options that have vested
for such holders may provide written notice to United American (in form and
substance reasonably satisfactory to BancGroup) that they wish to surrender
their United American Options to BancGroup, effective at the Effective Date,
and, in lieu of having their United American Options being assumed by BancGroup
as described in the immediately following paragraph, to receive an amount of
BancGroup Common Stock in exchange therefor equal to the difference between the
total value of the shares of BancGroup Common Stock to be issued pursuant to
such United American Options (based upon the number of shares of BancGroup
Common Stock to be issued pursuant to the United American Options multiplied by
the Market Value) less the aggregate exercise price of such United American
Options at the Effective Date, divided by the Market Value (the "Cashless
Exchange"). No fractions of shares shall be issued and fractions shall be paid
in cash at the Market Value. Any United American Options that have not vested at
the Effective Date shall be assumed by BancGroup in accordance with the
immediately following paragraph.
Assumption of Options. Except for the United American Options exercised or
terminated prior to the Effective Date or surrendered in the Cashless Exchange,
on the Effective Date, BancGroup will assume all United American Options
outstanding, and each such option will represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the United American
Options. The registration statement registering the shares of BancGroup Common
Stock issued pursuant to the Merger also registers the shares of BancGroup
Common Stock to be issued upon the exercise of the United American Options
assumed by BancGroup. The number of shares of BancGroup Common Stock to be
issued pursuant to such options will equal the number of shares of United
American Common Stock subject to such United American Options multiplied by the
Exchange Ratio, provided that no fraction of shares of BancGroup Common Stock
will be issued, and the number of shares of BancGroup Common Stock to be issued
upon the exercise of United American Options, if a fractional share exists, will
equal the number of whole shares obtained by rounding to the nearest whole
number, giving account to such fraction, or else such fractional interest shall
be paid in cash. The exercise price for the acquisition of BancGroup Common
Stock will be the exercise price for each share of United American Common Stock
subject to such options divided by the Exchange Ratio, adjusted appropriately
for any rounding to whole shares that may be done.
The United American Options are issuable pursuant to the United American
Directors' Stock Option Plan (the "United American Director Plan") and the
United American Officers' and Employees' Stock Option Plan (the "United American
Employee Plan") (collectively, the United American Director Plan and the United
American Employee Plan are referred to as the "Option Plans"). The options
issued under the United American Director Plan are exercisable at $9.00 per
share and under the United American Employee Plan at $10.00 per share. The
option exercise price provisions of the United American Director Plan provide
that the exercise price of such options (which were initially issued at an
exercise price of $10.00 per share) is reduced by the amount of cash dividends
paid by United American since February 1, 1994. Accordingly, the original option
exercise price of $10.00 was reduced by $1.00 to $9.00 to take into account
interim cash dividends paid by United American. The Agreement provides that
following the Effective Date the exercise price of the options issued under the
United American Director Plan will become fixed at $9.00 per share, with
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<PAGE> 37
no further reduction in exercise price resulting from cash dividends declared by
either United American or BancGroup.
The Option Plans are not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended, nor subject to the Employee Retirement Income
Security Act of 1974. United American Options are not transferrable except under
the laws of descent and distribution.
The terms of the United American Employee Plan provide that all United
American Options granted thereunder terminate on the Effective Date to the
extent not exercised prior thereto. Accordingly, no United American Options
granted under the United American Employee Plan will survive the closing of the
Merger. Shares of United American Common Stock issued upon exercise of United
American Options granted under the United American Employee Plan will be
converted in the Merger into shares of BancGroup Common Stock in accordance with
the Exchange Ratio.
Purpose of the Option Plans. The purpose of the Option Plans are to
advance the interests of United American and the Bank by affording to directors,
key management employees and officers an opportunity to acquire or increase
their propriety interest in United American and, thus, to motivate, retain and
attract highly competent individuals for the benefit of United American.
BancGroup believes that its assumption of the United American Options will be
consistent with this purpose. No further options will be granted under the
Option Plans after the Merger. A total of 17 persons currently hold United
American Options.
Tax Consequences -- Incentive Options. Options issued under the United
American Employee Plan are intended to qualify as "incentive stock options,"
under Section 422 of the Internal Revenue Code of 1986, as amended. Under the
Internal Revenue Code no income will result to a grantee of any such option upon
the granting or exercising of an option by the grantee, and BancGroup will not
be entitled to a tax deduction by reason of such grant or exercise.
If, after exercising the option, the employee holds the stock obtained
through exercise for at least two years after the date of option grant and at
least one year after the stock was obtained, the employee's gain (if any) on
selling the stock will generally be treated as a long term capital gain.
Generally, the employee's alternative minimum taxable income for minimum tax
purposes will be increased by the difference between the option price and the
fair market value of the stock on the date of exercise.
If the holding period requirements just stated are not met, then any gain
on the sale of the stock will be taxed partly or entirely at ordinary income tax
rates. If the stock is held for less than the required holding period, then the
difference between the option exercise price and the fair market value of the
stock on the date of exercise will be taxed at ordinary income tax rates. The
gain equal to the increase in the fair market value of the stock after the date
of exercise of the option will generally be taxed as capital gain.
It should be understood that the holding periods discussed above relate
only to federal income tax treatment and not to any securities law restrictions
that may apply to the sale of shares obtained through an option.
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.
Tax Consequences -- Non Qualified Options. The options issued under the
Director Option Plan are nonqualified options that 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. Holders of options under the United American Director Plan
should contact their own professional tax advisors for advice concerning their
particular tax situation and any change in the tax laws since the date of this
Prospectus.
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<PAGE> 38
Administration. The shares of stock to be delivered upon the exercise of
United American Options granted under the United American Director Plan shall be
made available, after the Merger, from the authorized but unissued shares of
BancGroup's Common Stock.
The United American Director 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 36101 telephone: (334)
240-5000.
Exercise of Options. After a United American Option becomes exercisable in
accordance with its terms, it may be exercised by the holder by giving written
notice to BancGroup on a form provided by BancGroup and by paying to BancGroup
in cash the exercise price of the shares to be acquired under the option.
Payment may be made to BancGroup by cash, check, bank draft, or money order, or,
by delivering BancGroup stock already owned by the option holder. The period
during which an option may be exercised is stated in the agreement respecting
each grant of options but in no case may be more than ten years from the date
the option is granted. The optionee must be in the continuous employ of United
American or BancGroup from the date of grant through the date of exercise,
except as stated below.
Termination of Employment. If an employee is terminated for cause, or if
an employee voluntarily terminates employment other than by retirement, the
option will also terminate as of the date of termination of employment. "Cause"
is defined in the Option Plan as the negligent or willful failure of an optionee
to perform his or her duties in a manner consistent with the best interests of
United American or its subsidiaries and in accordance with the directives of
management. If an employee's employment is terminated without cause, or if an
Optionee resigns as a director, the holder of the option has 30 days following
such termination to exercise such option. In the case of permanent and total
disability, an employee has the right at any time during the period ending one
year from the date of termination of employment as a result of such disability
to exercise the option.
Amendment and Other Matters. BancGroup's Board of Directors may at any
time amend the United American Director 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 United American Options held. Option
holders may obtain such information from BancGroup at the address given above.
The shares subject to options will be obtained by BancGroup from authorized
but unissued shares. BancGroup has reserved sufficient authorized but unissued
shares for issuance pursuant to options under the United American Plans and does
not anticipate acquiring any shares in the open market for such purposes.
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<PAGE> 39
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The Common Stock
was first listed on the NYSE on February 24, 1995. Prior to February 21, 1995,
BancGroup had two classes of common stock outstanding, Class A and Class B
Common Stock. The Class B Common Stock was not publicly traded. The Class A
Common Stock was traded in the over-the-counter market and quoted on the Nasdaq
NMS. The BancGroup Class A Common Stock had more limited voting rights than the
BancGroup Class B Common Stock. The Class A and Class B Common Stock were
reclassified into one class of BancGroup Common Stock on February 21, 1995, and
the Class A Common Stock ceased to be quoted on the Nasdaq NMS on February 24,
1995.
The following table shows the dividends paid per share and indicates the
high and low closing prices for the BancGroup Class A Common Stock as reported
by the Nasdaq NMS up to February 24, 1995, and the same information reported by
the NYSE for the BancGroup Common Stock commencing February 24, 1995.
<TABLE>
<CAPTION>
PRICE(1)
----------------------- DIVIDENDS(1)
HIGH LOW (PER SHARE)
----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1995
1st Quarter................................................. $11 13/16 $ 9 3/4 $0.1125
2nd Quarter................................................. 13 5/8 11 9/16 0.1125
3rd Quarter................................................. 14 15/16 13 3/4 0.1125
4th Quarter................................................. 16 7/16 14 1/8 0.1125
1996
1st Quarter................................................. 18 1/4 15 0.135
2nd Quarter................................................. 18 1/16 15 5/8 0.135
3rd Quarter................................................. 17 15/16 15 5/8 0.135
4th Quarter................................................. 20 1/8 17 3/8 0.135
1997
1st Quarter................................................. 24 18 2/3 0.15
2nd Quarter................................................. 24 7/8 22 0.15
3rd Quarter................................................. 29 3/16 24 1/4 0.15
4th Quarter (through December 26, 1997)..................... 35 1/16 28 15/16 0.15
</TABLE>
- ---------------
(1) Prices and dividends have been restated to reflect the impact of a
two-for-one stock split effected in the form of a 100% stock dividend paid
February 11, 1997.
On September 8, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $27.9375 per share.
At December 31, 1996, BancGroup's subsidiaries accounted for approximately
98% of BancGroup's consolidated assets. BancGroup derives substantially all of
its income from dividends received from its subsidiaries. Various statutory
provisions and regulatory policies limit the amount of dividends that
BancGroup's subsidiary bank may pay without regulatory approval. In addition,
federal statutes restrict the ability of BancGroup's subsidiary bank to make
loans to BancGroup.
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<PAGE> 40
UNITED AMERICAN
There is no established public trading market for the United American
Common Stock. The shares of United American Common Stock are not actively
traded, and such trading activity, as it occurs, takes place in privately
negotiated transactions. Management of United American is aware of certain
transactions in shares of United American that have occurred since January 1,
1995, although the trading prices of all stock transactions are not known. The
following sets forth the trading prices for the shares of United American Common
Stock that have occurred since January 1, 1995 for transactions in which the
trading prices are known to management of United American:
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1995
First Quarter....................................... -- -- --
Second Quarter...................................... $10.00 $10.00 --
Third Quarter....................................... -- -- --
Fourth Quarter...................................... 10.00 10.00 --
1996
First Quarter....................................... 10.00 10.00 $ .50
Second Quarter...................................... -- -- --
Third Quarter....................................... -- -- --
Fourth Quarter...................................... -- -- --
1997
First Quarter....................................... 10.00 10.00 .50
Second Quarter...................................... 15.00 10.00 --
Third Quarter....................................... 20.00 10.00 --
Fourth Quarter (through December 24, 1997).......... -- -- --
</TABLE>
In March 1995, United American sold 659,200 shares of United American
Common Stock in a private placement transaction at $10.00 per share. Each United
American shareholder of record on January 31, 1995 who purchased shares of
United American Common Stock in the offering, also was issued a nontransferable
stock purchase warrant entitling the shareholder to purchase for each two shares
of United American Common Stock purchased in the offering an additional share of
United American Common Stock on or before July 1, 1997 at a per share amount
equal to $10.00. An aggregate of 220,100 stock purchase warrants were issued in
the offering, all of which were exercised for shares of United American Common
Stock before July 1, 1997. On August 22, 1997, United American issued an
aggregate of 59,500 shares of United American Common Stock, valued at $20.00 per
share, to acquire an entity (owned in part by certain directors of United
American) which owned United American's main office and certain property
adjacent to the office. See "Business of United American -- Properties."
The Agreement provides that United American will not pay dividends prior to
the Effective Date. See "The Merger -- Conduct of Business Pending the Merger."
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 100,000,000 shares of
BancGroup Common Stock, par value $2.50 per share, and 1,000,000 shares of its
Preference Stock, par value $2.50 per share. As of September 30, 1997, there
were issued and outstanding a total of 41,964,197 shares of BancGroup Common
Stock. No shares of Preference Stock are issued and outstanding. 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 $5,012,686
were outstanding as of September 30, 1997 and convertible at any time into
358,049 shares of BancGroup Common Stock, subject to adjustment. There are
1,774,988 shares of BancGroup Common Stock subject to issue upon exercise of
options under BancGroup's stock option plans. In addition to BancGroup Common
Stock to be issued in the Merger, BancGroup will issue additional shares of
BancGroup
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<PAGE> 41
Common Stock in pending acquisitions. On January 20, 1997, BancGroup issued,
through a special purpose trust, $70 million of Trust Preferred Securities. See
"Business of BancGroup -- Proposed Affiliate Banks."
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 "BancGroup 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 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 Board of
Directors of BancGroup to issue authorized shares of BancGroup Common Stock
without stockholder approval. However, BancGroup's Common Stock is listed on the
NYSE, which requires stockholder approval of the issuance of additional shares
of BancGroup Common Stock under certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-up
of BancGroup, whether voluntary or involuntary, the holders of BancGroup Common
Stock will be entitled to share ratably in any of its assets or funds that are
available for distribution to its stockholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after preferences
of any outstanding Preference Stock.
PREFERENCE STOCK
The Preference Stock may be issued from time to time as a class without
series, or if so determined by the Board of Directors of BancGroup, either in
whole or in part in one or more series. The voting rights, and such
designations, preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, including, but not limited to, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of Preference Stock (or of the entire class of Preference Stock if none
of such shares has been issued), the number of shares constituting any such
series and the terms and conditions of the issue thereof may be fixed by
resolution of the Board of Directors of BancGroup. Preference Stock may have a
preference over the BancGroup Common Stock with respect to the payment of
dividends and the distribution of assets in the event of the liquidation or
winding-up of BancGroup and such other preferences as may be fixed by the Board
of Directors of BancGroup.
1986 DEBENTURES
BancGroup issued the 1986 Debentures in the total principal amount of
$28,750,000. The 1986 Debentures were issued under a trust indenture (the "1986
Indenture") between BancGroup and SunTrust Bank, Atlanta, Atlanta, Georgia, as
trustee.
The 1986 Debentures will mature on March 31, 2011, and are convertible at
any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $14 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture, a total of 512,800 shares of such BancGroup Common Stock will be
issued. The 1986 Debentures are redeemable, in whole or in part, at the option
of BancGroup at certain premiums until
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<PAGE> 42
1996, when the redemption price shall be equal to 100% of the face amount of the
1986 Debentures plus accrued interest. The payment of principal and interest on
the 1986 Debentures is subordinate, to the extent provided in the 1986
Indenture, to the prior payment when due of all Senior Indebtedness of
BancGroup. "Senior Indebtedness" is defined as any indebtedness of BancGroup for
money borrowed, or any indebtedness incurred in connection with an acquisition
or with a merger or consolidation, outstanding on the date of execution of the
1986 Indenture as originally executed, or thereafter created, incurred or
assumed, and any renewal, extension, modification or refunding thereof, for the
payment of which BancGroup (which term does not include BancGroup's consolidated
or unconsolidated subsidiaries) is at the time of determination responsible or
liable as obligor, guarantor or otherwise. Senior Indebtedness does not include
(i) indebtedness as to which, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
indebtedness is subordinate in right of payment to any other indebtedness of
BancGroup, and (ii) indebtedness which by its terms states that such
indebtedness is subordinate to or equally subordinate with the 1986 Debentures.
At December 31, 1996, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $870.0 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.
OTHER INDEBTEDNESS
On January 29, 1997, BancGroup issued, through a special purpose trust,
$70.0 million of Trust Preferred Securities. The securities bear interest at
8.92% and are subject to redemption in whole or in part any time after January
2007 through January 2027. The securities are subordinated to substantially all
of BancGroup's indebtedness. In BancGroup's consolidated statement of condition,
these securities will be shown as long-term debt.
BancGroup has contracted to enter into a merger with ASB BancShares, Inc.
("ASB"), a Delaware corporation wherein BancGroup would be surviving
corporation. As part of the consideration for the Common Stock of ASB, BancGroup
intends to issue debentures to three ASB shareholders. It is anticipated that
the aggregate principal amount of these debentures will be $7,724,813.
The debentures would pay a rate of interest equal to the New York Prime
Rate minus 1% (but in no event less than 7% per annum) and would be due and
payable ten years from the date of issuance. They are senior to the BancGroup
Common Stock upon liquidation, but would be subordinate to BancGroup's Senior
Indebtedness. See "BancGroup Capital Stock and Debentures." The Debentures are
redeemable by BancGroup with the consent of the holders thereof. A holder of a
Debenture may, subject to BancGroup's right to decline, request redemption of
any or all of the Debentures held by him or her.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and bylaws may have the
effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup Board of Directors to issue BancGroup
Preference Stock with such rights and privileges, including voting rights, as it
may deem appropriate may enable BancGroup's Board of Directors to prevent a
change in control despite a shift in ownership of the BancGroup Common Stock.
See "General" and "Preference Stock." In addition, the power of BancGroup's
Board of Directors to issue additional shares of BancGroup Common Stock may help
delay or deter a change in control by increasing the number of shares needed to
gain control. See "BancGroup Common Stock." The following provisions also may
deter any change in control of BancGroup.
Classified Board. BancGroup's Board of Directors is classified into three
classes, as nearly equal in number as possible, with the members of each class
elected to three-year terms. Thus, one-third of BancGroup's Board of Directors
is elected by stockholders each year. With this provision, two annual elections
are required in order to change a majority of the Board of Directors. There are
currently 22 directors of
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<PAGE> 43
BancGroup. This provision of the BancGroup Certificate also stipulates that (i)
directors can be removed only for cause upon a vote of 80% of the voting power
of the outstanding shares entitled to vote in the election of directors, voting
as a class, (ii) vacancies in the Board of Directors may only be filled by a
majority vote of the directors remaining in office, (iii) the maximum number of
directors shall be fixed by resolution of the Board of Directors, and (iv) the
provisions relating to the classified Board of Directors can only be amended by
the affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares entitled to vote in the election of directors, voting as a
class.
Business Combinations. Certain "Business Combinations" of BancGroup with a
"Related Person" may only be undertaken with the affirmative vote of at least
75% of the outstanding shares of "Voting Stock," plus the affirmative vote of at
least 67% of the outstanding shares of Voting Stock, not counting shares owned
by the Related Person, unless the Continuing Directors of BancGroup approve such
Business Combination. A "Related Person" is a person, or group, who owns or
acquires 10% or more of the outstanding shares of BancGroup Common Stock,
provided that no person shall be a Related Person if such person would have been
a Related Person on the date of approval of this provision by BancGroup's Board
of Directors, i.e., April 20, 1994. An effect of this provision may be to
exclude Robert E. Lowder, the current Chairman and Chief Executive Officer of
BancGroup, and certain members of his family from the definition of Related
Person. A "Continuing Director" is a director who was a member of the Board of
Directors immediately prior to the time a person became a Related Person. This
provision may not be amended without the affirmative vote of the holders of at
least 75% of the outstanding shares of Voting Stock, plus the affirmative vote
of the outstanding shares of at least 67% of the outstanding Voting Stock,
excluding shares held by a Related Person. This provision may have the effect of
giving the incumbent Board of Directors a veto over a merger or other Business
Combination that could be desired by a majority of BancGroup's stockholders. As
of April 30, 1997, the Board of Directors of BancGroup owned approximately
10.64% of the outstanding shares of BancGroup Common Stock.
Board Evaluation of Mergers. The BancGroup Certificate permits the Board
of Directors to consider certain factors such as the character and financial
stability of the other party, the projected social, legal, and economic effects
of a proposed transaction upon the employees, suppliers, regulatory agencies and
customers and communities of BancGroup, and other factors when considering
whether BancGroup should undertake a merger, sale of assets, or other similar
transaction with another party. This provision may not be amended except by the
affirmative vote of at least 80% of the outstanding shares of BancGroup Common
Stock. This provision may give greater latitude to the Board of Directors in
terms of the factors which the board may consider in recommending or rejecting a
merger or other Business Combination of BancGroup.
Director Authority. The BancGroup Certificate prohibits 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 of Directors to act by majority vote.
Bylaw Provisions. BancGroup's Bylaws provide that stockholders wishing to
propose nominees for the Board of Directors or other business to be taken up at
an annual meeting of BancGroup shareholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of stockholders' meetings but could make it more
difficult for shareholders to nominate directors or introduce business at
stockholders' meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning 15% or more of
the outstanding BancGroup Common Stock (or who is an affiliate of BancGroup and
has over the past three years beneficially owned 15% or more of such stock)
(either, for the purpose of this paragraph, an "Interested Stockholder"), unless
the Board of Directors 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
35
<PAGE> 44
combination with an Interested Stockholder if (i) the business combination is
approved by BancGroup's 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 BancGroup Common Stock
(excluding BancGroup Common 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 the BancGroup Certificate relating to
business combinations with a related person, described above at "Business
Combinations," but they are generally less restrictive than the BancGroup
Certificate.
Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve has been given 60
days' prior written notice of such proposed acquisition and within that time
period the Federal Reserve has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve, the acquisition of more than 10% of a class of voting
stock of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as BancGroup, would, under the
circumstances set forth in the presumption, constitute the acquisition of
control. The receipt of revocable proxies, provided the proxies terminate within
a reasonable time after the meeting to which they relate, is not included in
determining percentages for change in control purposes.
36
<PAGE> 45
COMPARATIVE RIGHTS OF SHAREHOLDERS
If the Merger is consummated, shareholders of United American (except those
perfecting dissenters' rights) will become holders of BancGroup Common Stock.
The rights of the holders of the United American Common Stock who become holders
of the BancGroup Common Stock following the Merger will be governed by the
BancGroup Certificate and Bylaws, as well as the laws of Delaware, the state in
which BancGroup is incorporated.
The following summary compares the rights of the holders of United American
Common Stock with the rights of the holders of the BancGroup Common Stock. For a
more detailed description of the rights of the holders of BancGroup Common
Stock, including certain features of the BancGroup Certificate and the DGCL that
might limit the circumstances under which a change in control of BancGroup could
occur, see "BancGroup Capital Stock and Debentures."
The following information is qualified in its entirety by the BancGroup
Certificate and Bylaws, and United American's Articles of Incorporation and
Bylaws, the DGCL and the FBCA.
DIRECTOR ELECTIONS
United American. United American's directors are elected annually.
Shareholders may not cumulate votes in connection with such election (or for any
other purpose).
BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the Board 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
United American. United American directors may be removed by shareholders
with or without cause.
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
United American. Each holder of United American 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
United American. Holders of United American 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 United American.
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
United American. Section 607.0831 of the FBCA provides that a director of
United American will not be personally liable for monetary damages to United
American or any other person for any statement, vote, decision or failure to
act, regarding corporate management or policy, by a director unless: (i) the
director breached or failed to perform his duties as a director, and (ii) the
director's breach of or failure to perform those duties constitutes: (a) 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, (b) a transaction in
37
<PAGE> 46
which the director derived an improper personal benefit, (c) a payment of
certain unlawful dividends and distributions, (d) in a proceeding by or in the
right of United American to procure judgment in its favor or by or in the right
of a shareholder, conscious disregard for the best interests of United American,
or willful misconduct, or (e) in a proceeding by or in the right of someone
other than United American 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 United American 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 United American 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
United American. Under Section 607.0850 of the FBCA, the directors and
officers of United American may be indemnified against certain liabilities which
they may incur in their capacity as officers and directors. Such indemnification
is generally available if the director or officer acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interest of United American, 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 director or officer are
material to the cause of action so adjudicated and constituted: (i) a violation
of the criminal law, unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe his
or her conduct was unlawful; (ii) a transaction from which the executive derived
an improper personal benefit; or (iii) willful misconduct or conscious disregard
for the best interest of United American in a proceeding by or in the right of
United American to procure a judgment in its favor or in a proceeding by or in
the right of a shareholder. United American's Bylaws authorize United American
to indemnify its officers and directors to the extent permitted by the statute.
Furthermore, 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.
United American maintains a directors' and officers' insurance policy
pursuant to which officers and directors of United American would be entitled to
indemnification against certain liabilities, including reimbursement of certain
expenses.
BancGroup. The BancGroup Certificate provides that directors, officers,
employees and agents of BancGroup shall be indemnified to the full extent
permitted under the DGCL. Section 145 of the DGCL contains detailed and
comprehensive provisions providing for indemnification of directors and officers
of Delaware corporations against expenses, judgments, fines and settlements in
connection with litigation. Under the DGCL, other than an action brought by or
in the right of BancGroup, such indemnification is available if it is determined
that the proposed indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of BancGroup
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. In actions brought by or in the right of
BancGroup, such indemnification is limited to expenses (including attorneys'
fees) actually and reasonably
38
<PAGE> 47
incurred in the defense or settlement of such action if the indemnitee acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of BancGroup and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person has been
adjudged to be liable to BancGroup unless and only to the extent that the
Delaware Court of Chancery or the court in which the action was brought
determines upon application that in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the DGCL.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
United American. United American's Bylaws authorize a special shareholders
meeting to be called by the board of directors, United American's chairman of
the board or president, or 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 of
shareholders to be taken instead without a meeting by written consent of
shareholders 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
United American. 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: (i) the articles of incorporation of
the surviving corporation will not differ from its articles before the merger,
and (ii) 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 DGCL provides that mergers and sales of substantially all
of the assets of Delaware corporations must be approved by a majority of the
outstanding stock of the corporation entitled to vote thereon. The DGCL also
provides, however, that the stockholders of the corporation surviving a merger
need not approve the transaction if: (i) the agreement of merger does not amend
in any respect the certificate of incorporation of such corporation; (ii) each
share of stock of such corporation outstanding immediately prior to the
effective date of the merger is to be an identical outstanding or treasury share
of the surviving corporation after the effective date of the merger; and (iii)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20% of the shares of common stock of such corporation
outstanding immediately prior to the effective date of the merger. See also
"BancGroup Capital Stock and Debentures -- Changes in Control" for a description
of the statutory provisions and the provisions of the BancGroup Certificate
relating to changes of control of
39
<PAGE> 48
BancGroup. See "Antitakeover Statutes" for a description of additional
restrictions on business combination transactions.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
United American. Section 607.1002 of the FBCA permits the Board of
Directors to amend the Articles of Incorporation in certain minor respects
without shareholder action, but Section 607.1003 requires most amendments to be
adopted by the shareholders 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 shareholders provide otherwise. The
shareholders entitled to vote have concurrent power to amend or repeal the
bylaws.
BancGroup. Under the DGCL, a Delaware corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "super-majority" 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 DGCL, 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
United American. Holders of United American Common Stock as of the Record
Date are entitled to dissenters' rights of appraisal under Florida law. For a
description of such appraisal rights, see "The Merger -- Rights of Dissenting
Shareholders."
BancGroup. Under the DGCL, a 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 NMS, 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
United American. United American's Articles of Incorporation do not
authorize the issuance of any shares of preferred stock.
BancGroup. The BancGroup Certificate authorizes the issuance of 1,000,000
shares of Preference Stock from time to time by resolution of the Board of
Directors of BancGroup. Currently, no shares of
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<PAGE> 49
Preference Stock are issued and outstanding. See "BancGroup Capital Stock and
Debentures -- Preference Stock."
EFFECT OF THE MERGER ON UNITED AMERICAN SHAREHOLDERS
As of December 23, 1997, United American had 218 shareholders of record and
1,779,600 outstanding shares of common stock. As of September 30, 1997, there
were 41,964,197 shares of BancGroup Common Stock outstanding held by 8,007
stockholders of record.
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, that 90,500 United American Options are exercised prior to the Effective
Date, that no United American Options are exchanged in the Cashless Exchange, an
aggregate amount of 2,017,177 shares of BancGroup Common Stock would be issued
to the shareholders of United American pursuant to the Merger. These shares
would represent approximately 4.59% of the total shares of BancGroup Common
Stock outstanding after the Merger, not counting any shares of BancGroup Common
Stock to be issued in other pending acquisitions.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal stockholder and each director and officer of BancGroup. Based
upon the foregoing assumptions and additional shares issued pursuant to
completed business combinations since April 30, 1997, as a group, the directors
and officers of BancGroup who own approximately 10.34% of BancGroup's
outstanding shares would own approximately 9.88% after the Merger. See "Business
of BancGroup -- Voting Securities and Principal Stockholders."
BancGroup has entered into agreements pursuant to which additional shares
of BancGroup Common Stock will be issued. See "Business of BancGroup -- Proposed
Affiliate Banks."
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<PAGE> 50
THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF CONDITION
(UNAUDITED) (IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of September 30, 1997, (ii) the
condensed consolidated statement of condition of the completed business
combination with First Independence Bank of Florida ("Completed Business
Combination") as of September 30, 1997, (iii) adjustments to give effect to the
completed pooling-of-interests method business combination with First
Independence, (iv) the condensed consolidated statement of condition of United
American Holding Corp., (v) adjustments to give effect to the proposed
pooling-of-interests method business combination with United American, (vi)
combined presentation of the condensed consolidated statements of condition of
the other probable business combinations with BancGroup; ASB Bancshares, Inc.,
South Florida Banking Corp. and First Central Bank ("Other Probable Business
Combinations") as of September 30, 1997, (vii) adjustments to give effect to the
proposed pooling-of-interests method business combinations with South Florida
and First Central and the proposed purchase method business combination with
ASB, (viii) the pro forma combined condensed statement of condition of BancGroup
and subsidiaries as if such combinations had occurred on September 30, 1997.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided below may not be indicative of future results.
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<PAGE> 51
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------------------------------------
CONSOLIDATED COMPLETED UNITED
COLONIAL BUSINESS ADJUSTMENTS/ AMERICAN ADJUSTMENTS/
BANCGROUP COMBINATION (DEDUCTIONS) HOLDING (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks............ $ 221,463 $ 3,432 $ $ 11,228 $ $ 236,123
Interest-bearing deposits in
banks............................. 14,013 270 14,283
Federal funds sold................. 2,470 949 6,247 9,666
Securities available for sale...... 524,740 7,318 39,401 571,459
Investment securities.............. 311,796 311,796
Mortgage loans held for sale....... 182,878 182,878
Loans, net of unearned income...... 4,970,765 50,699 188,964 5,210,428
Less: Allowance for possible loan
losses............................ (61,913) (680) (2,866) (65,459)
---------- ------- ------- -------- -------- ----------
Loans, net......................... 4,908,852 50,019 -- 186,098 -- 5,144,969
Premises and equipment, net........ 123,776 2,137 9,277 135,190
Excess of cost over tangible and
identified intangible assets
acquired, net..................... 68,849 2,089 70,938
Mortgage servicing rights.......... 134,118 134,118
Other real estate owned............ 12,612 394 983 13,989
Accrued interest and other
assets............................ 100,360 799 5,201 106,360
---------- ------- ------- -------- -------- ----------
Total assets....................... $6,605,927 $65,048 $ -- $260,794 $ -- $6,931,769
========== ======= ======= ======== ======== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits........................... $5,136,556 $58,283 $ $227,500 $ $5,422,339
FHLB short-term borrowings......... 610,000 610,000
Other short-term borrowings........ 185,333 8,120 193,453
Subordinated debt.................. 6,208 6,208
Trust preferred securities......... 70,000 70,000
Other long-term debt............... 24,891 2,246 27,137
Other liabilities.................. 100,586 449 1,454 317(4) 102,806
---------- ------- ------- -------- -------- ----------
Total liabilities.................. 6,133,574 58,732 -- 239,320 317 6,431,943
Preferred Stock....................
Common Stock....................... 104,910 3,203 (3,203)(1) 17 (17)(4) 111,213
1,260(1) 5,043(4)
Additional paid in capital......... 187,260 3,130 (3,130)(1) 18,965 (18,965)(4) 206,272
5,073(1) 13,939(4)
Retained earnings.................. 180,778 (15) 2,546 (317)(4) 182,992
Treasury Stock.....................
Unearned compensation.............. (1,796) (69) (1,865)
Unrealized gain (loss) on
securities available for sale, net
of taxes.......................... 1,201 (2) 15 1,214
---------- ------- ------- -------- -------- ----------
Total equity....................... 472,353 6,316 -- 21,474 (317) 499,826
---------- ------- ------- -------- -------- ----------
Total liabilities and equity....... $6,605,927 $65,048 $ -- $260,794 $ -- $6,931,769
========== ======= ======= ======== ======== ==========
Capital Ratios:
Capital Ratio..................... 8.11%
Tangible Leverage Ratio........... 7.28%
Tier One Capital Ratio*........... 9.93%
Total Capital Ratio*.............. 11.31%
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks............ $ 16,043 $ $ 252,166
Interest-bearing deposits in
banks............................. 20 14,303
Federal funds sold................. 8,235 17,901
Securities available for sale...... 69,658 641,117
Investment securities.............. 25,153 336,949
Mortgage loans held for sale....... 182,878
Loans, net of unearned income...... 314,471 5,524,899
Less: Allowance for possible loan
losses............................ (2,962) (68,421)
-------- -------- ----------
Loans, net......................... 311,509 -- 5,456,478
Premises and equipment, net........ 10,244 (115)(3) 145,319
Excess of cost over tangible and
identified intangible assets
acquired, net..................... 8,937(3) 79,875
Mortgage servicing rights.......... 134,118
Other real estate owned............ 1,009 14,998
Accrued interest and other
assets............................ 5,329 235(3) 111,924
-------- -------- ----------
Total assets....................... $447,200 $ 9,057 $7,388,026
======== ======== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits........................... $392,864 $ $5,815,203
FHLB short-term borrowings......... 610,000
Other short-term borrowings........ 10,039 203,492
Subordinated debt.................. 7,725(5) 13,933
Trust preferred securities......... 70,000
Other long-term debt............... 1,685 28,822
Other liabilities.................. 3,566 770(2,3,5) 107,142
-------- -------- ----------
Total liabilities.................. 408,154 8,495 6,848,592
Preferred Stock....................
Common Stock....................... 2,853 1,168(3) 118,880
(2)(3)
4,777(2)
(1,213)(2)
1,722(5)
(1,638)(5)
Additional paid in capital......... 10,902 11,740(3) 224,218
(1,048)(3)
5,152(2)
(8,716)(2)
1,054(5)
(1,138)(5)
Retained earnings.................. 25,485 (11,764)2,3,5 196,713
Treasury Stock..................... (534) 534(3)
Unearned compensation.............. (1,865)
Unrealized gain (loss) on
securities available for sale, net
of taxes.......................... 340 (66)(3) 1,488
-------- -------- ----------
Total equity....................... 39,046 562 539,434
-------- -------- ----------
Total liabilities and equity....... $447,200 $ 9,057 $7,388,026
======== ======== ==========
Capital Ratios:
Capital Ratio..................... 8.34%
Tangible Leverage Ratio........... 7.30%
Tier One Capital Ratio*........... 9.91%
Total Capital Ratio*.............. 11.43%
</TABLE>
- ---------------
* Based on risk weighted assets.
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<PAGE> 52
COMPLETED BUSINESS COMBINATION
FIRST INDEPENDENCE BANK OF FLORIDA
(pooling of interests)
(1) To record the issuance of 504,075 shares of BancGroup Common Stock in
exchange for all of the outstanding shares and warrants of First Independence:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Independence outstanding shares....................... 640,674
First Independence warrants (converted according to merger
agreement)................................................ 104,285
Conversion ratio -- shares.................................. 0.7257
Conversion ratio -- warrants................................ 0.3753
BancGroup shares to be issued............................... 504,075
Par value of 504,075 shares issued at $2.50 per share....... $ 1,260
Shares issued at par value.................................. $1,260
Total capital stock of First Independence................... 6,333
Excess recorded as an increase in contributed capital....... 5,073
-------
6,333
To eliminate First Independence
Common stock, at par value................................ (3,203)
Contributed capital....................................... (3,130)
-------
(6,333)
-------
Net change in equity................................... $ --
=======
</TABLE>
PENDING BUSINESS COMBINATIONS
SOUTH FLORIDA BANKING CORP.
(pooling of interests)
(2)(A) To record the issuance of 1,910,722 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of South Florida Banking Corp.:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
South Florida outstanding shares............................ 1,213,465
Conversion ratio............................................ 1.5746
BancGroup shares to be issued............................... 1,910,722
Par value of 1,910,722 shares issued at $2.50 per share..... $ 4,777
Shares issued at par value.................................. $ 4,777
Total capital stock of South Florida........................ 9,929
Excess recorded as an increase to contributed capital....... 5,152
----------
9,929
To eliminate South Florida
Common stock, at par value................................ (1,213)
Contributed capital....................................... (8,716)
----------
(9,929)
----------
Net change in equity................................... $ --
==========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees, net of
taxes................................................... $ 120
==========
</TABLE>
44
<PAGE> 53
ASB BANCSHARES, INC.
(purchase)
(3)(A) To assign the amount by which the estimated value of BancGroup's
investment in ASB is in excess of the historical carrying value amount of the
net assets acquired, based on their estimated fair value of such assets:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Equity in carrying value of net assets of ASB............... $12,115
Adjustments to state assets at fair value:
Write-off computer software and hardware.................. (115)
Acquisition accruals:
Present value of deferred compensation (calculated
assuming retirement in 1998, monthly payments of
$8,333.33, beginning January 1, 2002 for 84 months
discounted at 8%)...................................... (393)
Litigation accrual........................................ (15)
Legal, accounting and professional........................ (15)
Potential severance payable upon acquisition.............. (116)
Tax effect of purchase adjustments.......................... 235
Goodwill.................................................... 8,937
-------
8,518
Adjusted equity in carrying value of net assets............. $20,633
=======
Allocated as follows:
Subordinated Debentures for 31,506 shares of ASB.......... $ 7,725
Shares to be issued at par value 467,387 X 2.50........... 1,168
Additional Paid in Capital................................ 11,740
-------
Total purchase price to be paid in stock and
debt............................................ $20,633
=======
</TABLE>
UNITED AMERICAN HOLDING CORPORATION
(pooling of interests)
(4)(A) To record the issuance of 2,017,177 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of United American:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
United American outstanding shares.......................... 1,779,600
Conversion ratio............................................ 1.1335
BancGroup shares to be issued............................... 2,017,177
Par value of 2,017,177 shares issued at $2.50 per share..... $ 5,043
Shares issued at par value.................................. $ 5,043
Total capital stock of United American...................... 18,982
Excess recorded as an increase to contributed capital....... 13,939
---------
18,982
To eliminate United American
Common stock, at par value................................ (17)
Contributed capital....................................... (18,965)
---------
(18,982)
---------
Net change in equity................................... $ --
=========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees and salary
continuation agreements, net of taxes................... $ 317
=========
</TABLE>
45
<PAGE> 54
FIRST CENTRAL BANK
(pooling of interests)
(5)(A) To record the issuance of 688,742 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of First Central:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Central outstanding shares............................ 327,500
Conversion ratio............................................ 2.103
BancGroup shares to be issued............................... 688,742
Par value of 688,742 shares issued at $2.50 per share....... $ 1,722
Shares issued at par value.................................. $ 1,722
Total capital stock of First Central........................ 2,776
Excess recorded as an increase to contributed capital....... 1,054
-------
2,776
To eliminate First Central Common stock, at par value....... (1,638)
Contributed capital....................................... (1,138)
-------
(2,776)
-------
Net change in equity................................... $ --
=======
(B) To record possible non-recurring charges associated with
severance payable to terminated employees and salary
continuation agreements, net of taxes................... $ 111
=======
</TABLE>
46
<PAGE> 55
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statements of
income of BancGroup and subsidiaries on a historical basis for the nine months
ended September 30, 1997 and 1996 and the years ended December 31, 1996, 1995,
and 1994, (ii) the condensed statements of income of the completed business
combination with First Independence Bank of Florida ("Completed Business
Combination"), for the nine months ended September 30, 1997 and 1996 and the
years ended December 31, 1996, 1995 and 1994, (iii) adjustments to give effect
to the pooling-of-interests method business combination with First Independence,
(iv) the condensed consolidated statements of income of United American Holding
Corp. for the nine months ended September 30, 1997 and 1996 and the years ended
December 31, 1996, 1995 and 1994, (v) adjustments to give effect to the proposed
pooling-of-interests method business combination with United American, (vi) the
combined presentation of condensed consolidated statements of other probable
business combinations with BancGroup, South Florida Banking Corp., First Central
Bank and ASB Bancshares, Inc. ("Other Probable Business Combinations"), for the
nine months ended September 30, 1997 and 1996 and the years ended December 31,
1996, 1995 and 1994, (vii) adjustments to give effect to the probable
pooling-of-interests method business combinations with South Florida and First
Central and the probable purchase method business combination with ASB, (viii)
the pro forma statements of income of BancGroup and subsidiaries as if such
business combinations had occurred on January 1, 1994. Note that for the
purchase method business combination, Article 11 of Regulation S-X requires the
pro forma statements of income to be presented only for the most recent fiscal
year and interim period. Accordingly, only the condensed consolidated statements
of income for the nine months ended September 30, 1997 and the year ended
December 31, 1996 are included in (vi) and (vii) above for ASB.
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. The pro forma
information provided may not necessarily be indicative of future results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------------------------
CONSOLIDATED COMPLETED UNITED
COLONIAL BUSINESS ADJUSTMENTS/ AMERICAN ADJUSTMENTS/
BANCGROUP COMBINATION (DEDUCTIONS) MOLDING (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income............. $ 362,830 $ 3,935 $ $ 14,340 $ $ 381,105
Interest expense............ 182,497 1,606 5,874 189,977
---------- ------- -------- --------- ---------- ----------
Net interest income......... 180,333 2,329 8,466 191,128
Provision for loan losses... 8,833 -- 445 9,278
---------- ------- -------- --------- ---------- ----------
Net interest income after
provision for loan
losses..................... 171,500 2,329 8,021 181,850
---------- ------- -------- --------- ---------- ----------
Noninterest income.......... 61,623 355 1,692 63,670
Noninterest expense......... 143,609 2,023 6,490 152,122
---------- ------- -------- --------- ---------- ----------
Income before income
taxes...................... 89,514 661 3,223 93,398
Applicable income taxes..... 33,460 -- 1,272 34,732
---------- ------- -------- --------- ---------- ----------
Net income.................. $ 56,054 $ 661 $ $ 1,951 $ $ 58,666
========== ======= ======== ========= ========== ==========
Average primary shares
outstanding................ 42,370,000 640,674 (640,674) 1,687,204 (1,687,204) 44,918,475
494,904 2,053,571
Average fully-diluted shares
outstanding................ 42,963,000 640,674 (640,674) 1,687,204 (1,687,204) 45,532,530
503,935 2,065,595
Earnings per share:
Primary.................... $ 1.32 $ 1.31
Fully diluted.............. $ 1.31 $ 1.29
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income............. $ 25,485 $ -- $ 406,590
Interest expense............ 11,097 435(1) 201,509
--------- ---------- ----------
Net interest income......... 14,388 (435) 205,081
Provision for loan losses... 355 9,633
--------- ---------- ----------
Net interest income after
provision for loan
losses..................... 14,033 (435) 195,448
--------- ---------- ----------
Noninterest income.......... 2,607 66,277
Noninterest expense......... 10,838 (17)(1) 163,390
447(1)
--------- ---------- ----------
Income before income
taxes...................... 5,802 (865) 98,335
Applicable income taxes..... 1,883 (163)(1) 36,452
--------- ---------- ----------
Net income.................. $ 3,919 $ (702) $ 61,883
========= ========== ==========
Average primary shares
outstanding................ 1,618,116 (1,618,116) 48,333,694
3,415,219
Average fully-diluted shares
outstanding................ 1,618,116 (1,618,116) 48,954,127
3,421,597
Earnings per share:
Primary.................... $ 1.28
Fully diluted.............. $ 1.27
</TABLE>
47
<PAGE> 56
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED UNITED
BANCGROUP BUSINESS ADJUSTMENTS/ AMERICAN ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) HOLDING (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income.............. $ 300,943 $ 2,870 $ $ 10,547 $ $ 314,360
Interest expense............. 151,547 1,172 3,971 156,690
---------- ------- -------- ---------- ---------- ----------
Net interest income.......... 149,396 1,698 6,576 157,670
Provision for loan losses.... 6,292 43 291 6,626
---------- ------- -------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 143,104 1,655 6,285 151,044
---------- ------- -------- ---------- ---------- ----------
Noninterest income........... 53,900 383 1,281 55,564
Noninterest expense.......... 129,378 1,616 4,706 135,700
---------- ------- -------- ---------- ---------- ----------
Income before income taxes... 67,626 422 2,860 70,908
Applicable income taxes...... 23,794 1,125 24,919
---------- ------- -------- ---------- ---------- ----------
Net income................... $ 43,832 $ 422 $ $ 1,735 $ $ 45,989
========== ======= ======== ========== ========== ==========
Average primary shares
outstanding**............... 39,525,000 529,107 (529,107) 1,498,889 (1,498,889) 41,701,966
411,220 1,765,746
Average fully-diluted shares
outstanding**............... 40,204,000 529,107 (529,107) 1,498,889 (1,498,889) 42,384,318
411,832 1,768,486
Earnings per share:
Primary**................. $ 1.11 $ 1.10
Fully diluted**........... $ 1.10 $ 1.09
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Interest income.............. $ 15,460 $ 329,820
Interest expense............. 6,034 162,724
--------- ---------- ----------
Net interest income.......... 9,426 167,096
Provision for loan losses.... 490 7,116
--------- ---------- ----------
Net interest income after
provision for loan losses... 8,936 159,980
--------- ---------- ----------
Noninterest income........... 1,573 57,137
Noninterest expense.......... 6,661 142,361
--------- ---------- ----------
Income before income taxes... 3,848 74,756
Applicable income taxes...... 1,361 26,280
--------- ---------- ----------
Net income................... $ 2,487 $ $ 48,476
========= ========== ==========
Average primary shares
outstanding**............... 1,501,864 (1,501,864) 44,328,894
2,626,928
Average fully-diluted shares
outstanding**............... 1,501,864 (1,501,864) 45,013,888
2,629,570
Earnings per share:
Primary**................. $ 1.09
Fully diluted**........... $ 1.08
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
48
<PAGE> 57
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ UNITED ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) AMERICAN (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ --------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income.......... $ 406,838 $ 3,916 $ $ 14,623 $ 425,377
Interest expense......... 205,843 1,692 5,513 213,048
---------- --------- ---------- --------- ---------- ----------
Net interest income...... 200,995 2,224 9,110 212,329
Provision for loan
losses.................. 12,545 108 396 13,049
---------- --------- ---------- --------- ---------- ----------
Net interest income after
provision for loan
losses.................. 188,450 2,116 8,714 199,280
---------- --------- ---------- --------- ---------- ----------
Noninterest income....... 72,382 602 1,845 74,829
Noninterest expense...... 183,316 2,244 6,466 192,026
---------- --------- ---------- --------- ---------- ----------
Income before income
taxes................... 77,516 474 4,093 82,083
Applicable income
taxes................... 27,303 (13) 1,609 28,899
---------- --------- ---------- --------- ---------- ----------
Net income............... $ 50,213 $ 487 $ $ 2,484 $ 53,184
========== ========= ========== ========= ========== ==========
Average primary shares
outstanding**........... 39,764,000 529,153 (529,153) 1,500,021 (1,500,021) 41,963,259
418,580 1,780,679
Average fully-diluted
shares outstanding**.... 40,623,000 529,153 (529,153) 1,500,021 (1,500,021) 42,851,591
437,602 1,790,989
Earnings per share:
Net income:
Primary**............. $ 1.26 $ 1.27
Fully diluted**....... $ 1.25 $ 1.25
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Interest income.......... $ 31,369 $ 456,746
Interest expense......... 13,279 $ 579(3) 226,906
--------- ---------- ----------
Net interest income...... 18,090 (579) 229,840
Provision for loan
losses.................. 683 13,732
--------- ---------- ----------
Net interest income after
provision for loan
losses.................. 17,407 (579) 216,108
--------- ---------- ----------
Noninterest income....... 2,989 77,818
Noninterest expense...... 12,903 (23)(3) 205,502
596(3)
--------- ---------- ----------
Income before income
taxes................... 7,493 (1,152) 88,424
Applicable income
taxes................... 2,461 (217)(3) 31,143
--------- ---------- ----------
Net income............... $ 5,032 $ (935) $ 57,281
========= ========== ==========
Average primary shares
outstanding**........... 1,546,586 (1,546,586) 45,357,294
3,394,035
Average fully-diluted
shares outstanding**.... 1,546,586 (1,546,586) 46,253,793
3,402,202
Earnings per share:
Net income:
Primary**............. $ 1.26
Fully diluted**....... $ 1.25
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997 pooling-of-
interests business combination with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
49
<PAGE> 58
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ UNITED ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) AMERICAN (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income.............. $ 341,826 $ 3,275 $ 11,764 $ 356,865
Interest expense............. 170,483 1,357 4,558 176,398
---------- ------- -------- ---------- ---------- ----------
Net interest income.......... 171,343 1,918 7,206 180,467
Provision for loan losses.... 8,986 18 615 9,619
---------- ------- -------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 162,357 1,900 6,591 170,848
---------- ------- -------- ---------- ---------- ----------
Noninterest income........... 60,527 411 1,273 62,211
Noninterest expense.......... 150,654 3,008 5,477 159,139
---------- ------- -------- ---------- ---------- ----------
Income before income taxes... 72,230 (697) 2,387 73,920
Income taxes................. 25,765 668 26,433
---------- ------- -------- ---------- ---------- ----------
Net income................... $ 46,465 $ (697) $ -- $ 1,719 $ 47,487
========== ======= ======== ========== ========== ==========
Average primary shares
outstanding**............... 37,912,000 479,792 (479,792) 1,389,508 (1,389,508) 39,884,665
348,185 1,624,480
Average fully-diluted shares
outstanding**............... 39,796,000 479,792 (479,792) 1,389,508 (1,389,508) 41,805,666
370,394 1,639,272
Earnings per share:
Net income:
Primary**................. $ 1.23 $ 1.19
Fully diluted**........... $ 1.19 $ 1.16
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Interest income.............. $ 18,395 $ 375,260
Interest expense............. 7,400 183,798
--------- ---------- ----------
Net interest income.......... 10,995 191,462
Provision for loan losses.... 579 10,198
--------- ---------- ----------
Net interest income after
provision for loan losses... 10,416 181,264
--------- ---------- ----------
Noninterest income........... 1,680 63,891
Noninterest expense.......... 8,608 167,747
--------- ---------- ----------
Income before income taxes... 3,488 77,408
Income taxes................. 1,029 27,462
--------- ---------- ----------
Net income................... $ 2,459 $ 49,946
========= ========== ==========
Average primary shares
outstanding**............... 1,540,278 (1,540,278) 42,488,573
2,603,908
Average fully-diluted shares
outstanding**............... 1,540,278 (1,540,278) 44,423,421
2,617,755
Earnings per share:
Net income:
Primary**................. $ 1.18
Fully diluted**........... $ 1.15
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
50
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ UNITED ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) AMERICAN (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ --------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................ $ 255,758 $ 2,786 $ $ 7,401 $ 265,945
Interest expense............... 105,797 965 2,767 109,529
---------- --------- ---------- -------- --------- ----------
Net interest income............ 149,961 1,821 4,634 156,416
Provision for loan losses...... 8,254 132 419 8,805
---------- --------- ---------- -------- --------- ----------
Net interest income after
provision for loan losses..... 141,707 1,689 4,215 147,611
---------- --------- ---------- -------- --------- ----------
Noninterest income............. 54,149 322 1,077 55,548
Noninterest expense............ 144,119 2,191 4,484 150,794
---------- --------- ---------- -------- --------- ----------
Income before income taxes..... 51,737 (180) 808 52,365
Income taxes................... 17,243 17 17,260
---------- --------- ---------- -------- --------- ----------
Net income..................... $ 34,494 $ (180) $ $ 791 $ 35,105
========== ========= ========== ======== ========= ==========
Average primary shares
outstanding**................. 35,907,000 329,107 (329,107) 840,800 (840,800) 37,127,914
238,833 982,081
Average fully-diluted shares
outstanding**................. 37,383,000 329,107 (329,107) 840,800 (840,800) 38,603,914
238,833 982,081
Earnings per share:
Net income:
Primary**................... $ 0.96 $ 0.95
Fully diluted**............. $ 0.95 $ 0.94
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATION (DEDUCTIONS) TOTAL
----------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Interest income................ $ 15,064 $ 281,009
Interest expense............... 5,150 114,679
--------- ---------- ----------
Net interest income............ 9,914 166,330
Provision for loan losses...... 271 9,076
--------- ---------- ----------
Net interest income after
provision for loan losses..... 9,643 157,254
--------- ---------- ----------
Noninterest income............. 1,341 56,889
Noninterest expense............ 6,828 157,622
--------- ---------- ----------
Income before income taxes..... 4,156 56,521
Income taxes................... 1,350 18,610
--------- ---------- ----------
Net income..................... $ 2,806 $ 37,911
========= ========== ==========
Average primary shares
outstanding**................. 1,526,230 (1,526,230) 39,706,731
2,578,817
Average fully-diluted shares
outstanding**................. 1,526,230 (1,526,230) 41,182,731
2,578,817
Earnings per share:
Net income:
Primary**................... $ 0.95
Fully diluted**............. $ 0.95
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
PRO FORMA ADJUSTMENTS:
(IN THOUSANDS)
PENDING BUSINESS COMBINATIONS
Adjustments applicable to the purchase method business combination with ASB
Bancshares:
(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>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Increases in income:
Amortization of write-down on fixed assets
(5 year period).......................... $ 17 $ 23
------- -------
Total............................... 17 23
------- -------
Increase in expense:
Interest on subordinated debentures (assumed
at 7.5%)................................. (435) (579)
Amortization of goodwill (15 year period)... (447) (596)
------- -------
Total............................... (882) (1,175)
------- -------
Net decrease in income before tax............. (865) (1,152)
------- -------
Tax effect of the pro forma adjustments (other
than goodwill amortization)................. 163 217
------- -------
Net decrease in income................... $ (702) $ (935)
======= =======
</TABLE>
51
<PAGE> 60
NONRECURRING CHARGES
(In thousands)
Nonrecurring charges and related tax effects which result directly from the
business combinations and which will be included in BancGroup's results are set
forth below. These charges are not reflected in the condensed pro forma
statements of income.
(1) Possible adjustments applicable to the purchase method business
combination with ASB.
<TABLE>
<S> <C>
Increase in expense:
Potential severance payable to terminated employees....... $ (87)
-------
Net decrease in income before taxes......................... (87)
Tax effect of the pro forma adjustment...................... 32
-------
Net decrease in income................................. $ (55)
=======
</TABLE>
(2) Possible adjustments applicable to the pooling of interest method
business combination with South Florida:
<TABLE>
<S> <C>
Increase in expense:
Potential severance payable to terminated employees....... $ (188)
-------
Net decrease in income before tax........................... (188)
-------
Tax effect of the pro forma adjustments..................... 68
-------
Net decrease in income................................. $ (120)
=======
</TABLE>
(3) Possible adjustments applicable to the pooling of interest method
business combination with United American:
<TABLE>
<S> <C>
Increase in expense:
Adjustment for immediate vesting under salary continuation
agreements............................................. $ (424)
Potential severance payable to terminated employees....... (76)
-------
Net decrease in income before tax........................... (500)
-------
Tax effect of the pro forma adjustments..................... 183
-------
Net decrease in income................................. $ (317)
=======
</TABLE>
52
<PAGE> 61
(4) Possible adjustments applicable to the pooling of interest method
business combination with First Central:
<TABLE>
<S> <C>
Increase in expense:
Adjustment for immediate vesting under salary continuation
agreements............................................. $ (169)
Potential severance payable to terminated employees....... (6)
-------
Net decrease in income before tax........................... (175)
-------
Tax effect of the pro forma adjustments..................... 64
-------
Net decrease in income................................. $ (111)
=======
</TABLE>
53
<PAGE> 62
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical basis for the nine months ended September 30, 1997 and 1996, as of
September 30, 1997 and, years ended December 31, 1996, 1995, 1994, 1993 and 1992
and as of December 31, 1996, 1995, 1994, 1993 and 1992 and on a pro forma basis
for the nine months ended September 30, 1997 and 1996, as of September 30, 1997
and, years ended December 31, 1996, 1995 and 1994.
The pro forma information includes consolidated BancGroup and subsidiaries
and consolidated First Independence, South Florida, United American, ASB and
First Central. The pro forma balance sheet data gives effect to the combinations
as if they had occurred on December 31, 1996 and the pro forma operating data
gives effect to the combinations as if they had occurred at the beginning of the
earliest period presented. Note that for the purchase method combination,
Article 11 of Regulation S-X requires pro forma statements to be presented for
only the most recent fiscal year and interim period. Accordingly, ASB is only
included in the pro forma information as of and for the nine months ended
September 30, 1997 and the year ended December 31, 1996.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus and incorporated by reference.
The pro forma information provided below may not be indicative of future
results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income.................................... $406,590 $362,830 $329,820 $300,943
Interest expense................................... 201,509 182,497 162,724 151,547
-------- -------- -------- --------
Net interest income................................ 205,081 180,333 167,096 149,396
Provision for loan losses.......................... 9,633 8,833 7,116 6,292
-------- -------- -------- --------
Net interest income after provision for loan
losses........................................... 195,448 171,500 159,980 143,104
Noninterest income................................. 66,277 61,623 57,137 53,900
Noninterest expense................................ 163,390 143,609 142,361 129,378
-------- -------- -------- --------
Income before income taxes......................... 98,335 89,514 74,756 67,626
Applicable income taxes............................ 36,452 33,460 26,280 23,794
-------- -------- -------- --------
Net income......................................... $ 61,883 $ 56,054 $ 48,476 $ 43,832
======== ======== ======== ========
EARNINGS PER SHARE
Net income:
Primary.......................................... $ 1.28 $ 1.32 $ 1.09 $ 1.11
Fully-diluted.................................... $ 1.27 $ 1.31 $ 1.08 $ 1.10
Average shares outstanding
Primary.......................................... 48,334 42,370 44,329 39,525
Fully-diluted.................................... 48,954 42,963 45,014 40,204
Cash dividends:
Common........................................... $ 0.45 $ 0.45 $ 0.405 $ 0.405
</TABLE>
54
<PAGE> 63
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------------- -----------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL
1996 1995 1994 1993 1992 1996* 1995*
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest Income............. $456,746 $375,260 $281,009 $236,084 $226,057 $406,838 $341,826
Interest Expense............ 226,906 183,798 114,679 92,813 100,932 205,843 170,483
-------- -------- -------- -------- -------- -------- --------
Net interest income......... 229,840 191,462 166,330 143,271 125,125 200,995 171,343
Provision for possible loan
losses.................... 13,732 10,198 9,076 15,234 18,207 12,545 8,986
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses.................... 216,108 181,264 157,254 128,037 106,918 188,450 162,357
Noninterest income.......... 77,818 63,891 56,889 55,649 50,217 72,382 60,527
Noninterest expense......... 201,037 167,747 157,622 144,335 129,476 178,851 150,654
SAIF special
assessment(1)............. 4,465 -- -- 4,465
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes..................... 88,424 77,408 56,521 39,351 27,659 77,516 72,230
Applicable income taxes..... 31,143 27,462 18,610 12,265 7,793 27,303 25,765
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items..................... 57,281 49,946 37,911 27,086 19,866 50,213 46,465
Extraordinary items......... -- -- -- (396)
Cumulative effect of change
in accounting............. -- -- -- 3,933
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 57,281 $ 49,946 $ 37,911 $ 30,623 $ 19,866 $ 50,213 $ 46,465
======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 1.26 $ 1.18 $ 0.95 $ 0.73 $ 0.61 $ 1.26 $ 1.23
Fully Diluted**........... 1.25 1.15 0.95 0.73 0.61 1.25 1.19
Net Income:
Primary**................. 1.26 1.18 0.95 0.82 0.61 1.26 1.23
Fully Diluted**........... 1.25 1.15 0.95 0.82 0.61 1.25 1.19
Average shares outstanding
Primary**................. 45,357 42,489 39,707 37,194 32,361 39,764 37,912
Fully Diluted**........... 46,254 44,423 41,183 39,380 35,025 40,623 39,796
Cash dividends:
Common**.................. $ 0.54 $ 0.338 $ 0.54 $ 0.338
Class A**................. 0.113 $ 0.400 $ 0.355 $ 0.335 0.113
Class B**................. 0.063 0.200 0.155 0.135 0.063
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
BANCGROUP BANCGROUP BANCGROUP
HISTORICAL HISTORICAL HISTORICAL
1994* 1993* 1992*
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF INCOME
Interest Income............. $255,758 $204,322 $192,526
Interest Expense............ 105,797 81,008 86,283
-------- -------- --------
Net interest income......... 149,961 123,314 106,243
Provision for possible loan
losses.................... 8,254 11,767 14,625
-------- -------- --------
Net interest income after
provision for loan
losses.................... 141,707 111,547 91,618
Noninterest income.......... 54,149 50,990 46,226
Noninterest expense......... 144,119 125,901 112,340
SAIF special
assessment(1).............
-------- -------- --------
Income before income
taxes..................... 51,737 36,636 25,504
Applicable income taxes..... 17,243 11,249 6,960
-------- -------- --------
Income before extraordinary
items..................... 34,494 25,387 18,544
Extraordinary items......... (396)
Cumulative effect of change
in accounting............. 3,890
-------- -------- --------
Net income.................. $ 34,494 $ 28,881 $ 18,544
======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 0.96 $ 0.81 $ 0.67
Fully Diluted**........... 0.95 0.81 0.67
Net Income:
Primary**................. 0.96 0.92 0.67
Fully Diluted**........... 0.95 0.91 0.67
Average shares outstanding
Primary**................. 35,907 31,272 27,785
Fully Diluted**........... 37,383 33,458 30,407
Cash dividends:
Common**..................
Class A**................. $ 0.040 $ 0.355 $ 0.335
Class B**................. 0.020 0.155 0.135
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
55
<PAGE> 64
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1997 1997 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
DATA
At period end:
Total assets............. $7,388,026 $6,605,927 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned
income............... 5,524,899 4,970,765 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for
sale................. 182,878 182,878 157,966 112,203 61,556 368,515 150,835
Deposits............... 5,815,203 5,136,556 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt......... 112,755 101,099 39,092 47,688 86,662 57,397 22,979
Shareholders' equity... 539,434 472,353 402,708 352,731 275,319 256,866 165,142
Average daily balances
Total assets........... 6,695,111 5,956,312 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning
assets............... 6,142,738 5,462,405 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned
income............... 5,000,795 4,479,967 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for
sale................. 127,862 127,862 135,135 98,785 135,046 248,502 121,820
Deposits............... 4,485,524 3,913,525 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity... 485,780 424,886 383,401 308,532 269,353 200,217 159,785
Book value per share**... $ 11.34 $ 11.26 $ 10.29 $ 9.43 $ 7.93 $ 7.69 $ 6.34
Tangible book value per
share**................ $ 9.71 $ 9.66 $ 9.51 $ 8.62 $ 7.35 $ 7.18 $ 6.06
SELECTED RATIOS
Income before
extraordinary items and
the cumulative effect
of a change in
accounting for income
taxes to:
Average assets....... 1.23% 1.21% 0.95% 1.06% 0.93% 0.84% 0.72%
Average stockholders'
equity............. 16.99 16.84 13.09 15.06 12.81 12.68 11.61
Net income to:
Average assets....... 1.23 1.21 0.95 1.06 0.93 0.96 0.72
Average stockholders'
equity............. 16.99 16.84 13.09 15.06 12.81 14.42 11.61
Efficiency ratio(1)...... 62.44 58.92 64.94 64.39 69.83 71.96 73.16
Dividend payout.......... 30.14 33.28 42.86 36.59 41.67 38.59 50.00
Average equity to average
assets................. 7.26 7.13 7.25 7.06 7.26 6.64 6.16
Allowance for possible
loan losses to total
loans (Net of unearned
income)................ 1.24% 1.25% 1.27% 1.29% 1.55% 1.61% 1.50%
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combinations with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
56
<PAGE> 65
UNITED AMERICAN HOLDING CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AT AND FOR THE NINE
MONTHS ENDED AT AND FOR THE YEAR ENDED
--------------------- ----------------------------------------------------
9/30/97 9/30/96 1996 1995 1994 1993 1992
--------- --------- --------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
At Period End:
Cash and cash equivalents..................... $ 17,475 $ 11,998 $ 19,475 $ 8,721 $ 14,820 $11,315 $11,351
Investment securities......................... 39,401 28,674 23,044 24,660 13,045 8,962 8,482
Loans, net.................................... 186,098 138,638 149,615 111,378 83,320 56,173 64,507
Other assets.................................. 17,820 12,704 12,747 9,113 6,651 12,613 9,775
--------- --------- --------- --------- -------- ------- -------
Total assets............................ $ 260,794 $ 192,014 $ 204,881 $ 153,872 $117,836 $89,063 $94,115
========= ========= ========= ========= ======== ======= =======
Deposits...................................... $ 227,500 $ 169,632 $ 176,416 $ 134,357 $107,362 $80,605 $86,168
Other liabilities............................. 11,820 6,774 11,842 4,825 4,237 2,860 4,015
Shareholders' equity.......................... 21,474 15,608 16,623 14,690 6,237 5,598 3,932
--------- --------- --------- --------- -------- ------- -------
Total liabilities and shareholders'
equity................................ $ 260,794 $ 192,014 $ 204,881 $ 153,872 $117,836 $89,063 $94,115
========= ========= ========= ========= ======== ======= =======
For the Period:
Total interest income......................... $ 14,340 $ 10,546 $ 14,623 $ 11,764 $ 7,401 $ 6,331 $ 7,122
Total interest expense........................ 5,873 3,971 5,513 4,558 2,767 2,777 3,471
--------- --------- --------- --------- -------- ------- -------
Net interest income..................... 8,467 6,575 9,110 7,206 4,634 3,554 3,651
Provision for loan............................ 445 291 396 615 419 2,516 1,462
--------- --------- --------- --------- -------- ------- -------
Net interest income after provision for
loan losses........................... 8,022 6,284 8,714 6,591 4,215 1,038 2,189
Noninterest income............................ 1,691 1,281 1,845 1,273 1,077 1,011 823
Noninterest expense........................... 6,490 4,705 6,466 5,477 4,484 3,759 3,057
--------- --------- --------- --------- -------- ------- -------
Income (loss) before income taxes....... 3,223 2,860 4,093 2,387 808 (1,710) (45)
Income taxes.................................. 1,271 1,125 1,609 668 17 0 0
--------- --------- --------- --------- -------- ------- -------
Net Income (loss)....................... $ 1,952 $ 1,735 $ 2,484 $ 1,719 $ 791 $(1,710) $ (45)
========= ========= ========= ========= ======== ======= =======
Net income (loss) per share................... $ 1.16 $ 1.16 $ 1.66 $ 1.24 $ .94 $ (2.79) $ (.09)
========= ========= ========= ========= ======== ======= =======
Weighted average number of shares
outstanding................................. 1,687,204 1,498,889 1,500,021 1,389,508 840,800 613,333 500,000
========= ========= ========= ========= ======== ======= =======
Actual shares outstanding at end of period...... 1,779,600 1,501,000 1,520,500 1,500,000 840,800 840,800 500,000
========= ========= ========= ========= ======== ======= =======
Book value per share............................ $ 12.07 $ 10.40 $ 10.93 $ 9.79 $ 7.42 $ 6.66 $ 7.86
========= ========= ========= ========= ======== ======= =======
Ratios and Other Data:
Return on average assets...................... 0.84% 1.01% 1.40% 1.25% 0.80% -1.89% -0.05%
Return on average equity...................... 10.54% 11.67% 16.38% 14.60% 13.39% -31.75% -1.11%
Average equity to average earning assets...... 8.94% 9.76% 9.61% 9.41% 6.97% 7.21% 5.20%
Net yield on average earning assets........... 9.25% 9.25% 9.26% 9.40% 8.73% 8.48% 9.13%
Average earning assets to average
interest-bearing liabilities................ 1.24 1.25 1.25 1.24 1.17 1.10 1.13
Noninterest expense to average assets......... 2.80% 2.74% 3.63% 3.98% 4.55% 4.16% 3.42%
Nonperforming assets as percent of total
assets...................................... .77% .48% 0.53% 0.77% 1.73% 15.77% 8.10%
Allowance for loan losses to total loans...... 1.51% 1.63% 1.55% 1.76% 1.75% 1.51% 3.56%
</TABLE>
57
<PAGE> 66
UNITED AMERICAN HOLDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
United American's results of operations are primarily dependent upon the
results of operations of the Bank. The Bank conducts commercial banking business
consisting of attracting deposits from the general public and applying those
funds to the origination of commercial, consumer and real estate loans
(including commercial loans collateralized by real estate). The Bank's
profitability depends primarily on net interest income, which is the excess of
interest income generated from interest-earning assets (i.e., loans, investments
and federal funds sold) over interest expense incurred on interest-bearing
liabilities (i.e., customer deposits and borrowed funds). Net interest income is
affected by the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate earned and paid on these balances. Net
interest income is dependent upon The Bank's interest-rate spread which is the
excess of average yield earned on its interest-earning assets over the average
rate paid on its interest-bearing liabilities. When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income. The interest-rate spread is impacted
by interest rates and the amounts of deposits and loans. Additionally, the
Bank's profitability is affected by such factors as the level of non-interest
income and expenses, the provision for credit losses, and the effective tax
rate. Non-interest income consists primarily of service fees on deposit accounts
and income from the sale of loans and investment securities. Non-interest
expense consists primarily of compensation and employee benefits, occupancy and
equipment expenses, professional fees, data processing costs, deposit insurance
premiums paid to the FDIC, and other operating expenses.
Management's discussion and analysis of earnings and related financial data
are presented herein to assist investors in understanding the financial
condition of United American at, and the results of operations of United
American for the nine months ended September 30, 1997 and 1996, and the years
ended, December 31, 1996, 1995 and 1994. This discussion should be read in
conjunction with the consolidated financial statements and related footnotes of
United American presented elsewhere herein.
LIQUIDITY
Liquidity management involves the ability to meet the cash flow
requirements of customers who may be depositors wanting to withdraw their funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. In the ordinary course of business, the Bank's cash flows
are generated from interest and fee income, as well as from loan repayments and
the maturity of investment securities held-to-maturity. In addition to cash and
due from banks, the Bank considers all securities available-for-sale and federal
funds sold as primary sources of asset liquidity. Many factors affect the
ability to accomplish these liquidity objectives successfully, including the
economic environment, and the asset/liability mix within the balance sheet, as
well as the Bank's reputation in the community. At December 31, 1996 and
September 30, 1997, the Bank had commitments to originate loans totaling $43.3
million and $37.7 million, respectively. In addition, scheduled maturities of
certificates of deposit during the year following December 31, 1996 and the 12
months following September 30, 1997 totalled $66.3 million and $95.7 million,
respectively. Management believes that the Bank has adequate resources to fund
all of its commitments, that substantially all of its existing commitments will
be funded within 12 months and, if so desired, that the Bank can adjust the
rates and terms on certificates of deposit and other deposit accounts to retain
deposits in a changing interest rate environment.
A state-chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its transaction deposit accounts and 8% of its
non-transaction deposit accounts. The liquidity reserve may consist of cash on
hand, cash on demand deposit with other correspondent banks, and other
investments and short-term marketable securities as determined by the rules of
the Florida Department, such as federal funds sold and United States securities
or securities guaranteed by the United States. As of December 31, 1996 and
September 30, 1997, the Bank's liquidity ratio was 20.47% and 21.19%,
respectively.
58
<PAGE> 67
CAPITAL RESOURCES
United American's total stockholders' equity was $16.6 million and $14.7
million as of December 31, 1996 and 1995, respectively, which represents an
increase of $1.9 million. This increase was the result of 1996's net income of
$2.5 million, along with $255,000 resulting from sale of stock pursuant to the
exercise of stock purchase warrants issued in 1995 and the sale of treasury
stock, offset by payment of dividends in the amount of $750,000 and a $57,000
change in the unrealized securities losses at December 31, 1996 from December
31, 1995. From December 31, 1996 to September 30, 1997, United American's total
stockholders' equity increased from $16.6 million to $21.5 million, an increase
of $4.9 million. This increase was the result of net income for the first nine
months of 1997 of $2.0 million, $2.0 million resulting from the sale of stock
pursuant to the exercise of stock purchase warrants issued in 1995 and $1.2
million relating to stock issued in connection with the acquisition of C&G
Properties of Orlando, Inc., an increase in the carrying value of securities
available for sale of $20,000 and additional paid in capital of $520,000
resulting from entries related to the recording of stock based compensation in
connection with options granted to directors and officers during the six month
period, offset by payment of dividends of $760,000 and unearned compensation of
$69,000 (related to such stock based compensation). United American's total
stockholders' equity was 8.11%, 9.55% and 8.23% of total assets as of December
31, 1996, December 31, 1995 and September 30, 1997, respectively.
The federal banking regulatory authorities have adopted certain "prompt
corrective action" rules with respect to depository institutions. The rules
establish five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." The various federal banking regulatory agencies have adopted
regulations to implement the capital rules by, among other things, defining the
relevant capital measures for the five capital categories. An institution is
deemed to be "well capitalized" if it has a total risk-based capital ratio of
10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1
leverage ratio of 5% or greater and is not subject to a regulatory order,
agreement, or directive to meet and maintain a specific capital level. At
December 31, 1996 and September 30, 1997, the Bank met the capital ratios of a
"well capitalized" financial institution with a total risk-based capital ratio
of 10.03% and 10.13%, respectively, a Tier 1 risk-based capital ratio of 8.78%
and 8.87%, respectively, and a Tier 1 leverage ratio of 7.53% and 7.28%,
respectively. Depository institutions which fall below the "adequately
capitalized" category generally are prohibited from making any capital
distribution, are subject to growth limitations, and are required to submit a
capital restoration plan. There are a number of requirements and restrictions
that may be imposed on institutions treated as "significantly undercapitalized"
and, if the institution is "critically undercapitalized," the banking regulatory
agencies have the right to appoint a receiver or conservator.
59
<PAGE> 68
In accordance with risk capital guidelines issued by the FDIC, the Bank is
required to maintain a minimum standard of total capital to risk-weighted assets
of 8%. Additionally, the FDIC requires banks to maintain a minimum
leverage-capital ratio of Tier 1 capital (as defined) to total assets. The
leverage-capital ratio ranges from 3% to 5% based on the bank's rating under the
regulatory rating system. The required leverage-capital ratio for the Bank at
December 31, 1996 was 4%. The following table summarizes the regulatory capital
levels and ratios for the Bank:
<TABLE>
<CAPTION>
ACTUAL REGULATORY
RATIOS REQUIREMENT
------- -----------
<S> <C> <C>
At September 30, 1997:
Total capital to risk-weighted assets..................... 10.13% 8.00%
Tier 1 capital to risk-weighted assets.................... 8.87 4.00
Tier 1 capital to total assets -- leverage ratio.......... 7.28 4.00
At December 31, 1996:
Total capital to risk-weighted assets..................... 10.03 8.00
Tier 1 capital to risk-weighted assets.................... 8.78 4.00
Tier 1 capital to total assets -- leverage ratio.......... 7.53 4.00
At December 31, 1995:
Total capital to risk-weighted assets..................... 10.95 8.00
Tier 1 capital to risk-weighted assets.................... 9.70 4.00
Tier 1 capital to total assets -- leverage ratio.......... 8.06 4.00
At December 31, 1994:
Total capital to risk-weighted assets..................... 8.12 8.00
Tier 1 capital to risk-weighted assets.................... 6.84 4.00
Tier 1 capital to total assets -- leverage ratio.......... 6.01 4.00
</TABLE>
RESULTS OF OPERATIONS
General
United American's net income was $1,952,000, or $1.16 per share, for the
nine months ended September 30, 1997, as compared to $1,735,000, or $1.16 per
share, for the nine months ended September 30, 1996, an increase of $217,000.
United American's net income for the year ended December 31, 1996 was
$2,485,000, as compared to net income for the year ended December 31, 1995 of
$1,719,000, an increase of $766,000, or 44.6%.
60
<PAGE> 69
The following table presents information regarding (i) the total dollar
amount of United American's interest income from interest-earning assets and the
resultant average yield; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resultant average cost; (iii) net interest
income; (iv) net interest spread; and (v) net interest margin, for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------
1997 1996
---------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans(1)............................ $170,644 $12,811 10.04% $120,124 $ 9,195 10.20%
Investments......................... 25,813 1,093 5.66 25,921 1,106 5.70
Federal funds sold.................. 10,725 436 5.44 6,285 245 5.21
-------- ------- ----- -------- ------- -----
Total earning assets................ 207,182 14,340 9.25 152,330 10,546 9.25
------- ----- ------- -----
Non-earning assets.................... 24,825 19,570
-------- --------
Total assets................ $232,007 171,900
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Savings and NOW accounts............ $ 17,040 $ 269 2.11% $ 13,824 $ 216 2.09%
Money market deposits............... 42,866 969 3.02 35,223 703 2.67
Certificates of deposit............. 98,241 4,242 5.77 69,370 2,916 5.61
Borrowings.......................... 9,450 393 5.56 3,926 136 4.63
-------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities............... 167,597 5,873 4.69 122,343 3,971 4.34
------- ----- ------- -----
Non-interest bearing liabilities...... 45,893 34,692
Shareholders' equity.................. 18,517 14,865
-------- --------
Total liabilities and
shareholders' equity...... $232,007 $171,900
======== ========
Spread and Interest Differential:
Net interest income................... $ 8,467 $ 6,575
======= =======
Interest-rate spread(2)............... 4.56% 4.91%
===== =====
Net interest margin(3)................ 5.45% 5.76%
===== =====
Ratio of average earning assets to
average interest-bearing
liabilities......................... 1.24 1.25
======== ========
</TABLE>
61
<PAGE> 70
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans(1)................. $126,218 $12,846 10.18% $ 94,338 $ 9,954 10.55% $67,987 $6,707 9.87%
Investments.............. 25,844 1,475 5.71 20,040 1,170 5.84 11,255 468 4.16
Federal funds sold....... 5,801 302 5.21 10,720 640 5.97 5,507 226 4.10
-------- ------- ----- -------- ------- ----- ------- ------ ----
Total earning assets..... 157,863 14,623 9.26 125,098 11,764 9.40 84,749 7,401 8.73
------- ----- ------- ----- ------ ----
Non-earning assets......... 20,189 12,388 13,868
-------- -------- -------
Total assets...... $178,052 $137,486 $98,617
======== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Savings and NOW
accounts............... $ 14,310 $ 304 2.12% $ 11,607 $ 273 2.35% $ 9,437 $ 188 1.99%
Money market deposits.... 36,156 980 2.71 30,548 839 2.75 24,652 602 2.44
Certificates of
deposit................ 71,244 3,999 5.61 56,311 3,285 5.83 35,003 1,740 4.97
Borrowings............... 4,528 230 5.08 2,461 161 6.54 3,114 237 7.61
-------- ------- ----- -------- ------- ----- ------- ------ ----
Total
interest-bearing
liabilities..... 126,238 5,513 4.37 100,927 4,558 4.52 72,206 2,767 3.83
------- ----- ------- ----- ------ ----
Non-interest bearing
liabilities.............. 36,641 24,784 20,503
Shareholders' equity....... 15,173 11,775 5,908
-------- -------- -------
Total liabilities
and
shareholders'
equity.......... $178,052 $137,486 $98,617
======== ======== =======
Spread and Interest
Differential:
Net interest income........ $ 9,110 $ 7,206 $4,634
======= ======= ======
Interest-rate spread(2).... 4.89% 4.88% 4.90%
===== ===== ====
Net interest margin(3)..... 5.77% 5.76% 5.47%
===== ===== ====
Ratio of average earning
assets to average
interest-bearing
liabilities.............. 1.25 1.24 1.17
======== ======== =======
</TABLE>
- ---------------
(1) Includes loans on non-accrual status.
(2) Interest-rate spread represents the excess of the average yield on
interest-earning assets over the average cost of interest-bearing
liabilities.
(3) Net interest margin represents net interest income (annualized) divided by
average interest-earning assets.
Net interest income
Net interest income, which constitutes the principal source of income for
United American, represents the excess of interest income on interest-earning
assets over interest expense on interest-bearing liabilities. The principal
interest-earning assets are federal funds sold, investment securities and loans
receivable. Interest-bearing liabilities primarily consist of time deposits,
interest-bearing checking accounts ("NOW accounts"), savings deposits and money
market accounts. Funds attracted by these interest-bearing liabilities are
invested in interest-earning assets. Accordingly, net interest income depends
upon the volume of average interest-earning assets and average interest-bearing
liabilities and the interest rates earned or paid on them.
The following table sets forth certain information regarding changes in
United American's interest income and interest expense during the year ended
December 31, 1996 as compared to the year ended December 31, 1995, and for the
nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(1) changes in interest rate (change in rate multiplied by
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<PAGE> 71
prior volume), (2) changes in the volume (change in volume multiplied by prior
rate) and (3) changes in rate-volume (change in rate multiplied by change in
volume).
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 VS. 1996 1996 VS. 1995
-------------------------------- --------------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-------------------------------- --------------------------------
RATE/ RATE/
RATE VOLUME VOLUME TOTAL RATE VOLUME VOLUME TOTAL
----- ------ ------ ------ ----- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................................... $(162) $3,862 $ (85) $3,615 $(349) $3,363 $(122) $2,892
Investments............................. (8) 9 (15) (14) (26) 339 (8) 305
Federal funds sold...................... 11 173 8 192 (81) (294) 37 (338)
----- ------ ----- ------ ----- ------ ----- ------
Total interest-earning assets.... (159) 4,044 (92) 3,793 (456) 3,408 (93) 2,859
----- ------ ----- ------ ----- ------ ----- ------
Interest-bearing liabilities:
Savings and NOW accounts................ 2 50 1 53 (27) 64 (6) 31
Money market deposits................... 92 153 21 266 (12) 154 (1) 141
Certificates of deposit................. 83 1,203 41 1,327 (124) 871 (33) 714
Borrowings.............................. 27 191 38 256 (36) 135 (30) 69
----- ------ ----- ------ ----- ------ ----- ------
Total interest-bearing
liabilities.................... 204 1,597 101 1,902 (199) 1,224 (70) 955
----- ------ ----- ------ ----- ------ ----- ------
Net change in net-interest income......... $(363) $2,447 $(193) $1,891 $(257) $2,184 $ (23) $1,904
===== ====== ===== ====== ===== ====== ===== ======
</TABLE>
United American's net interest income was $8.5 million for the nine months
ended September 30, 1997 compared to $6.6 million for the nine months ended
September 30, 1996, an increase of $1.9 million or 28.8%. The increase resulted
from an increase in earning assets of $63.0 million or 37.2%. Net interest
income was $9.1 million for the year ended December 31, 1996 compared with $7.2
million for the year ended December 31, 1995, an increase of $1.9 million or
26.4%. During the nine month period ending September 30, 1997, interest income
on investments and federal funds sold increased by $178,000 over the nine month
period ending September 30, 1996. This increase was attributable almost entirely
to an increase of $4.3 million in average balances of investments and federal
funds sold from $32.2 million for the nine months ending September 30, 1996 to
$36.5 million for the period ending September 30, 1997. Interest income on
investments and federal funds sold decreased $33,000 from the year ended
December 31, 1995 to the year ended December 31, 1996. Most of this decrease was
attributable to a decrease in the yield of the investment portfolio as
management intentionally shortened the maturity of the investments in
anticipation of possible changes in interest rates. During the nine months
ending September 30, 1997, interest expense on interest bearing liabilities
increased by $1.9 million over the nine month period ending September 30, 1996.
Most of this increase was attributable to an increase of $45.3 million in
average interest bearing liabilities from $122.3 million for the nine months
ending September 30, 1996 to $167.6 million for the nine months ended September
30, 1997. Interest expense on interest bearing liabilities increased $.9 million
from $4.6 million for the year ended December 31, 1995 to $5.5 million for the
year ended December 31, 1996. This increase was entirely attributable to an
increase in average balances of interest bearing liabilities from $100.9 million
for the year ended December 31, 1995 to $126.2 million for the year ended
December 31, 1996. During the same period, average rates paid on interest
bearing liabilities actually decreased 15 basis points, due in large part to a
reduction in the average rate paid on certificates of deposit by 15 basis
points. The overall result was a reduction in the net interest margin of 31
basis points to 5.46% for the nine month period ending September 30, 1997 from
5.77% for the nine months period ending September 30, 1996 and an increase of 1
basis point from 5.76% during 1995 to 5.77% during 1996.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the allowance
for loan losses to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by United
American, the amounts of non-performing loans, general economic conditions,
particularly as they relate to United American's market area, and other factors
related to the collectibility of United American's loan portfolio. For the nine
months ended September 30, 1997 the provision for loan losses was $445,000, as
compared to $291,000 for the nine months ended September 30, 1996. This increase
of
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<PAGE> 72
$154,000 was attributable solely to increased loan production and management's
desire to maintain reserves at certain levels. For the year ended December 31,
1996, the provision for loan losses was $396,000 as compared to $615,000 for the
year ended December 31, 1995, a decrease of $219,000. As of September 30, 1997,
December 31, 1996 and December 31, 1995, the allowance for loan losses was
1.51%, 1.55% and 1.76%, respectively, of total loans receivable, and was 281.8%,
454.2% and 369.0%, respectively, of non-performing loans.
Noninterest Income
Noninterest income is primarily composed of deposit service charges and
fees and mortgage origination fees. Non-interest income was $1.7 million for the
nine months ended September 30, 1997 versus $1.3 million for the nine months
ended September 30, 1996, or an increase of .4 million, or 30.9%. This increase
was attributable to service charges and NSF fees on deposit accounts resulting
from a 20.3% increase in demand deposits, coupled with an attempt to minimize
waived service charges. During the year ended December 31, 1996, noninterest
income increased to $1.8 million from $1.3 million during the year ended
December 31, 1995, an increase of $.5 million, or 44.9%. This increase similarly
was due to management's ongoing attempts to minimize waived service charges,
coupled with the significant growth in demand accounts from year end 1995 to
year end 1996 of approximately 44%.
Noninterest Expenses
During the nine months ended September 30, 1997, noninterest expenses
increased to $6.5 million from $4.7 million during the nine months ended
September 30, 1996, or an increase of 38.3%. During the year ended December 31,
1996, noninterest expenses increased to $6.47 million from $5.48 million during
the year ended December 31, 1995, an increase of $1.0 million, or 18.1%. The
following narrative sets forth additional information on certain noninterest
expense categories which had significant changes.
During the nine months ended September 30, 1997, compensation and benefits
increased to $3.6 million from $2.5 million for the nine months ended September
30, 1996, an increase of $1.1 million or 44.8%. During the year ended December
31, 1996, compensation and benefits increased to $3.38 million from $2.58
million during the year ended December 31, 1995, an increase of $800,000 or
31.0%. These increases were primarily due to an increase in the number of
employees at the Bank commensurate with the growth of the Bank and annual
compensation and benefit increases for employees.
Occupancy and related furniture and equipment expense increased to
$1,073,000 during the nine months ended September 30, 1997 from $761,000 during
the nine months ended September 30, 1996, an increase of $312,000 or 41.0%. For
the year ended December 31, 1996, occupancy and related furniture and equipment
expense decreased to $1.06 million from $1.11 million, a decrease of $50,000 or
4.5%. The reason for the increase in occupancy related expenses from September
30, 1996 to September 30, 1997 related to the full effect in the 1997 nine month
period of branch offices opened in February and September of 1996. The reason
for the decrease in occupancy related expenses from 1996 to 1997 related to a
decision by management to purchase three facilities in January, 1996 which were
previously occupied under triple net leases. The depreciation expense of the
facilities was less than the comparable lease expense.
Advertising and business development expenses increased from $371,000
during the nine months ended September 30, 1996 to $461,000 during the period
ended September 30, 1997, an increase of $90,000 or 24.3%. Advertising and
business development increased to $517,000 for the year ended December 31, 1996
from $403,000 for the year ended December 31, 1995, an increase of $114,000 or
28.3%. United American places importance on effective advertising and business
development, and the increases for both comparative periods are in line with the
Bank having branched into two new markets in February and September, 1996, and
an additional market in May 1997, as well as continuing to support a marketing
effort for those branch offices already in existence.
FDIC and state assessments increased to $46,000 for the nine months ended
September 30, 1997 from $28,000 for the period ended September 30, 1996, an
increase of $18,000 or 64.3%, due to higher FDIC rates in 1997. For the year
ended December 31, 1996, FDIC and state assessments were $38,888, down $200,000
from $238,000 for the year ended December 31, 1995. The decrease for the full
year ended December 31,
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<PAGE> 73
1996 as compared to the full year ended December 31, 1995 was attributable to a
significant reduction in FDIC premiums due to full capitalization of the
insurance fund, as well as a credit received from FDIC of $56,000 for prior
overpayments.
Income Tax Provision
During the nine months ended September 30, 1997 the income tax provision
increased to $1,272,000 from $1,125,000 for the nine month period ended
September 30, 1996, an increase of $147,000 or 13.1%. This increase in the tax
provision is commensurate with the increase in net income before taxes for the
comparable periods. During the years ended December 31, 1996 and 1995, United
American recorded a provision for income taxes of $1.608 million and $.668
million, respectively, reflecting a fully effective income tax rate of 39.3% in
1996, but an effective rate of only 28.0% in 1995. The reason for the reduced
rate in 1995 was due to the utilization of approximately $1.6 million in federal
and state net operating loss carryforwards in the year ended December 31, 1995.
All available federal and state net operating loss carryforwards were utilized
in 1995.
ASSET/LIABILITY MANAGEMENT
A principal objective of the Bank's asset/liability management strategy is
to minimize its exposure to changes in interest rates by matching the maturity
and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is overseen in part through the direction of the
Bank's Asset and Liability Committee (the "ALCO Committee") which establishes
policies and monitors results to control interest rate sensitivity.
Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the ALCO
Committee.
As a part of the Bank's interest-rate risk management policy, the ALCO
Committee examines the extent to which its assets and liabilities are
"interest-rate sensitive" and monitors the Bank's interest-rate sensitivity
"gap." An asset or liability is considered to be interest-rate sensitive if it
will reprice or mature within the time period analyzed, usually one year or
less. The interest-rate sensitivity gap is the difference between interest-
earning assets and interest-bearing liabilities scheduled to mature or reprice
within such time period. A gap is considered positive when the amount of
interest-rate sensitive assets exceeds the amount of 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 tend to adversely affect net
interest income, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest rates, a negative gap would
tend to result in an increase in net interest income, while a positive gap would
tend to adversely affect net interest income. In addition, any premiums on
mortgage-backed securities are amortized to interest income based on the
estimated remaining life of the related securities.
The ALCO Committee's policy is to maintain a cumulative one-year gap which
falls in the range of (10%) to 10% of total assets. At September 30, 1997, the
Bank's cumulative one-year gap was (4.15%) of total assets. Management attempts
to conform to this policy by managing the maturity distribution of its
investment portfolio, emphasizing originations and purchases of
adjustable-interest rate loans, and by managing the product mix and maturity of
its deposit accounts.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or period of
repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition,
65
<PAGE> 74
certain assets, such as adjustable-interest rate mortgage loans, have features
(generally referred to as "interest rate caps") which limit changes in interest
rates on a short-term basis and over the life of the asset. In the event of a
change in interest rates, prepayments (on loans and mortgage-backed securities)
and early withdrawal (of deposit accounts) levels also could deviate
significantly from those assumed in calculating the interest rate gap. The
ability of many borrowers to service their debts also may decrease in the event
of an interest rate increase.
Management's strategy is to maintain a relatively balanced interest-rate
risk position to protect its net interest margin from market fluctuations. To
this end, the ALCO Committee reviews, on a monthly basis, the maturity and
repricing of assets and liabilities.
Management believes that the type and amount of the Bank's interest rate
sensitive liabilities may reduce the potential impact that a rise in interest
rates might have on the Bank's net interest income. The Bank seeks to maintain a
core deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. United
American also maintains a portfolio of liquid assets in order to reduce its
overall exposure to changes in market interest rates. At December 31, 1996 and
September 30, 1997, the Bank's liquidity ratios were 20.5% and 21.2%,
respectively. The Bank also maintains a "floor", or minimum rate, on certain of
its floating or prime based loans. These floors allow the Bank to continue to
earn a higher rate when the floating rate falls below the established floor
rate.
The following table sets forth certain information relating to The Bank's
interest-earning assets and interest-bearing liabilities at September 30, 1997
that are estimated to mature or are scheduled to reprice within the period
shown.
<TABLE>
<CAPTION>
0 TO 30 31 TO 90 91 TO 365 ONE YEAR TO MORE THAN
DAYS DAYS DAYS FIVE YEARS FIVE YEARS TOTAL
-------- -------- --------- ----------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans(1)........................ $102,402 $ 6,022 $ 12,718 $50,543 $16,853 $188,538
Investments (2)................. 16,001 2,050 19,014 2,004 382 39,451
Federal Funds Sold.............. 6,247 -- -- -- -- 6,247
-------- ------- -------- ------- ------- --------
Total Interest-Earning
Assets................ 124,650 8,072 31,732 52,547 17,235 234,236
-------- ------- -------- ------- ------- --------
Interest Bearing Liabilities:
Savings and NOW accounts........ 18,062 -- -- -- -- 18,062
Money market deposits........... 50,058 -- -- -- -- 50,058
Certificates of deposit(3)...... 8,815 16,713 70,163 16,362 44 112,097
Borrowings...................... 10,366 -- -- -- -- 10,366
-------- ------- -------- ------- ------- --------
Total Interest-Bearing
Liabilities........... 87,301 16,713 70,163 16,362 44 190,583
-------- ------- -------- ------- ------- --------
Rate Sensitivity GAP.............. 37,349 (8,641) (38,431) 36,185 17,191 $ 43,653
======== ======= ======== ======= ======= ========
Cumulative Rate Sensitivity GAP... $ 37,349 $28,708 $ (9,723) $26,462 $43,653
======== ======= ======== ======= =======
Rate Sensitivity GAP Ratio........ 15.95% (3.69)% (16.41)% 15.45% 7.34%
======== ======= ======== ======= =======
Cumulative Rate Sensitivity GAP
Ratio........................... 15.95 12.78 (4.15) 11.30 18.64
======== ======= ======== ======= =======
Ratio of Cumulative GAP to Total
Assets.......................... 15.66 12.04 (4.08) 11.10 18.31
======== ======= ======== ======= =======
</TABLE>
- ---------------
(1) In preparing the table above, adjustable-interest rate loans were 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-interest rate
loans were scheduled according to their contractual maturities.
(2) In preparing the table above, adjustable-interest rate investment securities
were included in the period in which the interest rates are next scheduled
to adjust rather than in the period in which the investment securities
mature. Fixed-interest rate investment securities were scheduled according
to their contractual maturities.
(3) Time deposits were scheduled according to their contractual maturities.
66
<PAGE> 75
FINANCIAL CONDITION
Lending Activities
A significant source of United American's income is the interest earned on
its loan portfolio. The following table shows the relationship of loans to total
assets for the Bank as of the periods indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, -----------------------
1997 1996 1995
---------------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total Assets.................................. $260,794 $204,881 $153,872
Total Loans, net.............................. 186,098 149,615 111,378
Loans as % of Total Assets.................... 71.4% 73.0% 72.4%
</TABLE>
Lending activities are conducted pursuant to a written policy which has
been adopted by the Bank. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by a loan committee comprised of certain officers and directors of the Bank.
67
<PAGE> 76
The composition of the Bank's loan portfolio was as follows for the periods
indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------------------------
1997 1996
-------------------- --------------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial.................................... $ 45,431 23.95% $ 30,901 21.83%
Construction.................................. 29,735 15.67 13,695 9.67
Real Estate................................... 104,983 55.34 87,606 61.89
Consumer and other............................ 9,566 5.04 9,351 6.61
-------- ------ -------- ------
Total loans receivable.............. 189,715 100.00% 141,553 100.00%
====== ======
Less:
Unearned income and fees.................... (751) (604)
Allowance for loan losses................... (2,866) -1.51% (2,311) -1.63%
-------- ====== -------- ======
Loans, net.................................. $186,098 $138,638
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------- ----------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
-------- ------ -------- ------ ------- ------ ------- ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial........... $ 36,634 24.01% $ 27,132 23.84% $19,668 23.08% $16,685 29.03% $21,093 31.26%
Construction......... 15,188 9.95% 9,990 8.78% 7,234 8.49% 2,220 3.86% 3,588 5.32%
Real Estate.......... 91,388 59.90% 71,031 62.41% 54,260 63.66% 36,166 62.92% 38,830 57.56%
Consumer and other... 9,365 6.14% 5,662 4.97% 4,068 4.77% 2,411 4.19% 3,952 5.86%
-------- ------ -------- ------ ------- ------ ------- ------ ------- ------
Total loans
receivable..... 152,575 100.00% 113,815 100.00% 85,230 100.00% 57,482 100.00% 67,463 100.00%
====== ====== ====== ====== ======
Less:
Unearned income and
fees............. (598) (437) (417) (443) (556)
Allowance for loan
losses........... (2,362) (1.55)% (2,000) (1.76)% (1,493) (1.75)% (866) (1.51)% (2,400) (3.56)%
-------- ====== -------- ====== ------- ====== ------- ====== ------- ======
Loans, net......... $149,615 $111,378 $83,320 $56,173 $64,507
======== ======== ======= ======= =======
</TABLE>
68
<PAGE> 77
As of September 30, 1997, the maturities and interest rate sensitivities of
the Bank's loan portfolio, based on remaining scheduled principal repayments,
were as follows:
<TABLE>
<CAPTION>
DUE AFTER
DUE IN ONE YEAR
ONE YEAR THROUGH DUE AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial..................................... $26,842 $12,836 $ 5,753 $ 45,431
Construction................................... 13,300 10,882 5,553 29,735
Real Estate.................................... 19,449 69,178 16,356 104,983
Consumer and other............................. 2,555 6,205 806 9,566
------- ------- ------- --------
Total................................ $62,146 $99,101 $28,468 $189,715
======= ======= ======= ========
Loans with maturities over one year:
Fixed interest rate.......................... $50,754 $14,048 $ 64,802
Variable interest rate....................... 48,347 14,420 62,767
------- ------- --------
Total maturities greater than one
year............................... $99,101 $28,468 $127,569
======= ======= ========
</TABLE>
Asset Quality
Management seeks to maintain quality assets through sound underwriting and
sound lending practices. The largest category of loans in the Bank's loan
portfolio are collateralized by commercial real estate mortgages. As of
September 30, 1997 and December 31, 1996, 55.3%, and 59.9%, respectively, of the
total loan portfolio were collateralized by this type of property. The level of
delinquent loans and other real estate owned also is relevant to the credit
quality of a loan portfolio. As of September 30, 1997, total non-performing
assets were $2.0 million or .78% of total assets, compared to $1.09 million or
.53% of total assets as of December 31, 1996. This increase during the period
was the result of an office/warehouse taken into other real estate and two loans
amounting to $638,000 which went into a non-accrual status. Management is in the
process of negotiating a lease/purchase on the office/warehouse and the two
loans have been paid down approximately $300,000. Management believes that in
light of its assessment of the collateral underlying both the other real estate
owned and the loans, the Bank will not incur any significant loss.
The commercial real estate mortgage loans in the Bank's portfolio consist
of fixed- and adjustable-interest rate loans which were originated at prevailing
market interest rates. The Bank's policy has been to originate commercial real
estate mortgage loans predominantly in its primary market area. Commercial real
estate mortgage loans are generally made in amounts up to 75% of the appraised
value of the property securing the loan and entail significant additional risks
compared to residential mortgage loans. In making commercial real estate loans,
the Bank primarily considers the net operating income generated by the real
estate to support the debt service, the financial resources and income level and
managerial expertise of the borrower, the marketability of the collateral and
the Bank's lending experience with the borrower.
Unlike residential mortgage loans, which, generally, are made on the basis
of the borrower's ability to make repayment from his employment and other
income, and which are collateralized by real property whose value tends to be
more readily ascertainable, commercial loans typically are underwritten on the
basis of the borrower's ability to make repayment from the cash flow of his
business and, generally, are collateralized by business assets, such as accounts
receivable, equipment and inventory. As a result, the availability of funds for
the repayment of commercial loans may be substantially dependent on the success
of the business itself, which is subject to adverse conditions in the economy.
Commercial loans also entail certain additional risks since they usually involve
large loan balances to single borrowers or a related group of borrowers,
resulting in a more concentrated loan portfolio. Further, the collateral
underlying the loans may depreciate over time, cannot be appraised with as much
precision as residential real estate, and may fluctuate in value based on the
success of the business.
Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities which would cause them to be similarly impacted by
economic or other conditions. The Bank, on a routine basis, monitors these
concentrations in order to consider adjustments in its lending practices to
reflect
69
<PAGE> 78
economic conditions, loan to deposit ratios, and industry trends. Management
believes as of September 30, 1997 and December 31, 1996, that the Bank had no
significant concentration of risk with any individual counterparty to originate
loans. Bank loan customers are principally closely-held businesses and residents
concentrated in the central Florida area and as such, the debtors' ability to
honor their contract is substantially dependent upon the general economic
conditions of the region. Most of the Bank's business activity is with customers
located within the Central Florida area.
The Loan Committee of the Board of Directors of the Bank concentrates its
efforts and resources, and that of its senior management and lending officers,
on loan review and underwriting procedures. Internal controls include ongoing
reviews of loans made to monitor documentation and the existence and valuations
of collateral. In addition, management of the Bank has established a review
process with the objective of identifying, evaluating, and initiating necessary
corrective action for marginal loans. The goal of the loan review process is to
address classified and non-performing loans as early as possible.
Classification of Assets
Generally, interest on loans accrues and is credited to income based upon
the principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan on non-accrual status when in the
opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation or when principal or interest is
past due 90 days or more unless, in the determination of management, the
principal and interest on the loan are well collateralized and in the process of
collection. Consumer installment loans are generally charged-off after 90 days
of delinquency unless adequately collateralized and in the process of
collection. Loans are not returned to accrual status until principal and
interest payments are brought current and future payments appear reasonably
certain. Interest accrued and unpaid at the time a loan is placed on non-accrual
status is charged against interest income.
Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate owned ("OREO"). OREO
properties are recorded at the lower of cost or fair value less estimated
selling costs, and the estimated loss, if any, is charged to the allowance for
credit losses at the time it is transferred to OREO. Further write-downs in OREO
are recorded at the time management believes additional deterioration in value
has occurred and are charged to non-interest expense.
Loans on non-accrual status and other real estate owned, the ratio of such
loans and real estate owned to total assets, and certain other related
information was as follows for the periods indicated:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- ---------------
1997 1996 1996 1995
------- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans on non-accrual status:
Commercial........................................... $ 624 $ 347 $ 339 $ 334
Construction......................................... 0 0 0 0
Real estate.......................................... 146 0 104 208
Installment.......................................... 0 0 0 0
------ ----- ------ ------
Total loans on non-accrual status............ 770 347 443 542
Accruing loans over 90 days delinquent................. 247 0 77 0
------ ----- ------ ------
Total non-performing loans................... 1,017 347 520 542
Other real estate owned:............................... 983 569 569 637
------ ----- ------ ------
Total non-performing assets.................. $2,000 $ 916 $1,089 $1,179
====== ===== ====== ======
As a percentage of total assets:
Total non-performing loans................... 0.40% 0.18% 0.25% 0.35%
====== ===== ====== ======
Total non-performing assets.................. 0.770% 0.48% 0.53% 0.77%
====== ===== ====== ======
</TABLE>
As of September 30, 1997 and December 31, 1996, loans on non-accrual status
totaled $.8 million and $.4 million, respectively. Additionally, as of September
30, 1997, loans over 30 days delinquent amounted to $247,000.
70
<PAGE> 79
Allowance for Loan Losses
In originating loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the credit worthiness of the borrower over the term of
the loan and, in the case of a collateralized loan, the quality of the
collateral for the loan, as well as general economic conditions. As a matter of
policy, the Bank maintains an allowance for loan losses. The amount provided for
loan losses during any period is based on an evaluation by management of the
amount needed to maintain the allowance at a level sufficient to cover
anticipated losses and the inherent risk of losses in the loan portfolio. In
determining the amount of the allowance, management considers the dollar amount
of loans outstanding, its assessment of known or potential problem loans,
current economic conditions, the risk characteristics of the various
classifications of loans, credit record of its borrowers, the fair market value
of underlying collateral and other factors. Specific allowances are provided for
individual loans when ultimate collection is considered questionable by
management after reviewing the current status of loans which are contractually
past due and considering the fair value of the underlying collateral for each
loan.
Management continues to actively monitor the Bank's asset quality and to
charge-off loans against the allowance for loan losses when appropriate or to
provide specific loss allowances when necessary. Although management believes
that it uses the best information available at the time to make determinations
with respect to allowance for loan losses, subsequent adjustments to the
allowance for loan losses may be necessary if future economic conditions or
other facts differ from the assumptions used in making the initial
determinations or if regulatory policies change.
During the year ended December 31, 1996, the provision for loan losses was
$396,000, compared to $615,000 during the year ended December 31, 1995, or a
decrease of $219,000. Total charged off loans, net of recoveries, were $34,000
for 1996 and $109,000 for 1995. During the nine months ended September 30, 1997,
the provision for loan losses was $445,000, with recoveries exceeding charged
off loans by $59,000.
The activity in the Bank's allowance for loan losses was as follows for the
periods indicated:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------- -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance at beginning of
period...................... 2,362 2,000 $ 2,000 $ 1,493 $ 866 $ 2,400 $ 1,240
Loans charged off:
Commercial.................. 11 0 48 103 16 3,127 226
Construction................ 0 0 0 0 0 0 0
Real estate................. 11 58 58 17 10 727 121
Installment................. 13 5 20 0 24 207 0
-------- -------- -------- -------- ------- ------- -------
Total loans
charged-off........ 35 63 126 120 50 4,061 347
-------- -------- -------- -------- ------- ------- -------
Recoveries:
Commercial.................. 65 38 47 9 240 0 46
Construction................ 0 0 0 0 0 0 0
Real estate................. 28 40 40 0 8 0 0
Installment................. 1 5 5 3 10 11 0
-------- -------- -------- -------- ------- ------- -------
Total recoveries..... 94 83 92 12 258 11 46
-------- -------- -------- -------- ------- ------- -------
Net loans charged-off....... (59) (20) 34 108 (208) 4,050 301
-------- -------- -------- -------- ------- ------- -------
Provision for loan losses
charged to expense.......... 445 291 396 615 419 2,516 1,461
-------- -------- -------- -------- ------- ------- -------
Allowance at end of period.... $ 2,866 $ 2,311 $ 2,362 $ 2,000 $ 1,493 $ 866 $ 2,400
======== ======== ======== ======== ======= ======= =======
Net charge-offs as a
percentage of average loans
outstanding................. -0.03% -0.02% 0.03% 0.11% -0.31% 6.61% 0.50%
======== ======== ======== ======== ======= ======= =======
Allowance to period-end loans
receivable.................. 1.54% 1.67% 1.58% 1.80% 1.79% 1.54% 3.72%
======== ======== ======== ======== ======= ======= =======
Average loans outstanding..... 170,644 120,124 $126,219 $ 94,338 $67,987 $61,231 $60,420
======== ======== ======== ======== ======= ======= =======
Period-end total loans
receivable.................. 186,098 138,638 $149,615 $111,378 $83,320 $56,173 $64,507
======== ======== ======== ======== ======= ======= =======
</TABLE>
71
<PAGE> 80
Investment Securities
The total investment portfolio decreased to $22.8 million as of December
31, 1996, from $24.4 million as of December 31, 1995, a decrease of $1.6 million
or 6.6%. The decrease in investment securities in 1996 was due primarily to a
larger reliance on federal funds purchased, which increased from $1.6 million to
$8.3 million, coupled with a transfer of earning assets from investments to
loans due to strong demand during 1996. From December 31, 1996 to September 30,
1997, the total investment portfolio increased $16.6 million or 72.8% due to
general growth of the bank, coupled with a lesser reliance on federal funds
purchased.
The following table sets forth the carrying value of the Bank's investment
portfolio for the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------
1997 1996 1995
------------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities Available for Sale:
U.S. Treasury Securities............................. $29,020 $15,002 $12,067
U.S. Government agency obligations................... 9,999 7,463 12,042
Federal Reserve Bank stock............................. 382 319 301
------- ------- -------
Total investment securities.................. $39,401 $22,784 $24,410
======= ======= =======
</TABLE>
The Bank has adopted Statement of Financial Accounting Standards No. 115
("FAS 115"), which requires companies to classify investments securities as
either held-to-maturity, available-for-sale, or trading securities. Securities
classified as held-to-maturity are carried at amortized cost. Securities
classified as available-for-sale are reported at fair value, with unrealized
gains and losses, net of tax effect, reported as a separate component of
stockholders' equity. Securities classified as trading securities are recorded
at fair value, with unrealized gains and losses included in earnings. At
September 30, 1997 and December 31, 1996, all the Bank's securities were
classified as available-for-sale.
The maturity distribution and certain other information pertaining to
investment securities was as follows for September 30, 1997:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE YIELD
--------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities Available for Sale
U.S. Treasury Securities
Due within one year.................................... $28,998 $ 29,020 4.82%
Due one to five years.................................. 0 0
U.S. Government agency obligations
Due within one year.................................... 7,998 7,995 5.49
Due one to five years.................................. 2,000 2,004 5.74
Federal Reserve Bank Stock................................ 382 382
------- --------- ----
Total securities.................................. $39,378 $ 39,401 5.00%
======= ========= ====
</TABLE>
Deposit Activities
Deposits are the major source of the Bank's funds for lending and other
investment purposes. Deposits are attracted principally from within the Bank's
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more) and retirement savings plans.
72
<PAGE> 81
The distribution by type of the Bank's deposit accounts was as follows for
the periods indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
------------------- ---------------------------------------------------------------
1997 1996 1995 1994
------------------- ------------------- ------------------- -------------------
% OF % OF % OF % OF
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand Deposits....... $ 47,326 20.81% $ 44,915 25.46% $ 30,023 22.35% $ 23,256 21.66%
NOW accounts.......... 14,462 6.36 14,233 8.07 11,019 8.20 10,586 9.86
Money market
accounts............ 50,058 22.00 35,260 19.99 30,732 22.87 24,009 22.36
Savings accounts...... 3,557 1.56 2,699 1.53 1,995 1.49 1,939 1.81
Time deposits:
Under $100,000...... 57,542 25.29 45,058 25.54 35,620 26.51 32,157 29.95
$100,000 and over... 54,555 23.98 34,251 19.41 24,968 18.58 15,416 14.36
-------- ------ -------- ------ -------- ------ -------- ------
Total deposits.. $227,500 100.00% $176,416 100.00% $134,357 100.00% $107,363 100.00%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
Time deposits included individual retirement accounts ("IRAs") totalling
$4.0 million, $2.9 million and $2.5 million for September 30, 1997 and December
31, 1996 and 1995, respectively, all of which were in the form of certificates
of deposit.
The Bank's deposits increased to $176.5 million as of December 31, 1996,
from $134.4 million as of December 31, 1995, an increase of $42.1 million or
31.3%. From December 31, 1996 to September 30, 1997, deposits increased an
additional $51.1 million, or 29.0%. These increases were the result of expanding
into several new markets, coupled with providing deposit products at competitive
prices.
Maturity terms, service fees and withdrawal penalties are established by
the Bank on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals and federal regulations.
FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits by offering rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having the same type
of charter in such depository institutions' normal market area. Under these
regulations, "well capitalized" depository institutions may accept, renew, or
roll over deposits at such rates without restriction, "adequately capitalized"
depository institutions may accept, renew or roll over deposits at such rates
with a waiver from the FDIC (subject to certain restrictions on payments of
rates), and "undercapitalized" depository institutions may not accept, renew or
roll over deposits at such rates. As of December 31, 1996 and September 30,
1997, the Bank met the definition of a "well capitalized" depository
institution.
The Bank does not have a concentration of deposits from any one source, the
loss of which would have a material adverse effect. Management believes that
substantially all of the Bank's depositors are residents in its primary market
area and it currently does not accept brokered deposits.
Time deposits of $100,000 and over, public fund deposits and other large
deposit accounts tend to be short-term in nature and more sensitive to changes
in interest rates than other types of deposits and, therefore, may be a less
stable source of funds. In the event that existing short-term deposits are not
renewed, the resulting loss of the deposited funds could adversely affect the
Bank's liquidity. In a rising interest rate market, such short-term deposits may
prove to be a costly source of funds because their short-term nature facilitates
renewal at increasingly higher interest rates, which may adversely affect the
Bank's earnings. However, the converse is true in a falling interest-rate market
where such short-term deposits would be more favorable.
73
<PAGE> 82
Time deposits of $100,000 and over mature as follows for the periods
indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due in three months or less................................. $12,782 $10,066
Due from three months to six months......................... 16,370 5,982
Due from six months to one year............................. 18,428 12,315
Due over one year........................................... 6,975 5,888
------- -------
Total time deposits $100,000 and over............. $54,555 $34,251
======= =======
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data concerning United American have
been prepared in accordance with generally accepted accounting principles which
require 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. The principal element of United American's
earnings is interest income which may be significantly affected by the level of
inflation and by government monetary and fiscal policies adopted in response to
inflationary or deflationary pressures.
Inflation affects the reported financial condition and results of
operations of all companies. However, the majority of assets and liabilities of
financial institutions are monetary in nature and therefore differ greatly from
most commercial and industrial companies that have significant investments in
fixed assets or inventories. Inflation does have an important impact on the
growth of total assets and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity to assets
ratio Inflation also is a factor which may influence interest rates, yet the
frequency and magnitude of interest rate fluctuations do not necessarily
coincide with changes in the general inflation rate. In an effort to cope with
the effects of inflation, United American attempts to monitor its interest-rate
sensitivity gap position, as discussed above. In addition, a periodic review of
banking services and products is conducted to adjust pricing in view of current
costs.
FUTURE ACCOUNTING REQUIREMENTS
Statement of Financial Accounting Standards No. 125 ("FAS 125"),
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial components approach that focuses on
control. FAS 125 provides standards for distinguishing transfers of financial
assets from transfers that are secured borrowings. The accounting and disclosure
requirements of FAS 125 became become effective for United American beginning
January 1, 1997. Management does not anticipate that FAS 125 will have a
material impact on United American's financial statements.
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" ("SFAS
128"), which simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion No. 15 "Earnings per Share" and makes them
comparable to international EPS standards. SFAS 128 replaces the presentation of
"primary" EPS with a presentation of "basic" EPS and requires dual presentation
of "basic" and "diluted" EPS on the face of the statement of operation for all
entities with complex capital structures. The standard also requires a
reconciliation of the numerator and denominator of the "basic" EPS computation
to the numerator and denominator of the "diluted" EPS computation. SFAS 128 is
effective for fiscal years ending after December 15, 1997, but application to
interim periods prior to December 15, 1997 is not permitted. The adoption of
SFAS 128 is not expected to have a material effect on United American's
presentation of EPS.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130"), which establishes standards for reporting and display of
comprehensive income and its components (revenue, expenses, gains and losses) in
a full set of general-purpose financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. United American expects to adopt
the provisions of SFAS 130 in the first quarter of 1998 and will reclassify the
financial statements for earlier periods provided for comparative purposes as
required by the Statement. The application of the new rules will not have an
impact on United American's financial position or results of operations.
74
<PAGE> 83
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware and has operated under its current
name and management since 1981. BancGroup operates Colonial Bank as its wholly
owned commercial banking subsidiary in the states of Alabama, Georgia, Florida
and Tennessee. Colonial Bank, an Alabama banking corporation, conducts a full
service banking business through 119 branches in Alabama, five branches in
Tennessee, 14 branches in Georgia and 56 branches in Florida. Colonial Mortgage
Company, a subsidiary of Colonial Bank in Alabama, is a mortgage banking company
which services approximately $12.5 billion in residential loans and which
originates mortgages in 37 states through four divisional offices. BancGroup's
commercial banking loan portfolio is comprised primarily of commercial real
estate loans (24%) and residential real estate loans (45%), a significant
portion of which is located within the State of Alabama. BancGroup's growth in
loans over the past several years has been concentrated in commercial and
residential real estate loans.
RECENTLY COMPLETED AND OTHER PROPOSED BUSINESS COMBINATIONS
Since September 30, 1997, BancGroup has acquired one banking institution,
First Independence, located in Florida, with aggregate assets and stockholders'
equity acquired of $65.0 million and $6.3 million, respectively. This
acquisition is included in the pro forma statements contained herein. See "The
Colonial BancGroup, Inc. and Subsidiaries -- Condensed Pro Forma Statements of
Condition (Unaudited)."
BancGroup has entered into a definitive agreement dated as of August 28,
1997, to acquire ASB Bancshares, Inc. ("ASB"). ASB is a Delaware corporation and
is a holding company for Ashville Savings Bank located in Ashville, Alabama. ASB
will merge with BancGroup, and, following such merger, Ashville Savings Bank
will merge with BancGroup's existing bank subsidiary, Colonial Bank. BancGroup
will issue a maximum of 467,398 shares of its Common Stock, depending upon the
market value at the time of such merger, and issue an aggregate amount of
$7,724,813 in subordinated debentures to the shareholders of ASB. This
transaction is subject to, among other things, approval by the stockholders of
ASB and approval by appropriate regulatory authorities. At September 30, 1997,
ASB had assets of $144.5 million, deposits of $130.9 million and stockholders'
equity of $12.1 million.
BancGroup has entered into a definitive agreement dated as of September 4,
1997, to acquire South Florida Banking Corp. ("South Florida"). South Florida is
a Florida corporation and is a holding company for First National Bank of
Florida at Bonita Springs located in Bonita Springs, Florida. South Florida will
merge with BancGroup, and, following such merger, First National Bank of Florida
at Bonita Springs will merge with BancGroup's bank subsidiary, Colonial Bank.
BancGroup will issue an estimated maximum of 1,929,744 shares of its Common
Stock to the shareholders of South Florida. This transaction is subject to,
among other things, approval by the stockholders of South Florida and approval
by appropriate regulatory authorities. At September 30, 1997, South Florida had
assets of $246.0 million, deposits of $215.9 million and stockholders' equity of
$16.9 million.
BancGroup has entered into a definitive agreement dated as of September 9,
1997, to acquire First Central Bank ("First Central"). First Central is a
Florida bank located in St. Petersburg, Florida. First Central will merge with
BancGroup's bank subsidiary, Colonial Bank. BancGroup will issue a maximum of
688,742 shares of its Common Stock, depending upon the market value at the time
of such merger. 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 acquisition. This transaction is subject to, among
other things, approval by the stockholders of First Central and approval by
appropriate regulatory authorities. At September 30, 1997, First Central had
assets of $56.6 million, deposits of $46.0 million and stockholders' equity of
$10.1 million.
YEAR 2000 COMPLIANCE
Most computer software programs and processing systems, including those
used by BancGroup and its subsidiaries in their operations, have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse
75
<PAGE> 84
effects on the business and operations of any business, including BancGroup,
that relies on computers and associated technologies. In response to the
challenges of addressing such consequences in the banking industry, bank
regulatory agencies, including the Federal Reserve, BancGroup's primary
regulator, have established a Year 2000 Supervision Program and published
guidelines for implementing procedures to bring the computer software programs
and processing systems into year 2000 compliance.
In compliance with the guidelines of the Federal Reserve, BancGroup has
assigned staff on a full time basis to assess the impact of year 2000 on all
areas of BancGroup, Colonial Bank and the bank's mortgage company subsidiary.
The staff is responsible for developing and implementing a strategy to ensure
that all critical systems are year 2000 compliant and testing has begun by
fourth quarter 1998. All critical Bank software and processing systems are
currently being upgraded to year 2000 compliant status. The anticipated cost of
upgrading those systems for Colonial Bank is presently estimated to be
approximately $800,000. The mortgage company servicing system is scheduled to be
rewritten into year 2000 compliant format by November 1998. The cost of the
mortgage company servicing system rewrite, in addition to other systems upgrades
is estimated to be $2.7 million spread over the next two to three years.
BancGroup anticipates that these modifications will bring added functionality
and capacity to BancGroup. Micro computer based systems are currently being
assessed, and the cost of bringing those systems into year 2000 compliance is
not currently ascertainable. The costs to bring other miscellaneous systems into
year 2000 compliance is not expected to be material.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of April 30, 1997, BancGroup had issued and outstanding 40,740,357
shares of BancGroup Common Stock with 7,729 stockholders of record. Each such
share is entitled to one vote. In addition, as of that date, 1,839,981 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 512,800 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 100,000,000 shares of BancGroup Common Stock authorized.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of April 30, 1997, of more than five percent of outstanding
BancGroup Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ---------------- ---------- --------------
<S> <C> <C>
Robert E. Lowder(2)......................................... 2,888,820(3) 6.78%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder............................................. 2,199,298 5.17%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder............................................ 2,146,106 5.04%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated assuming the issuance of 1,839,981 shares of
BancGroup 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 and the 85,442 shares owned by his mother.
(3) Includes 181,020 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
76
<PAGE> 85
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 June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ---- --------- --------------
<S> <C> <C>
DIRECTORS
Lewis Beville............................................... 1,816 *
Young J. Boozer............................................. 15,256(2) *
William Britton............................................. 19,616 *
Jerry J. Chesser............................................ 147,428 *
Augustus K. Clements, III................................... 18,600 *
Robert S. Craft............................................. 11,994 *
Patrick F. Dye.............................................. 37,960(3) *
Clinton O. Holdbrooks....................................... 280,900(4) *
D. B. Jones................................................. 20,714(5) *
Harold D. King.............................................. 156,108 *
Robert E. Lowder**.......................................... 2,888,820(6) 6.78%
John Ed Mathison............................................ 28,454 *
Milton E. McGregor.......................................... -- *
John C. H. Miller, Jr....................................... 40,480(7) *
Joe D. Mussafer............................................. 20,264 *
William E. Powell, III...................................... 14,352 *
J. Donald Prewitt........................................... 244,940(8) *
Jack H. Rainer.............................................. 2,900 *
Jimmy Rane.................................................. -- *
Frances E. Roper............................................ 365,342 *
Samuel Sippial.............................................. 2,774 *
Ed V. Welch................................................. 30,454 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III........................................ 46,920(9) *
W. Flake Oakley, IV......................................... 39,458(9) *
P.L. "Mac" McLeod, Jr....................................... 74,951(9)(10) *
Michelle Condon............................................. 18,586(9) *
All Executive Officers and Directors as a Group............. 4,529,087(11) 10.64%
</TABLE>
- ---------------
* Represents less than one percent.
** Executive Officer.
(1) Percentages are calculated assuming the issuance of 1,839,981 shares of
Common Stock pursuant to BancGroup's stock option plans.
(2) Includes 1,000 shares of Common Stock out of 2,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 35,960 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 24,524 shares of Common Stock subject to options under BancGroup's
stock option plans, and 78,998 shares over which Mr. Holdbrooks serves as
trustee.
(5) Mr. Jones holds power to vote these shares as trustee.
(6) These shares include 181,020 shares of Common Stock subject to options
under BancGroup's stock option plans. See the table at "Voting Securities
and Principal Stockholders."
(7) Includes 20,000 shares subject to options.
(8) Includes 61,604 shares subject to stock options.
77
<PAGE> 86
(9) Young J. Boozer, III, W. Flake Oakley, IV, P.L. "Mac" McLeod, Jr. and
Michelle Condon, hold options respecting 25,000, 18,000, 26,000 and 11,000
shares of Common Stock, respectively, pursuant to BancGroup's stock option
plans.
(10) P.L. "Mac" McLeod, Jr. was nominated as President of BancGroup on August
12, 1997, and such nomination was approved by BancGroup's Board of
Directors on October 15, 1997.
(11) Includes shares subject to options.
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in (i) BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, at item 10; (ii) BancGroup's Proxy
Statement for its 1997 Annual Meeting, at items 10, 11 and 13; and (iii)
BancGroup's Report on Form 8-K dated October 30, 1997, and is incorporated
herein by reference.
After the Effective Date, it is anticipated that James L. Hewitt will be
nominated to the Board of Directors of BancGroup. The following biographical
information is provided in the event Mr. Hewitt accepts such nomination:
JAMES L. HEWITT
Jim Hewitt, a life long resident of Orlando, is a graduate of Florida State
University where he received a B.S. Degree in Finance and Accounting in 1965.
Following graduation, Mr. Hewitt was in Corporate Accounting, and subsequently
was employed as an Account Executive with the securities firm of Merrill, Lynch,
Pierce, Fenner and Smith, Inc. From 1970 to 1976, Mr. Hewitt was in the business
of organizing and operating Child Care Centers. Mr. Hewitt served as co-owner of
Little Friends, Inc. which established eight centers in four municipalities in
Florida. His company was sold to Gerber Products in March 1976. From March 1976
to January 1992, Mr. Hewitt was engaged in the acquisition, sale, and management
of real estate properties. During this period, Mr. Hewitt formed 28 separate
partnerships to acquire real estate properties in the Central Florida market
area. Mr. Hewitt was the founder and until November of 1991 a principal owner of
The Orlando Magic (NBA Franchise). Since January 1992, Mr. Hewitt has served as
the Chairman, President and Chief Executive Officer of United American Holding
Corporation, which owns United American Bank of Central Florida (which he
chartered in 1984).
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<PAGE> 87
BUSINESS OF UNITED AMERICAN
GENERAL
United American was incorporated under the laws of the State of Florida on
September 12, 1988 under the name Florida Security Holding Corporation. The name
of the corporation was changed to United American Holding Corporation on October
27, 1992. United American is a registered bank holding company under the BHCA,
and owns all of the voting shares of the Bank.
The Bank commenced operations in 1985. The Bank is a state banking
corporation subject to regulation by the Federal Deposit Insurance Corporation
("FDIC") and the Florida Department. The Bank's operations are conducted from
its main office located in Orlando, Florida, and branch offices located in the
Central Florida region.
The Bank provides a range of consumer and commercial banking services to
individuals, businesses and industries. The basic services offered by the Bank
include: demand interest bearing and noninterest bearing accounts, money market
deposit accounts, NOW accounts, time deposits, safe deposit services, credit
cards, cash management, direct deposits, notary services, money orders, night
depository, travelers' checks, cashier's checks, domestic collections, savings
bonds, bank drafts, drive-in tellers, and banking by mail. In addition, the Bank
makes secured and unsecured commercial, real estate, and consumer loans and
issues standby letters of credit. The Bank provides automated teller machine
("ATM") cards, as a part of the HONOR ATM network, thereby permitting customers
to utilize the convenience of larger ATM networks. The Bank does not have trust
powers and, accordingly, provides no trust services.
The revenues of the Bank are primarily derived from interest on, and fees
received in connection with, real estate and other loans, and from interest and
dividends from short-term investments. The principal sources of funds for the
Bank's lending activities are its deposits, repayment of loans, and the sale and
maturity of investment securities. The principal expenses of the Bank are the
interest paid on deposits, and operating and general administrative expenses.
As is the case with banking institutions generally, the Bank's operations
are materially and significantly influenced by general economic conditions and
by related monetary and fiscal policies of financial institution regulatory
agencies, including the Federal Reserve, the FDIC, and the Florida Department.
Deposit flows and costs of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other types of loans,
which in turn are affected by the interest rates at which such financing may be
offered and other factors affecting local demand and availability of funds. The
Bank faces strong competition in the attraction of deposits (its primary source
of lendable funds) and in the origination of loans.
DEPOSIT ACTIVITIES
Deposits are the major source of the Bank's funds for lending and other
investment activities. The Bank considers the majority of its regular savings,
demand, NOW and money market deposit accounts to be core deposits. These
accounts comprised 50.7% of the Bank's total deposits at September 30, 1997. At
September 30, 1997, 49.3% of the Bank's deposits were certificates of deposit.
Generally, the Bank attempts to maintain the rates paid on its deposits at a
competitive level. Time deposits of $100,000 and over made up 24.0% of the
Bank's total deposits at September 30, 1997. The majority of the deposits of the
Bank are generated in the Orange County market. The Bank does not accept
brokered deposits. For additional information on the Bank's deposit activities,
see "United American Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition -- Deposit Activities".
LENDING ACTIVITIES
The Bank offers a range of lending services, including real estate,
consumer and commercial loans, to individuals and small businesses and other
organizations that are located in, or conduct a substantial portion of their
business in, the Bank's market area. The Bank's loans receivable, net at
September 30, 1997 were $186.1 million, or 71.4% of total assets. The interest
rates charged on loans vary with the degree of risk, maturity, and
79
<PAGE> 88
amount of the loan, and are further subject to competitive pressures, money
market rates, availability of funds, and government regulations. The Bank has no
foreign loans or loans for highly leveraged transactions.
The Bank's loans are concentrated in three major areas: real estate loans,
commercial loans, and consumer loans. As of September 30, 1997, 71.0% of the
Bank's loan portfolio consisted of loans secured by mortgages on real estate and
24.0% of the loan portfolio consisted of commercial loans. At the same date,
5.2% of the Bank's loan portfolio consisted of consumer and other loans.
The Bank's real estate loans are secured by mortgages and consist primarily
of loans to individuals and businesses for the purchase, improvement of or
investment in real estate and for the construction of single-family residential
units or the development of single-family residential building lots. These real
estate loans may be made at fixed- or variable-interest rates. The Bank
generally does not make fixed-interest rate commercial real estate loans for
terms exceeding five years. Loans in excess of three years generally have
adjustable-interest rates. The Bank's residential real estate loans generally
are repayable in monthly installments based on up to a 30-year amortization
schedule with variable-interest rates.
The Bank's commercial loans include loans to individuals and
small-to-medium sized businesses located primarily in Orange County for working
capital, equipment purchases, and various other business purposes. A majority of
the Bank's commercial loans are secured by equipment or similar assets, but
these loans may also be made on an unsecured basis. Commercial loans may be made
at variable- or fixed-interest rates. Commercial lines of credit are typically
granted on a one-year basis, with loan covenants and monetary thresholds. Other
commercial loans with terms or amortization schedules of longer than one year
will normally carry interest rates which vary with the prime lending rate and
will become payable in full and are generally refinanced in three to five years.
The Bank's consumer loan portfolio consists primarily of loans to
individuals for various consumer purposes, but includes some business purpose
loans which are payable on an installment basis. The majority of these loans are
for terms of less than five years and are secured by liens on various personal
assets of the borrowers, but consumer loans may also be made on an unsecured
basis. Consumer loans are made at fixed-and variable-interest rates, and are
often based on up to a five-year amortization schedule.
Loan originations are derived from a number of sources, including direct
solicitation by the Bank's loan officers, existing customers and borrowers,
advertising, walk-in customers and, in some instances, referrals from brokers.
For additional information on the Bank's lending activities, see "United
American Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Condition -- Lending Activities," and "-- Asset
Quality."
INVESTMENTS
The Bank invests a portion of its assets in U.S. Treasury and U.S.
Government agency obligations, certificates of deposit, and federal funds sold.
The Bank's investments are managed in relation to loan demand and deposit
growth, and are generally used to provide for the investment of excess funds at
reduced yields and risks relative to yields and risks of the loan portfolio,
while providing liquidity to fund increases in loan demand or to offset
fluctuations in deposits. For additional information relating to United
American's investments, see "United American Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial
Condition -- Investment Securities" and Note 3 to the Notes to United American's
Consolidated Financial Statements.
EMPLOYEES
As of September 30, 1997, United American employed 77 full-time employees
and 12 part-time employee. The employees are not represented by a collective
bargaining unit. United American and the Bank consider relations with employees
to be good.
PROPERTIES
The main office of United American and the Bank is located at 105 West
Colonial Drive, Orlando, Florida 32801, in a two story building of approximately
4,400 square feet, which is owned by the Bank.
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<PAGE> 89
The Bank also has banking offices as follows: the Longwood Office is
located at 801 East State Road 434, Longwood, Florida, 32750; the Kissimmee
Office is located at 1700 West Vine Street, Kissimmee, Florida 34741; the
Maitland Office is located at 360 East Horatio Avenue, Maitland, Florida 32751;
the Pine Hills Office is located at 5404 Silver Star Road, Orlando, Florida
32808; the Apopka Office is located at 2488 Semoran Blvd., Apopka, Florida
32703; the Corrine Drive Office is located at 3101 Corrine Drive, Orlando,
Florida 32803; the Ocoee Office is located at 1550 Maguire Road, Ocoee, Florida
34761; and the South Orlando Office is located at 2703 South Orange Avenue,
Orlando, Florida 32806. All of the foregoing offices are owned by the Bank,
except the Pine Hills Office (which is leased under a sublease arrangement for a
period of time pending a resolution of the dispute between the owners as to
whether the sublessor has the right to continue to lease the property), the
Apopka Office (which is leased pursuant to a lease arrangement which, with
renewal options, expires in 2020), and the South Orlando Office (which is leased
pursuant to a lease arrangement which, with renewal options, expires in 2021).
In September, 1996, United American decided to pursue further development
of its main office. As a part of those efforts, in November, 1996,
representatives of United American and C & G Properties of Orlando, Inc. ("C&G
Properties"), which owned United American's main office and certain property
adjacent to the office, had discussions regarding the acquisition by United
American of such property. C&G Properties was owned, in part, directly or
indirectly by Messrs. Hewitt, John T. Cash, Jr., and James P. Caruso (each of
whom is a director of United American). In December 1996, the United American
Board of Directors initiated a plan to acquire all of the outstanding stock of
C&G Properties. The discussions continued into 1997 and, on May 19, 1997, the
United American Board authorized United American to enter into an agreement to
acquire all of the outstanding shares of C&G Properties in exchange for the
issuance by United American of additional shares of United American Common Stock
at a value of $20.00 for each share of United American Common Stock. On July 8,
1997, the parties entered into an agreement, and on August 22, 1997, the C&G
Properties stock was purchased by United American for the appraised value of the
property owned by C&G Properties which, net of a mortgage assumed by United
American and payment of selling commissions, was $1,190,000. To acquire C&G
Properties, United American issued an aggregate of 59,500 shares of United
American Common Stock, valued at $20.00 per share, including beneficial
ownership of 17,850 shares by Mr. Hewitt, 1,488 shares by Mr. Cash and 935
shares by Mr. Caruso. United American intends to use the property acquired from
C&G Properties for office expansion, the construction of an ATM and additional
drive-up teller lanes, and for additional Central Florida Region parking.
The Bank leases its South Orlando Office from Compton Properties, Ltd., a
partnership in which James P. Caruso, a director of United American, is a
general partner. The property lease provides for monthly rental payments of
$6,224, increasing in accordance with the terms of the lease. The Bank utilized
the services of McCree, Inc. (which is owned by Richard T. McCree, a director of
United American) as general contractor for work performed on the South Orlando
Office, pursuant to which it was paid a management fee of $45,000. United
American also anticipates utilizing the services of McCree, Inc. to perform
renovations and additions to its main office.
LEGAL PROCEEDINGS
United American and the Bank are periodically parties to or otherwise
involved in legal proceedings arising in the normal course of business, such as
claims to enforce liens, claims involving the making and servicing of real
property loans, and other issues incident to their respective businesses.
Management does not believe that there is any pending or threatened proceeding
against United American or the Bank which, if determined adversely, would have a
material adverse effect on United American's consolidated financial position.
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<PAGE> 90
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information as of the Record Date, regarding
the ownership of United American Common Stock by each director of United
American, and by all directors and executive officers as a group. Unless
otherwise indicated, all persons shown in the table have sole voting and
investment power with regard to the shares shown.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
NAME BENEFICIALLY OWNED(1) OF OWNERSHIP
- ---- --------------------- ------------
<S> <C> <C>
James L. Hewitt............................................. 388,790(2) 21.2
James P. Caruso............................................. 119,250(3) 6.6
John T. Cash, Jr............................................ 85,388(4) 4.7
Vincent S. Hughes........................................... 79,750(5) 4.5
Mel R. Martinez............................................. 29,100(6) 1.6
Richard T. McCree........................................... 57,200(7) 3.2
David G. Powers............................................. 30,600(8) 1.7
M. Alan Rowe................................................ 29,300(9) 1.6
All directors and executive officers as a group (11
persons).................................................. 867,978 44.6
</TABLE>
- ---------------
(1) Information related to beneficial ownership is based upon information
available to United American and uses "beneficial ownership" concepts set
forth in rules of the Commission under the Securities Exchange Act of 1934,
as amended. Under such rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he may disclaim any beneficial
interest. Accordingly, directors are named as beneficial owners of shares as
to which they may disclaim any beneficial interest. Except as otherwise
indicated in the notes to this table, the individuals possessed sole voting
and investment power as to all shares of United American Common Stock set
forth opposite their names. The shares set forth above also include as to
each director the number of shares listed below, which represent shares the
individual has the right to acquire pursuant to presently exercisable
options:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL NUMBER OF SHARES
- ------------------ ----------------
<S> <C>
James L. Hewitt............................................. 55,300
James P. Caruso............................................. 16,750
John T. Cash, Jr............................................ 9,400
Vincent S. Hughes........................................... 8,750
Mel R. Martinez............................................. 3,100
Richard T. McCree........................................... 6,700
David G. Powers............................................. 21,300
M. Alan Rowe................................................ 20,000
</TABLE>
(2) Includes 1,100 shares held by his retirement account.
(3) Includes 90,500 shares held by an investment entity on his behalf.
(4) Includes 28,000 shares held by his spouse and 5,000 shares held by his
company and its profit sharing trust.
(5) Consists of shares held by his revocable trust.
(6) Includes 25,000 shares held jointly with his spouse and 1,000 shares held by
his retirement account.
(7) Includes 25,000 shares held jointly with his spouse, and 4,000 shares held
by his retirement account.
(8) Includes 1,000 shares held by his retirement account.
(9) Includes 3,500 shares held by his retirement account.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Agreement by United American'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 United American Common Stock present in person or by proxy at the Special
Meeting to approve the Agreement, United American's Board of Directors intends
to adjourn the Special Meeting to a
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<PAGE> 91
later date provided a majority of the shares present and voting on the motion
have voted in favor of such adjournment. The place and date to which the Special
Meeting would be adjourned would be announced at the Special Meeting. Proxies
voted against the Agreement and abstentions will not be voted to adjourn the
Special Meeting. Abstentions and broker non-votes will not be voted on this
matter but will not count as "no votes." If it is necessary to adjourn the
Special Meeting and the adjournment is for a period of not more than 30 days
from the original date of the Special Meeting, no notice of the time and place
of the adjourned meeting need be given the shareholders, other than an
announcement made at the Special Meeting.
The effect of any such adjournment would be to permit United American to
solicit additional proxies for approval of the Agreement. While such an
adjournment would not invalidate any proxies previously filed as long as the
record date for the adjourned meeting remained the same, including proxies filed
by shareholders voting against the Agreement, an adjournment would afford United
American the opportunity to solicit additional proxies in favor of the
Agreement.
OTHER MATTERS
The Board of Directors of United American 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 United American.
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1998 annual meeting of stockholders, any stockholder proposal
to take action at such meeting must be received at BancGroup's main office at
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101, no later
than 120 calendar days in advance of the date of March 14, 1998.
LEGAL MATTERS
Certain legal matters regarding the shares of BancGroup Common Stock of
BancGroup offered hereby are being passed upon by the law firm of Miller,
Hamilton, Snider & Odom, L.L.C., Mobile, Alabama, of which John C. H. Miller,
Jr., a director of BancGroup, is a partner. Such firm received fees for legal
services performed in 1996 of $1,474,853. John C. H. Miller, Jr. beneficially
owns 38,352 shares of Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1996 of $41,000. Certain legal matters relating
to the Merger are being passed upon for United American by the law firm of
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., Orlando, Florida.
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup and the
supplemental consolidated financial statements of BancGroup as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as experts in accounting and auditing.
It is not expected that a representative of such firm will be present at the
Special Meeting.
Coopers & Lybrand L.L.P., serves as the independent accountants for United
American. United American's consolidated financial statements as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 are
included 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.
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<PAGE> 92
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 UNITED AMERICAN PRIOR TO
THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF UNITED AMERICAN PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING VOTING IN PERSON.
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<PAGE> 93
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
September 30, 1997 and 1996:
Unaudited Consolidated Condensed Balance
Sheets -- September 30, 1997 and 1996.................. F-2
Unaudited Consolidated Condensed Statements of
Income -- Nine Months Ended September 30, 1997 and
1996................................................... F-3
Unaudited Consolidated Condensed Statements of Cash
Flows -- Nine Months Ended September 30, 1997 and
1996................................................... F-4
Notes to Unaudited Consolidated Condensed Financial
Statements............................................. F-5
December 31, 1996 and 1995:
Report of Independent Accountants......................... F-6
Consolidated Balance Sheets -- December 31, 1996 and
1995................................................... F-7
Consolidated Statements of Income -- Years Ended December
31, 1996, 1995 and 1994................................ F-8
Consolidated Statements of Stockholders' Equity -- Years
Ended December 31, 1996, 1995 and 1994................. F-9
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1996, 1995 and 1994....................... F-10
Notes to Consolidated Financial Statements................ F-12
</TABLE>
F-1
<PAGE> 94
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks................................... $ 11,228 $ 10,516
Federal funds sold........................................ 6,247 1,482
-------- --------
Total cash and cash equivalents................... 17,475 11,998
Interest-bearing deposits in banks.......................... 270 258
Investment securities available for sale (at aggregate fair
value).................................................... 39,401 28,674
Loans receivable (net of allowance for loan losses, deferred
loan fees, and unearned discounts of $2,866 in 1997 and
$2,311 in 1996)........................................... 186,098 138,638
Bank premises and equipment, net............................ 9,277 5,930
Accrued interest receivable................................. 1,751 1,175
Goodwill, net............................................... 2,089 2,156
Other real estate........................................... 983 569
Other assets................................................ 3,450 2,616
-------- --------
Total assets...................................... $260,794 $192,014
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand................................ $ 47,326 $ 39,341
Interest-bearing:
Demand................................................. 14,462 12,498
Savings................................................ 53,615 43,630
Time, $100,000 and over................................ 54,555 30,094
Other time............................................. 57,542 44,069
-------- --------
Total deposits.................................... 227,500 169,632
Securities sold under agreements to repurchase.............. 8,120 4,297
Accrued interest payable.................................... 460 348
Other liabilities........................................... 994 1,029
Note payable................................................ 2,246 1,100
-------- --------
Total liabilities................................. 239,320 176,406
-------- --------
Stockholders' equity:
Common stock, par value $.01; 2,000 and 2,000 shares
authorized; 1,780 and 1,501 shares issued and
outstanding at September 30, 1997 and 1996,
respectively........................................... 17 15
Additional paid-in capital................................ 18,965 15,066
Unrealized gain (loss) on securities available for sale
(net of tax)........................................... 15 (76)
Unearned compensation..................................... (69) --
Retained earnings (deficit)............................... 2,546 603
-------- --------
Total stockholders' equity........................ 21,474 15,608
-------- --------
Total liabilities and stockholders' equity........ $260,794 $192,014
======== ========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
F-2
<PAGE> 95
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Interest income and fees:
Loans..................................................... $12,811 $9,196
Investment securities available for sale.................. 1,093 1,106
Federal funds sold........................................ 436 244
--------- ---------
Total interest income and fees.................... 14,340 10,546
--------- ---------
Interest expense:
Deposits.................................................. 5,479 3,835
Securities sold under agreement to repurchase............. 278 120
Federal funds purchased................................... 1 3
Other..................................................... 115 13
--------- ---------
Total interest expense............................ 5,873 3,971
--------- ---------
Net interest income before provision for loan
losses.......................................... 8,467 6,575
Provision for loan losses................................... 445 291
--------- ---------
Net interest income after provision for loan
losses.......................................... 8,022 6,284
--------- ---------
Noninterest income:
Service charges on deposit accounts....................... 1,258 935
Other income.............................................. 434 346
--------- ---------
Total noninterest income.......................... 1,692 1,281
--------- ---------
Noninterest expense:
Salaries and employee benefits............................ 3,553 2,454
Occupancy and equipment expense........................... 1,073 761
Loss on sale of other real estate......................... -- 31
Loss on sale of other assets.............................. -- 13
Other expense............................................. 1,864 1,446
--------- ---------
Total noninterest expense......................... 6,490 4,705
--------- ---------
Income before income tax provision..................... 3,224 2,860
Income tax provision........................................ 1,272 1,125
--------- ---------
Net income.................................................. $1,952 $1,735
========= =========
Earnings per share.......................................... $ 1.16 $ 1.16
Weighted average number of common shares outstanding........ 1,687,204 1,498,889
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
F-3
<PAGE> 96
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Interest received......................................... $13,174 $10,001
Service charges received.................................. 1,258 935
Loan fees collected....................................... 804 720
Other income received..................................... 434 350
Interest paid............................................. (5,800) (3,921)
Cash paid to suppliers and employees...................... (6,258) (4,459)
Income taxes paid......................................... (1,623) (965)
------- -------
Net cash provided by operating activities......... 1,989 2,661
------- -------
Cash Flows from Investing Activities:
Proceeds from sales and maturities of available for sale
investment securities.................................. 24,500 14,500
Proceeds from the sale of other real estate............... 292 37
Proceeds from sale of other assets........................ -- 11
Purchase of available for sale investment securities...... (41,127) (18,981)
Purchase of interest-bearing deposits in banks............ (8) (8)
Net increase in loans made to customers................... (37,800) (27,773)
Purchase of bank premises and equipment................... (1,007) (3,061)
------- -------
Net cash used in investing activities............. (55,150) (35,275)
------- -------
Cash Flows from Financing Activities:
Net increase in demand deposit and savings accounts....... 18,296 21,702
Net increase in time deposits............................. 32,789 13,574
Net increase (decrease) in securities sold under
agreements to repurchase............................... 2,892 3,705
Net increase in federal funds purchased................... (4,000) (3,500)
Proceeds from the sale of common stock.................... 1,996 10
Payment of dividends...................................... (758) (750)
Sale of treasury stock.................................... -- 50
Proceeds from note payable................................ 1,500 1,100
Payments on note payable.................................. (1,554) --
------- -------
Net cash provided by financing activities......... 51,161 35,891
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents........ (2,000) 3,277
Cash and Cash Equivalents:
Beginning of period....................................... 19,475 8,721
------- -------
End of period............................................. 17,475 11,998
======= =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company's subsidiary bank foreclosed on several properties that served
as collateral for certain real estate loans in the amount of $706,328 and
$-0-during the nine months ended September 30, 1997 and 1996, respectively.
These properties were either sold during 1997 or 1996 or are included in other
real estate.
See accompanying notes to unaudited consolidated condensed financial statements.
F-4
<PAGE> 97
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions for interim financial
statements and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
These unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the years ended December 31, 1996 and 1995. In the opinion of the Company,
the financial statements reflect all adjustments which are of a normal recurring
nature and which are necessary to present fairly the financial position of the
Company as of September 30, 1997 and the results of operations for the nine
months ended September 30, 1997 and 1996, and cash flows for the nine months
ended September 30, 1997 and 1996. The results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of the results which may
be expected for the entire fiscal year.
2. STOCK OPTIONS
In June, 1997, 40,500 non-qualified stock options were issued to Directors
and 11,500 stock options were issued to Executive officers at an exercise price
of $10 per share. As of September 30, 1997, the Directors options were fully
vested and the Executive officers options were 40% vested. $405,000 and $46,000
in compensation expense was recorded in connection with the Directors and
Executive officers options, respectively. Additionally, $69,000 in unearned
compensation was recorded to reflect the unvested portion of the Executive
officers options.
3. SUBSEQUENT EVENT
Effective August 22, 1997, the Company acquired all of the assets, related
liabilities and outstanding shares of C&G Properties of Orlando, Inc. This
acquisition was accounted for using the purchase method of accounting. The
initial purchase price was $1,190,000 issued in 59,500 shares of United American
Holding Corporation common stock. The purchase price was allocated as follows:
<TABLE>
<S> <C>
Land........................................................ $1,894,150
Building.................................................... 495,100
Mortgage payable............................................ (1,199,250)
----------
$1,190,000
==========
</TABLE>
F-5
<PAGE> 98
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
United American Holding Corporation and Subsidiary
Orlando, Florida
We have audited the accompanying consolidated balance sheets of United
American Holding Corporation and Subsidiary as of December 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 United
American Holding Corporation and Subsidiary as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Orlando, Florida
January 27, 1997, except for
Notes 5 and 11, as to which
the date is August 22, 1997
F-6
<PAGE> 99
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks................................... $ 11,212,235 $ 7,094,854
Federal funds sold........................................ 8,262,739 1,626,442
------------ ------------
Total cash and cash equivalents................... 19,474,974 8,721,296
Interest-bearing deposits in banks.......................... 260,850 250,000
Investment securities available for sale (at aggregate fair
value).................................................... 22,783,559 24,410,070
Loans receivable (net of allowance for loan losses, deferred
loan fees, and unearned discounts of $2,960,566 in 1996
and $2,436,943 in 1995)................................... 149,615,125 111,378,197
Bank premises and equipment, net............................ 6,358,257 3,150,126
Accrued interest receivable................................. 1,182,768 1,101,457
Goodwill, net............................................... 2,139,403 2,206,260
Other real estate........................................... 569,129 636,586
Other assets................................................ 2,497,150 2,017,795
------------ ------------
Total assets...................................... $204,881,215 $153,871,787
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand................................ $ 44,914,864 $ 30,023,112
Interest-bearing:
Demand................................................. 14,233,432 11,018,657
Savings................................................ 37,958,880 32,726,455
Time, $100,000 and over................................ 34,251,350 24,968,108
Other time............................................. 45,057,332 35,620,349
------------ ------------
Total deposits.................................... 176,415,858 134,356,681
Securities sold under agreements to repurchase.............. 5,228,266 592,073
Federal funds purchased..................................... 4,000,000 3,500,000
Accrued interest payable.................................... 387,064 297,013
Other liabilities........................................... 1,127,019 435,568
Note payable................................................ 1,100,000 --
------------ ------------
Total liabilities................................. 188,258,207 139,181,335
------------ ------------
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, par value $.01 and $2.50 per share;
2,000,000 and 2,000,000 shares authorized; 1,520,500
and 1,500,000 shares issued and outstanding at December
31, 1996 and 1995, respectively........................ 15,205 3,750,000
Additional paid-in capital................................ 15,261,156 11,321,361
Unrealized gain (loss) on securities available for sale
(net of tax (benefit) of $(2,739) in 1996 and $26,741
in 1995)............................................... (5,317) 51,910
Retained earnings (deficit)............................... 1,351,964 (382,819)
------------ ------------
16,623,008 14,740,452
Less treasury stock, 5,000 shares at cost................. -- (50,000)
------------ ------------
Total stockholders' equity........................ 16,623,008 14,690,452
------------ ------------
Total liabilities and stockholders' equity........ $204,881,215 $153,871,787
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 100
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Interest income and fees:
Loans.................................................. $12,846,404 $ 9,953,552 $6,707,332
Investment securities available for sale............... 1,474,625 1,170,528 467,821
Federal funds sold..................................... 302,240 640,241 225,431
----------- ----------- ----------
Total interest income and fees................. 14,623,269 11,764,321 7,400,584
----------- ----------- ----------
Interest expense:
Deposits............................................... 5,283,643 4,396,903 2,530,652
Securities sold under agreements to repurchase......... 189,659 100,582 22,776
Federal funds purchased................................ 3,639 2,521 1,848
Other.................................................. 35,871 57,870 211,381
----------- ----------- ----------
Total interest expense......................... 5,512,812 4,557,876 2,766,657
----------- ----------- ----------
Net interest income before provision for loan
losses....................................... 9,110,457 7,206,445 4,633,927
Provision for loan losses................................ 396,000 615,446 418,842
----------- ----------- ----------
Net interest income after provision for loan
losses....................................... 8,714,457 6,590,999 4,215,085
----------- ----------- ----------
Noninterest income:
Service charges on deposit accounts.................... 1,363,223 940,438 683,522
Gain on sale of other real estate...................... -- 3,308 8,068
Other income........................................... 481,917 329,025 385,580
----------- ----------- ----------
Total noninterest income....................... 1,845,140 1,272,771 1,077,170
----------- ----------- ----------
Noninterest expense:
Salaries and employee benefits......................... 3,382,132 2,584,073 1,943,829
Occupancy and equipment expense........................ 1,064,586 1,109,696 786,840
Loss on sale of other real estate...................... 31,237 54,989 --
Loss on sale of other assets........................... 1,360 -- 16,170
Other expense.......................................... 1,986,592 1,728,025 1,736,661
----------- ----------- ----------
Total noninterest expense...................... 6,465,907 5,476,783 4,483,500
----------- ----------- ----------
Income before income tax provision............. 4,093,690 2,386,987 808,755
Income tax provision..................................... 1,608,907 667,975 17,317
----------- ----------- ----------
Net income............................................... $ 2,484,783 $ 1,719,012 $ 791,438
=========== =========== ==========
Earnings Per Share....................................... $ 1.66 $ 1.24 $ 0.94
Weighted Average Number of Common Shares Outstanding..... 1,500,021 1,389,508 840,800
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 101
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) RETAINED
COMMON STOCK ADDITIONAL TREASURY STOCK ON SECURITIES EARNINGS/
----------------------- PAID-IN ----------------- AVAILABLE (ACCUMULATED
SHARES PAR VALUE CAPITAL SHARES COST FOR SALE DEFICIT)
--------- ----------- ----------- ------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993..................... 840,800 $ 2,102,000 $ 6,389,551 -- $ -- $ -- $(2,893,269)
Effect of change in
accounting method for
investments............ -- -- -- -- -- (6,063) --
Change in unrealized gain
(loss)................. -- -- -- -- -- (147,057) --
Net income............... -- -- -- -- -- -- 791,438
--------- ----------- ----------- ------ -------- --------- -----------
Balance, December 31,
1994..................... 840,800 2,102,000 6,389,551 -- -- (153,120) (2,101,831)
Sale of stock............ 659,200 1,648,000 4,931,810 -- -- -- --
Change in unrealized gain
(loss)................. -- -- -- -- -- 205,030 --
Purchase of treasury
stock.................. -- -- -- (5,000) (50,000) -- --
Net income............... -- -- -- -- -- -- 1,719,012
--------- ----------- ----------- ------ -------- --------- -----------
Balance, December 31,
1995..................... 1,500,000 3,750,000 11,321,361 (5,000) (50,000) 51,910 (382,819)
Sale of stock............ 20,500 51,250 153,750 -- -- -- --
Change in unrealized gain
(loss)................. -- -- -- -- -- (57,227) --
Sale of treasury stock... -- -- -- 5,000 50,000 -- --
Dividends paid ($.50 per
share)................. -- -- -- -- -- -- (750,000)
Change in par value...... -- (3,786,045) 3,786,045 -- -- -- --
Net income............... -- -- -- -- -- -- 2,484,783
--------- ----------- ----------- ------ -------- --------- -----------
Balance, December 31,
1996..................... 1,520,500 $ 15,205 $15,261,156 -- $ -- $ (5,317) $ 1,351,964
========= =========== =========== ====== ======== ========= ===========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, December 31,
1993..................... $ 5,598,282
Effect of change in
accounting method for
investments............ (6,063)
Change in unrealized gain
(loss)................. (147,057)
Net income............... 791,438
-----------
Balance, December 31,
1994..................... 6,236,600
Sale of stock............ 6,579,810
Change in unrealized gain
(loss)................. 205,030
Purchase of treasury
stock.................. (50,000)
Net income............... 1,719,012
-----------
Balance, December 31,
1995..................... 14,690,452
Sale of stock............ 205,000
Change in unrealized gain
(loss)................. (57,227)
Sale of treasury stock... 50,000
Dividends paid ($.50 per
share)................. (750,000)
Change in par value...... --
Net income............... 2,484,783
-----------
Balance, December 31,
1996..................... $16,623,008
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 102
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Interest received.................................. $ 13,865,567 $ 10,764,183 $ 6,870,246
Service charges received........................... 1,363,223 940,438 683,522
Loan fees collected................................ 870,340 540,476 415,659
Other income received.............................. 472,528 329,025 385,580
Interest paid...................................... (5,422,761) (4,498,035) (2,733,089)
Cash paid to suppliers and employees............... (5,949,423) (6,314,840) (4,004,561)
Income taxes paid.................................. (1,384,000) (740,000) (34,000)
Income tax refund received......................... -- -- 693,516
------------ ------------ ------------
Net cash provided by operating
activities............................... 3,815,474 1,021,247 2,276,873
------------ ------------ ------------
Cash Flows from Investing Activities:
Proceeds from maturity of interest-bearing
deposits........................................ -- -- 400,000
Proceeds from sales and maturities of available for
sale investment securities...................... 31,011,450 20,500,000 6,800,000
Proceeds from the sale of other real estate........ 36,220 638,036 5,447,960
Proceeds from sale of other assets................. 11,000 -- 17,000
Proceeds from the disposition of bank equipment.... -- 4,200 --
Purchase of available for sale investment
securities...................................... (29,468,618) (31,537,073) (11,414,060)
Insurance proceeds for loss of bank equipment...... -- 4,685 --
Purchase of interest-bearing deposits in banks..... (10,850) (200,000) --
Net increase in loans made to customers............ (38,825,430) (28,959,011) (27,141,529)
Purchase of bank premises and equipment............ (3,615,938) (1,384,036) (882,360)
------------ ------------ ------------
Net cash used in investing activities...... (40,862,166) (40,933,199) (26,772,989)
------------ ------------ ------------
Cash Flows from Financing Activities:
Net increase in demand deposit and savings
accounts........................................ 23,338,952 13,978,941 12,328,655
Net increase in time deposits...................... 18,720,225 13,015,030 14,428,921
Net increase (decrease) in securities sold under
agreements to repurchase........................ 4,636,193 (831,843) 1,423,916
Net increase in federal funds purchased............ 500,000 3,500,000 --
Proceeds from the sale of common stock............. 205,000 6,579,810 --
Payment of dividends............................... (750,000) -- --
Purchase of treasury stock......................... -- (50,000) --
Sale of treasury stock............................. 50,000 -- --
Principal payments on notes payable................ -- (2,378,315) (180,528)
Proceeds from note payable......................... 1,100,000 -- --
------------ ------------ ------------
Net cash provided by financing
activities............................... 47,800,370 33,813,623 28,000,964
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ 10,753,678 (6,098,329) 3,504,848
</TABLE>
F-10
<PAGE> 103
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash and Cash Equivalents:
Beginning of year.................................. 8,721,296 14,819,625 11,314,777
------------ ------------ ------------
End of year........................................ $ 19,474,974 $ 8,721,296 $ 14,819,625
============ ============ ============
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income...................................... $ 2,484,783 $ 1,719,012 $ 791,438
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 473,822 438,031 384,375
Gain on sale of investments................... (4,475) -- --
Gain on sale of bank equipment................ (4,914) (2,606) --
Loss on sale of other real estate............. 31,237 51,681 (8,068)
Loss on other assets.......................... -- -- 16,170
Deferred income taxes......................... (118,531) (10,768) --
Provision for loan losses..................... 396,000 615,446 418,842
Amortization of premiums and accretion of
discounts on investment securities......... 1,447 (145,829) (22,529)
Increase in deferred loan fees................ 192,502 65,803 37,100
Increase in accrued interest receivable....... (81,311) (436,431) (130,500)
Decrease (increase) in other assets........... (336,588) (1,571,305) 656,027
Increase in accrued interest payable.......... 90,051 59,841 15,015
Increase in other liabilities................. 691,451 238,372 119,003
------------ ------------ ------------
Total adjustments.......................... 1,330,691 (697,765) 1,485,435
------------ ------------ ------------
Net Cash Provided by Operating Activities............ $ 3,815,474 $ 1,021,247 $ 2,276,873
============ ============ ============
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
The Company's subsidiary bank foreclosed on several properties that served as
collateral for certain real estate loans in the amount of $-0-, $237,541 and
$98,462 during 1996, 1995 and 1994, respectively. These properties were either
sold during 1996, 1995 or 1994 or are included in other real estate at December
31.
See accompanying notes to consolidated financial statements.
F-11
<PAGE> 104
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION
United American Holding Corporation (the "Company") is a one-bank holding
company which owns 100% of the outstanding shares of United American Bank of
Central Florida (the "Bank"). The Bank, which commenced operations in 1985, is a
state-chartered bank headquartered in Orlando, Florida. The Bank's deposits are
insured by the Federal Deposit Insurance Corporation. The Bank is subject to
certain state regulations which, among other provisions, impose certain
limitations on the payment of dividends to its parent.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Consolidation. The accounting and reporting policies of the
Company are in accordance with generally accepted accounting principles, and
conform to general practices within the banking industry. In consolidation, all
significant intercompany accounts and transactions are eliminated.
Cash and Cash Equivalents. Cash and cash equivalents include cash on hand,
amounts due from banks and federal funds sold. Generally, federal funds
purchased and sold are for one day periods.
Investment Securities. Investments in debt and equity securities are
classified in three categories and accounted for as follows:
Securities Held to Maturity. Securities that management has the
intent and the Bank has the ability at the time of purchase to hold until
maturity are classified as securities held to maturity. Securities in this
category are carried at amortized cost. Sales of securities classified as
held to maturity are prohibited except under rare circumstances. If a
security has a decline in fair value below its amortized cost that is other
than temporary, then the security will be written down to its new cost
basis by recording a loss in the statements of operations.
Discounts and premiums on securities held to maturity are accreted or
amortized to income using the interest method over the remaining
contractual life of the security, adjusted for actual prepayments.
Securities Available for Sale. Securities to be held for indefinite
periods of time and not intended to be held to maturity are classified as
available for sale. Assets included in this category are those assets that
management intends to use as part of its asset/liability management
strategy and that may be sold in response to changes in interest rates,
resultant prepayment risk and other factors related to interest rate and
resultant prepayment risk changes. Securities available for sale are
recorded at fair value. Both unrealized gains and losses on securities
available for sale, net of taxes, are included as a separate component of
shareholders' equity in the balance sheets until these gains or losses are
realized. If a security has a decline in fair value that is other than
temporary, then the security will be written down to its fair value by
recording a loss in the statements of operations. Gains and losses on the
sale of securities are computed by specific identification. Upon
disposition, unrealized gains or losses previously reported as a component
of shareholders' equity are recognized and included in current earnings.
Trading Securities. Securities that are held principally for the
purpose of selling in the near future are classified as trading securities.
These securities are recorded at fair value. Both unrealized gains and
losses are included in the statement of operations. The Bank currently has
no securities classified as trading securities.
Goodwill. Goodwill, resulting from the business combination of the
companies whose financial statements are consolidated herein, is amortized using
the straight-line method over forty years.
Loans and Allowance for Loan Losses. Loans are stated at the amount of
unpaid principal, reduced by deferred loan fees, allowance for loan losses and
purchase discounts. Loan origination fees, net of direct loan
F-12
<PAGE> 105
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
costs, are amortized to interest income as an adjustment of yield over the life
of the loan. Interest is accrued on a simple-interest basis. Loans are charged
to the allowance for loan losses at such time as management considers them
uncollectible in the normal course of business. Accrual of interest on past due
loans including impaired loans is discontinued when management believes, after
considering economic and business conditions and collection efforts, the
borrower's financial condition is such that collection of interest is doubtful.
Classification of a loan as nonaccrual is not necessarily indicative of a
potential loss of principal. Collections of interest and principal on
non-accrual loans are generally applied as reductions to principal outstanding.
The allowance for loan losses is established through a provision for loan
losses charged to operations. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay.
A loan is considered impaired, based on current information and events, if
it is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical effective
interest rate, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral.
Bank Premises and Equipment. Land is stated at cost, and depreciable
assets are stated at cost, less accumulated depreciation. Depreciation is
provided on the straight-line method over the estimated useful lives of the
related assets. Maintenance and repairs are charged to expense as incurred and
major renewals and betterments are capitalized. Gains or losses are credited or
charged to income upon disposition.
Other Real Estate. Property acquired by foreclosure is transferred to
other real estate at the lower of the balance of the loan on the property at the
date of transfer, or fair value net of estimated selling costs. Adjustments made
to the value at time of transfer are charged to the allowance for loan losses.
After transfer, the property is carried at the lower of cost (fair value or
balance of loan) or fair value less estimated costs to sell. Such determinations
are made on an individual asset basis. Subsequent decreases in value are
recognized as a valuation allowance. Likewise, any increases in value, up to the
carrying value at date of transfer, are offset against the valuation allowance.
Increases or decreases in the valuation allowance are charged or credited to
operations.
Costs relating to holding the property are charged to operations as
incurred. Costs incurred for development or improvement of the property are
capitalized. Gains and losses on the disposition of other real estate are
charged to operations as incurred.
Income Taxes. Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes resulting from temporary differences. Such temporary
differences result from differences in the carrying value of assets and
liabilities for tax and financial reporting purposes. The deferred tax assets
and liabilities represent the future tax consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the period in
deferred tax assets and liabilities.
Net Income Per Share. Net income per share is based on the average number
of common shares outstanding and any dilutive common stock equivalent for each
period using the treasury stock method. Fully diluted per share data are not
materially different from the primary per share data presented.
F-13
<PAGE> 106
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Reclassifications. Certain prior year amounts have been reclassified from
previous presentations to conform to 1996 presentations. Such reclassifications
had no impact on total assets, equity, net income or total cash flow balances
previously reported.
Statement of Cash Flows. For purposes of reporting cash flows, cash and
cash equivalents include cash and due from banks and federal funds sold.
3. INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment securities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury and obligations of U.S.
Government corporations and
agencies............................ $22,472,266 $36,197 $(44,254) $22,464,209
Federal reserve bank stock............. 319,350 -- -- 319,350
----------- ------- -------- -----------
Total.......................... $22,791,616 $36,197 $(44,254) $22,783,559
=========== ======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury and obligations of U.S.
Government corporations and
agencies............................ $24,030,069 $79,977 $ (1,326) $24,108,720
Federal reserve bank stock............. 301,350 -- -- 301,350
----------- ------- -------- -----------
Total.......................... $24,331,419 $79,977 $ (1,326) $24,410,070
=========== ======= ======== ===========
</TABLE>
The amortized cost and approximate fair value of investment securities at
December 31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Available for sale:
Due in one year or less................................... $11,504,713 $11,518,159
Due after one year through five years..................... 10,967,553 10,946,050
----------- -----------
22,472,266 22,464,209
Federal reserve bank stock.................................. 319,350 319,350
----------- -----------
$22,791,616 $22,783,559
=========== ===========
</TABLE>
F-14
<PAGE> 107
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Proceeds from the sale of investments during 1996, 1995 and 1994 were
$4,998,000, $0 and $300,000, respectively. Proceeds from the maturity of
investments during 1996, 1995 and 1994 were $15,500,000, $20,500,000 and
$6,500,000, respectively.
Investment securities with amortized cost of $10,984,185 and $4,500,706 and
with fair values of approximately $10,964,860 and $4,510,305 at December 31,
1996 and 1995, respectively, were pledged as collateral for certain deposits.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
A summary of loan distribution at December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Commercial................................................ $ 36,634,162 $ 27,132,027
Construction.............................................. 15,187,733 9,989,645
Real estate............................................... 91,388,386 71,030,925
Installment............................................... 8,755,026 5,339,177
------------ ------------
151,965,307 113,491,774
Overdrafts................................................ 610,384 323,366
Unearned discount......................................... (23,205) (54,500)
Deferred loan fees........................................ (574,945) (382,443)
------------ ------------
151,977,541 113,378,197
Allowance for loan losses................................. (2,362,416) (2,000,000)
------------ ------------
$149,615,125 $111,378,197
============ ============
</TABLE>
Changes in the allowance for loan losses for 1996, 1995 and 1994 are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Allowance, beginning of year....................... $2,000,000 $1,492,730 $ 866,000
Provision charged to expense .................... 396,000 615,446 418,842
Recoveries on loans previously charged off....... 92,118 12,414 257,920
Loans charged off................................ (125,702) (120,590) (50,032)
---------- ---------- ----------
Allowance, end of year............................. $2,362,416 $2,000,000 $1,492,730
========== ========== ==========
</TABLE>
At December 31, 1996 and 1995, the recorded investment in loans for which
impairment has been recognized totalled $442,579 and $542,291, respectively, of
which $219,774 and $0, respectively, related to such loans with no valuation
allowance because the fair value of the collateral is greater than the loan, and
$222,805 and $542,291, respectively, related to loans with a corresponding
valuation allowance of $82,635 and $60,135, respectively. The average recorded
investment in impaired loans during 1996 and 1995 was $492,435 and $271,146,
respectively.
Loans for which interest has been discontinued totalled $442,579 and
$542,291 at December 31, 1996 and 1995, respectively.
Interest income that would have been earned on these loans under the
original terms was approximately $164,000 and $191,000 for the years ended
December 31, 1996 and 1995, respectively. Interest income on impaired loans of
approximately $12,000 and $5,000 was recognized for cash payments received in
1996 and 1995, respectively.
F-15
<PAGE> 108
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment at December 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- -----------
<S> <C> <C>
Leasehold improvements..................................... $ 588,069 $ 1,642,415
Furniture, fixtures and equipment.......................... 2,349,546 1,673,980
Vehicles................................................... 60,403 108,439
Buildings.................................................. 3,677,232 417,195
Land....................................................... 1,500,000 275,000
---------- -----------
8,175,250 4,117,029
Less accumulated depreciation and amortization............. (1,911,933) (1,572,436)
---------- -----------
6,263,317 2,544,593
Plus construction in progress.............................. 94,940 605,533
---------- -----------
$6,358,257 $ 3,150,126
========== ===========
</TABLE>
Depreciation and amortization expense on bank premises and equipment for
the years ended December 31, 1996, 1995 and 1994 was $401,721, $371,175 and
$310,881, respectively.
In December 1996, the Company's Board of Directors initiated a plan to
acquire all of the outstanding shares of C&G Properties of Orlando, Inc., which
owns the Company's main office and adjacent property net of a mortgage, and is
owned, in part, by certain directors of the Company. The purchase price was to
be paid in Company stock based on appraised values of the properties and an
estimate of the stock's fair value. In April 1997, the terms of the purchase
($1,190,000 net value and 59.500 shares) were set and approved. The transaction
closed on August 22, 1997.
6. NOTE PAYABLE
The note payable at December 31, 1996 is to an unrelated financial
institution and bears interest at the lender's base rate (8.25% at December 31,
1996). Interest is payable monthly with principal payable upon demand. The loan
agreement contains certain restrictive covenants including requirements related
to the maintenance of certain financial ratios.
7. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Bank enters into sales of securities under agreements to repurchase.
Repurchase agreements are treated as financings, and the obligations to
repurchase securities sold are reflected as a liability in the balance sheet.
The dollar amount of securities underlying the agreements remains in the asset
accounts. The securities sold under repurchase agreements remain in the custody
of a third-party trustee.
Information related to the Bank's securities sold under repurchase
agreements at December 31, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
U.S. Treasury and obligations of U.S. Government
corporations and agencies:
Carrying value............................................ $8,484,730 $1,500,000
Fair value................................................ 8,472,660 1,501,865
Repurchase agreements..................................... $5,228,266 $ 592,073
Weighted average interest rate............................ 4.69% 5.48%
</TABLE>
F-16
<PAGE> 109
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INTEREST ON DEPOSITS
A summary of interest on deposits is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest-bearing demand........................ $1,233,180 $1,071,743 $ 753,155
Savings........................................ 51,302 39,832 36,771
Time........................................... 3,999,161 3,285,328 1,740,726
---------- ---------- ----------
$5,283,643 $4,396,903 $2,530,652
========== ========== ==========
</TABLE>
At December 31, 1996, the scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1997........................................................ $66,286,000
1998........................................................ 7,649,000
1999........................................................ 2,794,000
Thereafter.................................................. 2,580,000
-----------
$79,309,000
===========
</TABLE>
9. OPERATING EXPENSES
Components of other operating expense that individually exceeded $85,000 in
any of the three years ending December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Data processing........................................ $125,441 $101,380 $ 63,110
Regulatory fees........................................ 37,538 237,602 266,999
Stationery and supplies................................ 160,908 104,666 99,375
Director fees.......................................... 95,100 68,400 36,000
Advertising and publicity.............................. 463,002 356,588 199,759
Legal and professional................................. 226,866 185,495 378,425
Repossession expense................................... $ 18,497 $ 27,717 $ 98,392
</TABLE>
10. INCOME TAXES
The components of the net deferred tax asset recognized in the accompanying
balance sheet and included in other assets at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax asset.......................................... $319,485 $130,882
Deferred tax liability...................................... -- (26,741)
-------- --------
$319,485 $104,141
======== ========
</TABLE>
The types of temporary differences between the tax bases of assets and
liabilities and their financial statement reporting amounts are attributable
principally to depreciation methods, loan loss provisions, and the fair values
of investments.
F-17
<PAGE> 110
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes for the years ended December 31, 1996, 1995
and 1994 consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
---------- -------- -------
<S> <C> <C> <C>
Current:
Federal.......................................... $1,490,031 $678,281 $23,710
State............................................ 237,407 462 --
---------- -------- -------
1,727,438 678,743 23,710
---------- -------- -------
Deferred:
Federal.......................................... (104,235) 462 (6,393)
State............................................ (14,296) (11,230) --
---------- -------- -------
(118,531) (10,768) (6,393)
---------- -------- -------
$1,608,907 $667,975 $17,317
========== ======== =======
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, a reconciliation of
expected federal tax expense or benefit (calculated by applying appropriate
statutory federal income tax rates) to the net income tax expense or benefit
included in the accompanying statements of operations is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
---------- --- --------- --- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Expected expense using
statutory federal rates.... $1,391,855 34% $ 811,576 34% $ 274,977 34%
Increase (decrease) in
valuation allowance..... -- -- (204,883) (9) (255,243) (32)
State tax, net of federal.... 130,321 3 5,219 -- -- --
Other, net................... 86,731 2 56,063 3 (2,417) --
---------- -- --------- -- --------- ---
Total income tax expense..... $1,608,907 39% $ 667,975 28% $ 17,317 2%
========== == ========= == ========= ===
</TABLE>
The Company utilized approximately $1,586,000 and $776,000 in federal net
operating loss carryforwards and $1,591,000 and $2,708,000 in state net
operating loss carryforwards for income tax purposes for the years ended
December 31, 1995 and 1994, respectively. All available federal and state net
operating loss carryforwards were used in 1995.
11. STOCK OPTIONS AND STOCK WARRANTS
Stock Option Plans. Effective February 1, 1994, the stockholders of the
Company approved a Directors' Stock Option Plan and an Officers' and Employees'
Stock Option Plan. The Bank has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation.
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation cost been determined based on the fair value at the
grant date for awards in 1995 and 1996 consistent with the provisions of SFAS
No. 123, the effect on net income would have been insignificant.
Under the plans, as amended and restated, options for an aggregate of
138,700 shares of the Company's common stock have been authorized to be granted
to directors, officers and employees. Under the Directors' Plan, the option
price of each share of stock is $10.00, less any cash dividends paid between
February 1, 1994 and the date of exercise; but not less than par value. Options
granted under the Officers' and Employees' Plan are at the greater of $10.00 or
the fair market value on the date of grant. The options granted under the
F-18
<PAGE> 111
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Directors' Stock Option Plan are exercisable at any time within ten years of
their date of grant. The options granted under the Officers' and Employees'
Stock Option Plan are exercisable 20%, 40%, 60%, 80% and 100% during the second,
third, fourth, fifth and sixth year, respectively, after the date of grant. No
options may be exercised more than ten years after the date of grant.
The following table summarizes stock option activity for the years
presented:
<TABLE>
<CAPTION>
NUMBER
OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Under option, December 31, 1994............................. 90,000 $10.00
Granted................................................... 30,500 10.00
-------
Under option, December 31, 1995............................. 120,500 10.00
Granted................................................... 18,000 10.00
-------
Under option, December 31, 1996............................. 138,500
=======
</TABLE>
At December 31, 1996 and 1995, respectively, there were 200 and 8,200
shares available for future option grants, and 82,700 and 58,500 options were
exercisable.
In 1995, the Company sold 659,200 shares of common stock which were
accompanied by 220,100 nontransferable common stock purchase warrants. Each
warrant allows the shareholder to purchase one share of Company stock on or
before July 1, 1997 for an amount equal to $10.
During 1996, 20,500 warrants were exercised, leaving 199,600 outstanding at
December 31, 1996.
In November 1996, options for an additional 40,500 shares, exercisable at
$10 per share, were approved by the Compensation Committee of the Board of
Directors to be granted to directors in June 1997. The additional shares were to
be allocated to the directors based on total shares owned by each after
consideration of the exercise of the above-mentioned warrants. In June 1997, the
options were granted and compensation expense of $405,000 was recorded.
12. EMPLOYEE BENEFIT PLANS
401(k) Savings Plan. The Bank has adopted a Section 401(k) savings plan
(the Plan) covering substantially all employees of the Bank. Under provisions of
the Plan, employees may contribute up to 15% of their compensation on a pre-tax
basis, subject to limits specified in the Internal Revenue Code. The Bank may
make, at the discretion of the Board of Directors and within various limitations
specified by the Internal Revenue Code, matching contributions of the employees'
contributions. The Bank's contribution under the Plan was approximately
$104,342, $92,100 and $36,400 for the years ended December 31, 1996, 1995 and
1994, respectively.
Supplementary Executive Retirement Benefit Plan. During 1995, the Bank
implemented a split-dollar life insurance plan for the benefit of certain
officers. This program is designed so that the liabilities for benefits are
funded by life insurance policies owned by the Bank and it is expected that the
Bank's portion of the life insurance proceeds will offset the cost of the
program.
Deferred Compensation Plan. Effective January 1, 1996, the Bank
established a deferred compensation plan for the benefit of certain qualified
employees. The plan entitles the participants to elect to defer a portion of
their compensation until such time as certain events requiring distribution of
amounts previously deferred occur. The plan provides for an annual matching
contribution by the Bank up to a maximum annual amount of $10,000 per
participant. Qualified employees eligible to participate in the program include
those management employees at the senior vice president level or higher that
have been designated by the Board of Directors of the Bank. The Bank's
contribution under the plan was $20,000 for the year ended December 31, 1996.
F-19
<PAGE> 112
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
Lease Commitments. The Bank leases two of its branches, the South Orlando
and Apopka branches, under operating leases which expire at various periods
through the year 2011. Future minimum lease payments, by year and in the
aggregate, under all operating leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1997........................................................ $ 136,000
1998........................................................ 136,000
1999........................................................ 136,000
2000........................................................ 136,000
2001........................................................ 136,000
Thereafter.................................................. 1,134,000
----------
$1,814,000
==========
</TABLE>
Minimum payments have not been reduced by total minimum sublease rentals of
$33,000 due in the next five years under noncancellable subleases.
Rent expense was approximately $115,000, $340,000 and $288,000 for 1996,
1995 and 1994, respectively.
Financial Instruments with Off-Balance Sheet Risks. The Bank is a party to
financial instruments with off-balance sheet risk in the normal course of its
business to meet the financing needs of its customers and to reduce its own
exposure to fluctuations in interest rates. These financial instruments include
loan commitments and standby letters of credit. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the financial statements. The Bank has no financial
instruments with off-balance sheet risk that are held for trading purposes.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to its financial instrument for loan commitments and standby letters
of credit is represented by the contracted amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The collateral varies for those
commitments, but may include a certificate of deposit held by the bank if
collateral is deemed necessary.
At December 31, 1996 and 1995, the Bank has commitments to customers of
approximately $1,150,000 and $1,200,000 for standby letters of credit and
$43,292,000 and $27,100,000 for unfunded firm loan commitments, respectively.
Since many of these commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements.
The Bank evaluates each customer's credit worthiness on a case-by-case
basis. It is the Bank's policy to obtain adequate collateral in accordance with
internal lending guidelines on all loans. Uncollateralized loans are made based
upon the judgment of Bank management in accordance with authorized lending
limits, Bank lending policies and credit criteria. Collateral on the Bank's
loans depends on the nature of the loan, and is principally commercial and
residential real property and other commercial tangible assets (inventory and
equipment). It is the Bank's policy to perfect its interest in the collateral
through the filing of mortgage deeds and security agreements with uniform
commercial code (UCC) recordings, or taking physical possession of the
collateral, if appropriate. Bank management believes it has access to collateral
in the event of loan default to minimize its credit risk.
F-20
<PAGE> 113
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1996 and 1995, the Bank has approximately $68,043,000
and $42,540,000, respectively, in fixed rate loans with interest rates ranging
from 5.89% to 14.75% and 5.65% to 15%, respectively, and $14,793,000 and
$7,524,000, respectively, in variable rate loans with interest rate ceilings
ranging from 10.75% to 13.5% and 9.5% to 13.5%, respectively.
Regulatory Matters. The Bank is required by federal banking regulations to
maintain minimum levels of capital measured by ratios of capital to
"risk-weighted" assets, as defined by the banking regulations. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
As of December 31, 1996, the most recent regulatory notification
categorized the Bank as well capitalized. To be categorized as well capitalized,
the Bank must maintain a minimum "Tier 1 capital" ratio of 6.00%, a minimum
"total capital" ratio of 10.00%, and a minimum "Tier 1 leverage capital" ratio
of 5.00%. There are no conditions or events since that notification that
management believes have changed the Bank's category. At December 31, 1996 and
1995, the Bank's "Tier 1 capital" was $15,246,000 and $12,214,000, respectively,
the Bank's "Tier 1" ratio was 8.78% and 9.70%, respectively, the Bank's "total
capital" was $17,416,000 and $13,788,000, respectively, the Bank's "total
capital" ratio was 10.03% and 10.95%, respectively, the Bank's "Tier I leverage
capital" was $15,246,000 and $12,214,000, respectively, and the Bank's "Tier I
leverage ratio" was 7.53% and 8.06%, respectively.
14. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
The Bank has no significant concentration of credit risk with any
individual counterparty to originate loans. Bank loan customers are principally
closely-held businesses and residents concentrated in the central Florida area
and as such, the debtors' ability to honor their contract is substantially
dependent upon the general economic conditions of the region.
Most of the Bank's business activity is with customers located within the
Central Florida area. Investments in state and municipal securities involve
governmental entities within the Bank's market area.
15. RELATED-PARTY TRANSACTIONS
Loans. Certain of the Bank's directors and officers are customers and have
loans with the Bank. The loans were made in the ordinary course of business on
substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other customers. Activity in loans to directors and officers is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Balance, at beginning of year............................... $2,139 $1,634
Loans originated.......................................... 561 902
Principal repayments...................................... (939) (397)
------ ------
Balance, at end of year..................................... $1,761 $2,139
====== ======
</TABLE>
Deposits. Deposits of principal stockholders, directors, executive
officers and companies in which they have a 10% or more beneficial interest
aggregated approximately $2,539,000 and $2,482,000 at December 31, 1996 and
1995, respectively.
F-21
<PAGE> 114
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Leases. During 1996, 1995 and 1994, respectively, two, four and four of
the Bank's leased premises are leased from entities in which one of the
Company's stockholders has an ownership interest. The Bank paid rent of
approximately $65,000, $325,000 and $288,000 related to these leases for the
years ended December 31, 1996, 1995 and 1994, respectively. The leases have
remaining lease terms less than one year.
Construction Contract. During 1996, 1995 and 1994, the Bank paid
approximately $551,000, $164,000 and $336,000, respectively, in construction
costs to an entity in which one of the Bank's directors has an ownership
interest.
Purchase. In January of 1996, the Bank purchased its Maitland and Longwood
branches and its Corrine Drive operations center from entities in which one of
the Company's stockholders has an ownership interest. The total purchase price
for all three locations was $2,410,000. These assets are included in Bank
premises and equipment at December 31, 1996.
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Values of Financial Instruments, (FAS No. 107), requires that the Company
disclose estimated fair values of financial instruments for which it is
practicable to estimate that value. Fair value estimates, methods and
assumptions are set forth below for the Company's financial instruments.
Cash and Cash Equivalents, and Interest-Bearing Deposits in Banks. For
those short-term instruments, the carrying amount is a reasonable estimate of
fair value.
Investment Securities. The fair value of investments is estimated based on
bid prices published in financial newspapers or bid quotations received from
securities dealers.
Loans Receivable. The fair value of fixed rate performing loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities. The carrying amount of adjustable rate performing
loans and nonperforming loans is a reasonable estimate of fair value.
Deposit Liabilities. The fair value of deposits with no stated maturity,
such as demand, NOW, money market and savings, is equal to the amount payable on
demand as of December 31, 1996 and 1995. The fair value of time deposits is
based on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities. The fair value estimates do not include the benefit that results
from the low-cost funding provided by the deposit liabilities compared to the
cost of borrowing funds in the market.
F-22
<PAGE> 115
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Federal Funds Sold, Note Payable and Securities Sold Under Agreements to
Repurchase. The estimated fair value of these liabilities which bear interest
at an adjustable rate approximates the carrying value.
The estimated fair value of the Company's financial instruments were as
follows at:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds
sold..................................... $ 19,736 $ 19,736 $ 8,971 $ 8,971
Securities available for sale............... 22,784 22,784 24,410 24,410
Loans receivable............................ 151,965 151,049 113,492 113,129
Accrued interest receivable................. 1,183 1,183 1,101 1,101
Financial liabilities:
Deposit liabilities......................... 176,416 177,257 134,357 135,194
Securities sold under agreements to
repurchase............................... 5,228 5,228 592 592
Federal funds sold.......................... 4,000 4,000 3,500 3,500
Note payable................................ 1,100 1,100 -- --
</TABLE>
Commitments to Extend Credit and Standby Letters of Credit. The fair value
of commitments to extend credit is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the counterparties. For fixed
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair value of financial
guarantees written and letters of credit is based on fees currently charged for
similar agreements or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparties.
The contract amount for commitments to extend credit and standby letters of
credit written at December 31, 1996 and 1995 follow:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------------------
CONTRACT ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Commitments to extend credit................................ $43,300,000 $ --
Standby letters of credit................................... 1,500,000 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------------------
CONTRACT ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Commitments to extend credit................................ $27,100,000 $ --
Standby letters of credit................................... 1,200,000 --
</TABLE>
Limitations. The fair value estimates are made at a discrete point in time
based on relevant market information and information about the financial
instrument. Because no market exists for a significant portion of the Bank's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
F-23
<PAGE> 116
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the fair value estimates are based on existing on- and
off-balance sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Other significant assets and liabilities
that are not considered financial assets or liabilities include core deposit
intangibles, deferred tax assets, property, plant and equipment, and goodwill.
In addition, the tax ramifications related to the realization of the unrealized
gains and losses on investment securities can have a significant effect on fair
value estimates and have not been considered in the estimates.
17. UNITED AMERICAN HOLDING CORPORATION (PARENT COMPANY ONLY)
The Company's principal assets are its investment in the Bank and goodwill.
The Company's primary source of income is equity in earnings of the Bank.
The Company's condensed balance sheet as of December 31, 1996 and the
related condensed statement of income, stockholders' equity and cash flows for
the year ended December 31, 1996 follow:
PARENT COMPANY ONLY CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
ASSETS
Cash........................................................ $ 120,334
Interest-bearing deposits in banks.......................... 210,850
Investment in subsidiary.................................... 15,240,285
Accrued interest receivable................................. 1,650
Organization costs, net..................................... 10,486
Goodwill, net............................................... 2,139,403
-----------
Total assets...................................... $17,723,008
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Due to bank............................................... $ --
Note payable.............................................. 1,100,000
-----------
Total liabilities................................. 1,100,000
-----------
Stockholders' equity:
Common stock, par value $.01 per share; 2,000,000 shares
authorized; 1,520,500 shares issued and outstanding at
December 31, 1996...................................... 15,205
Additional paid-in capital................................ 15,261,156
Unrealized loss on securities available for sale.......... (5,317)
Retained earnings (deficit)............................... 1,351,964
-----------
16,623,008
Less treasury stock....................................... --
-----------
Total stockholders' equity........................ 16,623,008
-----------
Total liabilities and stockholders' equity........ $17,723,008
===========
</TABLE>
F-24
<PAGE> 117
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Revenues:
Equity in net undistributed earnings of subsidiary........ $2,582,060
Interest income........................................... 14,574
----------
2,596,634
----------
Expenses:
Interest.................................................. 35,871
Amortization.............................................. 72,099
Other..................................................... 3,881
----------
111,851
----------
Income before income tax benefit............................ 2,484,783
Income tax benefit.......................................... --
----------
Net income.................................................. $2,484,783
==========
</TABLE>
PARENT COMPANY ONLY CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON RETAINED
COMMON STOCK ADDITIONAL TREASURY STOCK SECURITIES EARNINGS/
----------------------- PAID-IN ----------------- AVAILABLE (ACCUMULATED
SHARES PAR VALUE CAPITAL SHARES COST FOR SALE DEFICIT)
--------- ----------- ----------- ------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995..................... 1,500,000 $ 3,750,000 $11,321,361 (5,000) $(50,000) $ 51,910 $ (382,819)
Sale of stock............ 20,500 51,250 153,750 -- -- -- --
Change in unrealized
gain................... -- -- -- -- -- (57,227) --
Sale of treasury stock... -- -- -- 5,000 50,000 -- --
Dividends paid........... -- -- -- -- -- -- (750,000)
Change in par value...... -- (3,786,045) 3,786,045 -- -- -- --
Net income............... -- -- -- -- -- -- 2,484,783
--------- ----------- ----------- ------ -------- -------- ----------
Balance, December 31,
1996..................... 1,520,500 $ 15,205 $15,261,156 -- $ -- $ (5,317) $1,351,964
========= =========== =========== ====== ======== ======== ==========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, December 31,
1995..................... $14,690,452
Sale of stock............ 205,000
Change in unrealized
gain................... (57,227)
Sale of treasury stock... 50,000
Dividends paid........... (750,000)
Change in par value...... --
Net income............... 2,484,783
-----------
Balance, December 31,
1996..................... $16,623,008
===========
</TABLE>
F-25
<PAGE> 118
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Cash Flows from Operating Activities:
Cash paid to suppliers.................................... $ (3,879)
Cash paid to subsidiary................................... --
Interest paid............................................. (35,871)
Interest received......................................... 14,449
Income tax benefit received............................... --
-----------
Net cash used in operating activities............. (25,301)
-----------
Cash Flows from Investing Activities:
Proceeds from maturity of interest-bearing deposits in
bank................................................... --
Purchase of interest-bearing deposits in bank............. (10,850)
Contribution to subsidiary................................ (1,200,000)
Dividends received from subsidiary........................ 750,000
-----------
Net cash used in investing activities............. (460,850)
-----------
Cash Flows from Financing Activities:
Proceeds from sale of stock............................... 205,000
Purchase of treasury stock................................ --
Sale of treasury stock.................................... 50,000
Principal payments on notes payable....................... --
Proceeds from notes payable............................... 1,100,000
Payment of dividends...................................... (750,000)
-----------
Net cash provided by financing activities......... 605,000
-----------
Net Increase in Cash........................................ 118,849
Cash:
Beginning of year......................................... 1,485
-----------
End of year............................................... $ 120,334
===========
Reconciliation of Net Income to Net Cash Used in Operations:
Net income................................................ $ 2,484,783
-----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization........................................... 72,101
Equity in undistributed earnings of subsidiary......... (2,582,060)
Decrease in income tax refund receivable............... --
Decrease (increase) in accrued interest receivable..... (125)
Decrease in due to bank................................ --
Decrease in other liabilities.......................... --
Dividends received..................................... 750,000
-----------
Total adjustments................................. (1,760,084)
-----------
Net Cash Provided by (Used in) Operating Activities......... $ 724,699
===========
</TABLE>
F-26
<PAGE> 119
UNITED AMERICAN HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUBSEQUENT EVENTS
In January, 1997, the Company declared and paid dividends totalling
$760,250 to its stockholders.
19. FUTURE ACCOUNTING PRONOUNCEMENTS
In June, 1996, the Financial Accounting Standards Board (FASB) issued SFAS
125, which is effective for transactions that occur after December 31, 1996 and
will be applied prospectively. Among other things, this standard provides
criteria for recognition of sales in connection with transfers of financial
instruments including loan participations. The impact of this standard is not
expected to be significant.
F-27
<PAGE> 120
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
UNITED AMERICAN HOLDING CORPORATION
DATED AS OF
SEPTEMBER 8, 1997
A-1
<PAGE> 121
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................ A-5
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law.............................................. A-5
2.2 Corporate Existence......................................... A-5
2.3 Articles of Incorporation and Bylaws........................ A-6
2.4 Resulting Corporation's Officers and Board.................. A-6
2.5 Stockholder Approval........................................ A-6
2.6 Further Acts................................................ A-6
2.7 Effective Date and Closing.................................. A-6
2.8 Subsidiary Bank Merger...................................... A-6
ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.................... A-6
3.2 Surrender of Acquired Corporation Stock..................... A-7
3.3 Fractional Shares........................................... A-8
3.4 Adjustments................................................. A-8
3.5 BancGroup Stock............................................. A-8
3.6 Dissenting Rights........................................... A-8
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................ A-8
4.2 Capital Stock............................................... A-8
4.3 Financial Statements; Taxes................................. A-9
4.4 No Conflict with Other Instrument........................... A-9
4.5 Absence of Material Adverse Change.......................... A-10
4.6 Approval of Agreement....................................... A-10
4.7 Tax Treatment............................................... A-10
4.8 Title and Related Matters................................... A-10
4.9 Subsidiaries................................................ A-10
4.10 Contracts................................................... A-10
4.11 Litigation.................................................. A-10
4.12 Compliance.................................................. A-11
4.13 Registration Statement...................................... A-11
4.14 SEC Filings................................................. A-11
4.15 Form S-4.................................................... A-11
4.16 Brokers..................................................... A-11
4.17 Government Authorization.................................... A-11
4.18 Absence of Regulatory Communications........................ A-11
4.19 Disclosure.................................................. A-12
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED
CORPORATION
5.1 Organization................................................ A-12
5.2 Capital Stock............................................... A-12
5.3 Subsidiaries................................................ A-12
5.4 Financial Statements; Taxes................................. A-12
5.5 Absence of Certain Changes or Events........................ A-13
5.6 Title and Related Matters................................... A-14
5.7 Commitments................................................. A-14
</TABLE>
A-2
<PAGE> 122
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.8 Charter and Bylaws.......................................... A-15
5.9 Litigation.................................................. A-15
5.10 Material Contract Defaults.................................. A-15
5.11 No Conflict with Other Instrument........................... A-15
5.12 Governmental Authorization.................................. A-15
5.13 Absence of Regulatory Communications........................ A-15
5.14 Absence of Material Adverse Change.......................... A-16
5.15 Insurance................................................... A-16
5.16 Pension and Employee Benefit Plans.......................... A-16
5.17 Buy-Sell Agreement.......................................... A-16
5.18 Brokers..................................................... A-16
5.19 Approval of Agreements...................................... A-16
5.20 Disclosure.................................................. A-16
5.21 Registration Statement...................................... A-17
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-17
5.23 Environmental Matters....................................... A-17
5.24 Transfer of Shares.......................................... A-17
5.25 Collective Bargaining....................................... A-17
5.26 Labor Disputes.............................................. A-18
5.27 Derivative Contracts........................................ A-18
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-18
6.2 Additional Covenants of Acquired Corporation................ A-20
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-23
7.2 Press Release............................................... A-23
7.3 Mutual Disclosure........................................... A-23
7.4 Access to Properties and Records............................ A-23
7.5 Notice of Adverse Changes................................... A-23
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-24
8.2 Regulatory Authority Approval............................... A-24
8.3 Litigation.................................................. A-24
8.4 Registration Statement...................................... A-24
8.5 Tax Opinion................................................. A-24
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants................... A-25
9.2 Adverse Changes............................................. A-25
9.3 Closing Certificate......................................... A-25
9.4 Opinion of Counsel.......................................... A-26
9.5 NYSE Listing................................................ A-26
9.6 Other Matters............................................... A-26
9.7 Material Events............................................. A-26
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-26
10.2 Adverse Changes............................................. A-26
10.3 Closing Certificate......................................... A-26
10.4 Opinion of Counsel.......................................... A-27
10.5 Controlling Shareholders.................................... A-27
10.6 Other Matters............................................... A-27
</TABLE>
A-3
<PAGE> 123
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
10.7 Dissenters.................................................. A-27
10.8 Material Events............................................. A-27
10.9 Employment/Non-compete Agreements........................... A-27
10.10 Pooling of Interest......................................... A-27
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES.......... A-28
ARTICLE 12 -- NOTICES................................................ A-28
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-28
13.2 Termination................................................. A-28
13.3 Damages..................................................... A-29
ARTICLE 14 -- DEFINITIONS............................................ A-29
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-33
15.2 Benefit and Assignment...................................... A-34
15.3 Governing Law............................................... A-34
15.4 Counterparts................................................ A-34
15.5 Headings.................................................... A-34
15.6 Severability................................................ A-34
15.7 Construction................................................ A-34
15.8 Return of Information....................................... A-34
15.9 Equitable Remedies.......................................... A-34
15.10 Attorneys' Fees............................................. A-34
15.11 No Waiver................................................... A-34
15.12 Remedies Cumulative......................................... A-35
15.13 Entire Contract............................................. A-35
</TABLE>
A-4
<PAGE> 124
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
8th day of September 1997, by and between UNITED AMERICAN HOLDING CORPORATION ,
("Acquired Corporation"), a Florida corporation, and THE COLONIAL BANCGROUP,
INC. ("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company for its
wholly owned subsidiary, United American Bank of Central Florida (the "Bank"),
with its principal office in Orlando, Florida; and
WHEREAS, BancGroup is a bank holding company with a Subsidiary bank,
Colonial Bank, operating 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.
A-5
<PAGE> 125
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.
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"). Assuming all other conditions stated in this Agreement have
been or will be satisfied as of the Closing, the Closing shall take place at the
offices of BancGroup, in Montgomery, Alabama, at 5:00 p.m. on a date specified
by BancGroup that shall be as soon as reasonably practicable after the later to
occur of the Stockholder meeting or all required regulatory approvals under
Section 8.2, 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 Subsidiary bank. The exact timing and structure of
such merger have not been finalized at this time, and BancGroup in its
discretion will finalize such timing and structure at a later date. Acquired
Corporation will cooperate with BancGroup, including the call of any special
meetings of the board of directors of the Bank and the filing of any regulatory
applications, 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 of
record 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
$36.50 (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 $36.50 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 consecutive
trading days ending on the trading day five calendar days immediately preceding
the Effective Date. Regardless of the Market Value, however, the maximum number
of shares of BancGroup Common Stock to be issued in the Merger shall be
2,729,218 (based upon a minimum Market Value of $23.80) and the
A-6
<PAGE> 126
minimum number of shares of BancGroup Common Stock to be issued in the Merger
shall be 2,017,248 (based upon a maximum Market Value of $32.20) assuming
1,779,600 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 maximum and minimum number of
shares of BancGroup Common Stock to be issued in the Merger shall be increased
with each share of Acquired Corporation Stock outstanding at the Effective Date
exchanged for shares of BancGroup Common Stock equal to $36.50 divided by the
Market Value, provided that for this purpose the Market Value shall be deemed to
be no less than $23.80 and no greater than $32.20.
(b) No later than five days prior to the Effective Date, the holders of
Acquired Corporation Options may provide written notice to Acquired Corporation
(in form and substance reasonably satisfactory to BancGroup) that they wish to
surrender their Acquired Corporation Options to BancGroup, effective at the
Effective Date, and, in lieu of the treatment provided in Section 3.1(c) below,
to receive an amount of BancGroup Common Stock in exchange therefor equal to the
difference between the total value of the shares of BancGroup Common Stock to be
issued pursuant to such Acquired Corporation Options (based upon the number of
shares of BancGroup Common Stock to be issued pursuant to the Acquired
Corporation Options multiplied by the Market Value) less the aggregate exercise
price of such Acquired Corporation Options at the Effective Date, divided by the
Market Value. No fractions of shares shall be issued and fractions shall be paid
in cash at the Market Value.
(c)(i) On the Effective Date, and subject to section 3.1(b) above,
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, or by paying for such fraction in cash, based upon the Market Value.
The exercise price for the acquisition of BancGroup Common Stock shall be the
exercise price for each share of Acquired 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(c)(i), the "Exchange Ratio" shall mean the result obtained by dividing
$36.50 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(c) 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) BancGroup shall file at its expense a registration statement with the
SEC on Form S-8 or such other appropriate form (including the Form S-4 to be
filed in connection with the Merger) with respect to the shares of BancGroup
Common Stock to be issued pursuant to such options and shall use its reasonable
best efforts to maintain the effectiveness of such registration statement for so
long as such options remain outstanding. Such shares shall also be registered or
qualified for sale under the securities laws of any state in which registration
or qualification is necessary.
3.2 Surrender of Acquired 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
A-7
<PAGE> 127
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.
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 as well as the maximum and minimum number of BancGroup
Common Stock issuable in the Merger.
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
not have voted in favor of this Agreement and who has complied with the
applicable procedures set forth in the FBCA, relating to 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 by such holder of the certificate or certificates
representing shares of Acquired Corporation Stock held by him or her.
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) 100,000,000 shares of Common Stock, $2.50 par value per share, of which
as of July 31, 1997, 41,912,989 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights (not
counting additional shares subject to issue pursuant to stock option and other
plans and convertible debentures), and (B) 1,000,000 shares of Preference Stock,
$2.50 par value per share, none of which are issued and outstanding. The shares
of BancGroup Common Stock to be issued in the Merger are duly authorized and,
when so issued, will be validly issued and outstanding, fully paid and
nonassessable, will have been registered under the 1933 Act, and will have been
registered or qualified under the securities laws of all jurisdictions in which
such registration or qualification is required, based upon information provided
by Acquired Corporation.
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(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, 1995, December 31,
1996, and June 30, 1997;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June
30, 1997;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1994, 1995 and 1996, and for the six months ended
June 30, 1997; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1994, 1995 and 1996, and for the six
months ended June 30, 1997. All such financial statements are in all
material respects in accordance with the books and records of BancGroup and
have been prepared in accordance with GAAP 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 six months ended June 30, 1997, are subject
in all cases to normal recurring year-end adjustments and the omission of
footnote disclosure.
(b) All Tax returns required to be filed by or on behalf of BancGroup have
been timely filed (or requests for extensions therefor have been timely filed
and granted and have not expired), and all returns filed are complete and
accurate in all material respects. All Taxes shown on these returns to be due
and all additional assessments received have been paid. The amounts recorded for
Taxes on the balance sheets provided under section 4.3(a) are, to the Knowledge
of BancGroup, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign or other Taxes (including any interest or
penalties) of BancGroup accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which BancGroup
may at such dates have been liable in its own right or as transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of BancGroup, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liabilities of any sort have been proposed by any governmental representative
and no agreements for extension of time for the assessment of any material
amount of Tax have been entered into by or on behalf of BancGroup. BancGroup has
withheld from its employees (and timely paid to the appropriate governmental
entity) proper and accurate amounts for all periods in material compliance with
all Tax withholding provisions of applicable federal, state, foreign and local
Laws (including without limitation, income, social security and employment Tax
withholding for all types of compensation).
4.4 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which BancGroup or any of its Subsidiaries
is a party or by which they or their Assets may be bound; will not conflict with
any provision of the restated certificate of incorporation or bylaws of
BancGroup or the articles of incorporation or bylaws of any of its Subsidiaries;
and will not violate any provision of any Law, regulation, judgment or decree
binding on them or any of their Assets.
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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 Agreement. The board of directors of BancGroup has, or
will have prior to the Effective Date, approved this Agreement and the
transactions contemplated by it and has, or will have prior to the Effective
Date, 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 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, that
are material to the business of BancGroup, reflected in the most recent balance
sheet referred to in section 4.3(a), or acquired after the date of such balance
sheet (except properties, interests and Assets sold or otherwise disposed of
since such date, in the ordinary course of business), free and clear of all
mortgages, Liens, pledges, charges or encumbrances except (i) mortgages and
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
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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 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, 1996; (ii) 1996 Annual Report to Shareholders; (iii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31 and June
30, 1997; and (iv) any reports on Form 8-K, filed by BancGroup with the SEC
since December 31, 1996. Since December 31, 1996, BancGroup has timely filed all
reports and registration statements and the documents required to be filed with
the SEC under the rules and regulations of the SEC and all such reports and
registration statements or other documents have complied in all material
respects, as of their respective filing dates and effective dates, as the case
may be, with all the applicable requirements of the 1933 Act and the 1934 Act.
As of the respective filing and effective dates, none of such reports or
registration statements or other documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The documents incorporated by reference into the Registration
Statement, at the time they were filed with the SEC, complied in all material
respects with the requirements of the 1934 Act and Regulations thereunder and
when read together and with the other information in the Registration Statement
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time the Registration Statement becomes effective
or at the time of the Stockholders Meeting.
4.15 Form S-4. The conditions for use of a registration statement on SEC
Form S-4 set forth in the General Instructions on Form S-4 have been or will be
satisfied with respect to BancGroup and the Registration Statement.
4.16 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired 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 or pursuant to which such Agency has imposed or has indicated it
may impose any material restrictions on the operations of it or the business
conducted by it or in which such Agency has raised a material question
concerning the condition, financial or otherwise, of such company.
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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.
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 the date of this Agreement, the authorized
capital stock of Acquired Corporation consisted of 2,000,000 shares of common
stock, $0.01 par value per share, 1,779,600 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 190,500 shares of its common stock subject to exercise at any
time pursuant to stock options under its stock option plans. 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 grant or issuance of Acquired Corporation Options.
5.3 Subsidiaries. Except as set forth on Schedule 5.3, 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
nonassessable. As of the date of this Agreement, there were 200,000 shares of
the common stock, par value $10.00 per share, authorized of the Bank, 150,000 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 December 31, 1996, and as of June 30, 1997;
(ii) Consolidated statements of income for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June
30, 1997; and
(iii) Consolidated statements of stockholders' equity for each of the
three years ended December 31, 1994, 1995, and 1996, and for the six months
ended June 30, 1997.
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 GAAP 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
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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 six months ended June 30, 1997, are subject in all cases to
normal recurring year-end adjustments and the omission of footnote disclosure.
(b) Except as set forth on Schedule 5.4(b), all Tax returns required to be
filed by or on behalf of Acquired 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 has 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 upon the exercise of
existing Acquired Corporation Options and shares issued as director's
qualifying shares;
(b) borrowed or agreed to borrow any funds or incurred, or become
subject to, any Liability (absolute or contingent) except borrowings,
obligations (including purchase of federal funds) and Liabilities incurred
in the ordinary course of business and consistent with past practice;
(c) paid any material obligation or Liability (absolute or contingent)
other than current Liabilities reflected in or shown on the most recent
balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent
with past practice;
(d) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem,
directly or indirectly, or otherwise acquire, any of its outstanding
securities;
(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, that are material to the business of Acquired Corporation,
reflected in the most recent balance sheet referred to in section 5.4(a)(i), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes to such balance sheet, (ii) Liens for current Taxes not yet due and
payable and (iii) such imperfections of title and easements as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair present business operations
at such properties. To the Knowledge of Acquired Corporation, the material
structures and equipment of each Acquired Corporation Company comply in all
material respects with the requirements of all applicable Laws.
(b) Leases. Schedule 5.6(b) sets forth a list and description of all real
and personal property owned or leased by any Acquired 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 July 31, 1997.
(d) Computer Hardware and Software. Schedule 5.6(d) contains a description
of all agreements relating to data processing computer software and hardware now
being used in the business operations of any Acquired 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.
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
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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 does Acquired Corporation have Knowledge of any facts which are likely to
give rise to any such Litigation) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, which involves the
possibility of any judgment or Liability not fully covered by insurance in
excess of a reasonable deductible amount or which may have a Material Adverse
Effect on Acquired 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, to the Knowledge of
Acquired Corporation, there is no event which, with notice or lapse of time, or
both, may be or become an event of Default under any such material Contract,
agreement, lease or other commitment in respect of which adequate steps have not
been taken to prevent such a Default from occurring.
5.11 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of or constitute a Default under any material Contract,
indenture, mortgage, deed of trust or other material agreement or instrument to
which any Acquired 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
or pursuant to which such Agency has imposed or has indicated it may impose any
material restrictions on the operations of it or the business conducted by it or
in which such Agency has raised any material question concerning the condition,
financial or otherwise, of such company.
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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 Section 401K plan of Acquired Corporation 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 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
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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 Acquired Corporation. 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 and complies with all Laws to which it is subject. Acquired
Corporation does not have in its portfolio any loan exceeding its legal lending
limit, and except as disclosed on Schedule 5.22, Acquired Corporation has no
known significant delinquent, substandard, doubtful, loss, nonperforming or
problem loans.
5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired 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. To the Knowledge of Acquired Corporation, with respect to
Assets of any Acquired Corporation Company, including any Loan Property, (i)
there has been no spillage, leakage, contamination or release of any substances
for which the appropriate remedial action has not been completed; (ii) no owned
or leased property is contaminated with or contains any hazardous substance or
waste; and (iii) there are no underground storage tanks on any premises owned or
leased by any Acquired 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, to the Knowledge of
Acquired Corporation, no 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 Permits which are required 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
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
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union or labor organization covering any 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. As soon as reasonably
practicable after the execution of this Agreement, 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 and shall use its
reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act as soon as reasonably practicable after the filing
thereof and take any action required to be taken under other applicable
securities Laws in connection with the issuance of the shares of BancGroup
Common Stock upon consummation of the Merger. As soon as reasonably
practicable after the execution of this Agreement. Copies of all such
filings shall be furnished in advance to Acquired Corporation and its
counsel.
(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. (i) 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
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 of
the Resulting Corporation and its Subsidiaries.
(ii) BancGroup will make every reasonable effort to offer
alternative positions to Acquired Corporation Company employees who are
displaced through consolidation.
(g) Indemnification. (i) Subject to the conditions set forth in the
succeeding paragraphs, for a period of six years after the Effective Date
BancGroup shall, and shall cause Colonial Bank to, indemnify, defend and
hold harmless each person entitled to indemnification from the Acquired
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 extent authorized under the articles of
incorporation and bylaws of Acquired Corporation and Florida law.
(ii) Any Indemnified Party wishing to claim indemnification under
this subsection (g), upon learning of any such liability or Litigation,
shall promptly notify BancGroup thereof. In the event of any such
Litigation (whether arising before or after the Effective Date) (i)
BancGroup or Colonial Bank shall have the right to assume the defense
thereof with counsel reasonably acceptable to such Indemnified Party
and, upon assumption of such defense, BancGroup shall not be liable to
such Indemnified Parties for any legal expenses of other counsel or any
other expenses subsequently
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incurred by such Indemnified Parties in connection with the defense
thereof, except that if BancGroup or Colonial Bank elects not to assume
such defense or counsel for the Indemnified Parties advises that there
are substantive issues which raise conflicts of interest between
BancGroup and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and BancGroup or Colonial Bank
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received;
provided, that BancGroup shall be obligated pursuant to this subsection
to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate in the defense
of any such Litigation; and (iii) BancGroup shall not be liable for any
settlement effected without its prior consent; and provided further
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 officers may have against Acquired Corporation. In the
letter, the directors of officers 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(g) hereof; (ii) affirm that they do not have
nor are they aware of any claims they might have (other than those
referred to in the following clause (iii)) against Acquired 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(g)(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 by
third parties which have not yet been asserted against such director or
officer (other than claims arising from facts and circumstances of which
such director or officer is aware but which are not disclosed in such
director or executive officer's letter), (C) claims by third parties
arising from any transaction contemplated by this Agreement or disclosed
in any schedule to this Agreement, and (D) claims by third parties
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(g) other than as disclosed in the letters of the directors and
executive officers referred to in section 6.1(g)(iii) hereof or
described in any schedule to this Agreement and claims arising from any
transaction contemplated by this Agreement.
(h) Indexed Executive Salary Continuation Plan Agreements. BancGroup
acknowledges and agrees to abide by the terms of those certain Indexed
Executive Salary Continuation Plan Agreements, dated as of January 9, 1995,
which have been entered into by and between Acquired Corporation and James
L. Hewitt, Charles W. Hall, David M. McLeod, David G. Powers and M. Alan
Rowe, respectively.
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
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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 shall contact any person who may be required to execute an
undertaking under Section 10.5 hereof to request such undertaking and shall
take all such reasonable steps as are necessary to obtain such undertaking.
Acquired 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 tax-free reorganization within the meaning of Section 368 of the
Code.
(ii) If requested by BancGroup, Acquired Corporation shall use its
best efforts to cause all officers and directors that own any stock of
Acquired Corporation and all other shareholders of Acquired Corporation
who own more than five percent (5%) of Acquired Corporation 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. Except with respect to this Agreement
and the transactions contemplated hereby, no Acquired Corporation Company
nor any affiliate thereof nor any investment banker, attorney, accountant,
or other representative (collectively, "Representatives") retained by an
Acquired Corporation Company shall directly or indirectly solicit any
Acquisition Proposal by any Person. Except to the extent necessary to
comply with the fiduciary duties of Acquired Corporation's Board of
Directors as advised in writing by counsel to such Board of Directors, no
Acquired Corporation Company or any Representative thereof shall furnish
any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, and each Acquired Corporation Company shall direct
and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing, but Acquired Corporation may communicate
information about such an Acquisition Proposal to its shareholders if and
to the extent that it is required to do so in order to comply with its
legal obligations as advised in writing by counsel to such Board of
Directors. Acquired Corporation shall promptly notify BancGroup orally and
in writing in the event that any Acquired Corporation Company receives any
inquiry or proposal relating to any such Acquisition Proposal. Acquired
Corporation shall immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any Persons other than
BancGroup conducted heretofore with respect to any of the foregoing.
Acquired Corporation shall enter into the Stock Option Agreement with
BancGroup dated as of the date of this Agreement.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Corporation agree to support publicly the Merger.
(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 directors substantially in the form set forth in
Exhibit A.
(f) Financial Statements and Monthly Status Reports. 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
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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;
(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request; and
(v) Within 10 calendar days after the end of each month (or, if the
financial statements referred to in clause (d) are not then available,
as soon as possible thereafter) commencing with the next calendar month
following the date of this Agreement and ending at the Effective Date, a
written description of (a) any non-compliance with the terms of this
Agreement, together with its then current estimate of the out-of-pocket
costs and expenses incurred or reasonably accruable in connection with
the transactions contemplated by this Agreement; (b) the status, as of
the date of the report, of all existing or threatened litigation against
any Acquired Corporation Company; (c) copies of minutes of any meeting
of the board of directors of any Acquired Corporation Company and any
committee thereof occurring in the month for which such report is made,
including all documents presented to the directors at such meetings; and
(d) monthly financial statements, including a balance sheet and income
statement.
(g) Fiduciary Duties. Prior to the Effective Date, (i) no director or
officer (each an "Executive") of any Acquired 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
regional office in Orlando, Florida of all of the Bank's loan requests over
$500,000 that are not single-family residential loan requests or of any
other loan request outside the normal course of business, and (ii) Acquired
Corporation will consult with BancGroup to coordinate various business
issues on a basis mutually satisfactory to Acquired Corporation and
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.
(i) Adjustment or Termination of Acquired Corporation Options Held By
Directors. Certain directors of Acquired Corporation hold Acquired
Corporation Options. The terms of the United American Holding Corporation
Directors' Stock Option Plan (the "Directors' Plan") provide that the
exercise price of the Acquired Corporation Options shall be reduced by "the
amount of cash dividends paid on each share" of Acquired Corporation Stock
between February 1, 1994 and the date the Acquired Stock Options are
exercised. Acquired Corporation hereby agrees that it shall take whatever
action is necessary and shall likewise cause its Stock Option Committee (as
defined in the Directors' Plan) to take
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whatever action is necessary to cause either (i) all Acquired Corporation
Options to be exercised or terminated prior to the Effective Date or (ii)
the Stock Option Agreements on all Acquired Corporation Options outstanding
immediately prior to the Effective Date to be appropriately adjusted or
amended so that the exercise price of each of such Acquired Corporation
Options becomes fixed, with no further reduction in exercise price
resulting from cash dividends declared by either the Acquired Corporation
or BancGroup. In the event of any conflict between this section 5.28 and
any other provision of this Agreement, including but not limited to Article
3 -- Conversion of Acquired Corporation Stock, the terms of this Section
5.28 shall prevail.
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, including the holding
of any regular or special board meetings, to consummate and make effective, as
soon as practicable, the transactions contemplated by this Agreement. The
officers of each Party to this Agreement shall fully cooperate with officers and
employees, accountants, counsel and other representatives of the other Parties
not only in fulfilling the duties hereunder of the Party of which they are
officers but also in assisting, directly or through direction of employees and
other persons under their supervision or control, such as stock transfer agents
for the Party, the other Parties requiring information which is reasonably
available from such Party.
7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion, deems such
disclosure required by Law. In that event, such Party shall provide to the other
Party the text of such disclosure sufficiently in advance to enable the other
Party to have a reasonable opportunity to comment thereon.
7.3 Mutual Disclosure. Each Party hereto agrees to promptly furnish to
each other Party hereto its public disclosures and filings not precluded from
disclosure by Law including but not limited to call reports, Form 8-K, Form 10-Q
and Form 10-K filings, Y-3 applications, reports on Form Y-6, quarterly or
special reports to shareholders, Tax returns, Form S-8 registration statements
and similar documents.
7.4 Access to Properties and Records. Each Party hereto shall afford the
officers and authorized representatives of the other Party full access to the
Assets, books and records of such Party in order that such other Parties may
have full opportunity to make such investigation as they shall desire of the
affairs of such Party and shall furnish to such Parties such additional
financial and operating data and other information as to its businesses and
Assets as shall be from time to time reasonably requested. All such information
that may be obtained by any such Party will be held in confidence by such party,
will not be disclosed by such Party or any of its representatives except in
accordance with this Agreement, and will not be used by such Party for any
purpose other than the accomplishment of the Merger as provided herein.
7.5 Notice of Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Acquired 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. (a) 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.
(b) Each Party shall have obtained any and all other Consents required for
consummation of the Merger (other than those referred to in Section 8.2(a) of
this Agreement) for the preventing of any Default under any Contract or Permit
of such Party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such Party. No
Consent obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement so as to render inadvisable the consummation of the Merger.
8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority pursuant to
the 1934 Act, with respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory authority; and
all approvals or authorizations for the offer of BancGroup Common Stock shall
have been received or obtained pursuant to any applicable state securities Laws,
and no stop order or proceeding with respect to the transactions contemplated
hereby shall be pending or threatened under any such state Law.
8.5 Tax Opinion. An opinion of Coopers & Lybrand L.L.P., shall have been
received in form and substance reasonably satisfactory to the Acquired
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 by 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
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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 were 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
was 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 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, condition (financial or
otherwise), or Assets of BancGroup which would prevent the performance of
this Agreement or the transactions contemplated by this Agreement or
declare the same unlawful or cause the rescission thereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired 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
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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 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.6 Other Matters. There shall have been furnished to such counsel for
Acquired 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.
9.7 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.
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;
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(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
Smith, Mackinnon, Greeley, Bowdoin & Edwards, 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 that such person will not sell
or otherwise reduce risk relative to any shares of BancGroup Common Stock
received in the Merger until financial results concerning at least 30 days of
post-Merger combined operations have been published by BancGroup within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies. Acquired Corporation recognizes and acknowledges that BancGroup Common
Stock issued to such persons may bear a legend evidencing the agreement
described above.
10.6 Other Matters. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of Acquired 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 have exercised dissenters rights of appraisal under section 3.6 does
not exceed 10% of the outstanding shares of common stock of Acquired
Corporation.
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 Employment/Non-compete Agreements. Employment and/or non-competition
agreements, in form and substance reasonably satisfactory to BancGroup and the
following persons, shall have been executed between BancGroup and James L.
Hewitt, David McLeod and David Powers, respectively.
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.
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ARTICLE 11
TERMINATION OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4 and 5 of this
Agreement or in any closing certificate pursuant to Articles 9 and 10 shall
terminate and be extinguished at and shall not survive the Effective Date. All
covenants, agreements and undertakings required by this Agreement to be
performed by any Party hereto following the Effective Date shall survive such
Effective Date and be binding upon such Party. If the Merger is not consummated,
all representations, warranties, obligations, covenants, or agreements hereunder
or in any certificate delivered hereunder relating to the transaction which is
not consummated shall be deemed to be terminated or extinguished, except that
the last sentences of Sections 7.4 and 6.2(c), and Sections 7.2, 13.3, Article
11, Article 12, 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.
ARTICLE 12
NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so received:
(a) If to Acquired Corporation to James L. Hewitt, 105 West Colonial
Drive, Orlando, Florida 32801, facsimile (407) 839-0646, with copies to
John P. Greeley, Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., Citrus
Center, Suite 800, 255 South Orange Avenue, Orlando, Florida 32801,
facsimile (407) 843-2448, or as may otherwise be specified by Acquired
Corporation in writing to BancGroup.
(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce Street,
Suite 803, Montgomery, Alabama, 36104, facsimile (334) 240-5069, with a
copy to Hugh C. Nickson, III, Miller, Hamilton, Snider & Odom, L.L.C., One
Commerce Street, Suite 802, Montgomery, Alabama 36104, facsimile (334)
265-4533, or as may otherwise be specified in writing by BancGroup to
Acquired Corporation.
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 material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching Party
the ability to refuse to consummate the Merger under the standard set forth
in section 10.1 of this Agreement in the case of BancGroup and section 9.1
of this Agreement in the case of Acquired Corporation;
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(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 April 15, 1998, if the failure to
consummate the transactions provided for in this Agreement on or before
such date is not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this section 13.2(d).
13.3 Damages. In the event of termination pursuant to section 13.2, this
Agreement shall become void and have no effect, except as provided in Article
11, and except that Acquired Corporation and BancGroup shall be liable for
damages for any wilful breach of warranty, representation, covenant or other
agreement contained in this Agreement.
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement:
Acquired Corporation....... United American Holding Corporation, 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 a maximum of
190,500 shares of Acquired Corporation common stock
pursuant to Acquired Corporation's stock option
plans.
Acquired Corporation
Stock.................... Shares of common stock, par value $0.01 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 the Governors of the Federal
Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all
state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, HUD,
the VA, the FHA, the GNMA, the FNMA, the FHLMC, the
NYSE, and the SEC.
Agreement.................. Shall mean this Agreement and Plan of Merger and
the Exhibits and Schedules delivered pursuant
hereto and incorporated herein by reference.
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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.
Bank....................... United American Bank of Central Florida, a Florida
state bank.
Closing.................... The submission of the certificates of officers,
legal opinions and other actions required to be
taken in order to consummate the Merger in
accordance with this Agreement.
Code....................... The Internal Revenue Code of 1986, as amended.
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 $36.50 by the Market
Value, as set forth in section 3.1(c).
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.
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FBCA....................... The Florida Business Corporation Act
GAAP....................... Means generally accepted accounting principles
Applicable to banks and bank holding companies
consistently applied during the periods involved.
Knowledge.................. Means the actual knowledge of the Chairman,
President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, General
Counsel or any Senior or Executive Vice President
of BancGroup, in the case of knowledge of
BancGroup, or of Acquired Corporation and the Bank,
in the case of knowledge of Acquired Corporation.
Law........................ Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including, without limitation, those promulgated,
interpreted or enforced by any Agency.
Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including, without limitation, 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, (iii)
Liens in the form of easements and restrictive
covenants on real property which do not materially
adversely affect the use of such property by the
current owner thereof, and (iv) Liens which are not
reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding but shall not include regular,
periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities,
relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
Loan Property.............. Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect to
such property.
Loss....................... Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of
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business), liabilities, costs, expenses (including
without limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of
defense or investigation), and interest on any
amount payable to a third party as a result of the
foregoing.
Market Value............... Shall represent the per share market value of the
BancGroup Common Stock at the Effective Date and
shall be determined by calculating the average of
the closing prices of the Common Stock of BancGroup
as reported by the NYSE on each of the ten (10)
consecutive trading days ending on the trading day
five calendar days preceding the Effective Date.
Regardless of such average, the Market Value shall
be deemed to be no less than $23.80 and no greater
than $32.20.
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 effect" shall not
be deemed to include the impact of (w) changes in
banking and similar laws of general applicability
or interpretations thereof by courts or
governmental authorities, (x) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, (y) actions and
omissions of a Party (or any of its Subsidiaries)
taken with the prior informed consent of the other
Party in contemplation of the transactions
contemplated hereby, and (z) the Merger and
compliance with the provisions of this Agreement on
the operating performance of the Parties.
Merger..................... The merger of Acquired Corporation with BancGroup
as contemplated in this Agreement.
Merger Consideration....... The distribution of BancGroup Common Stock for each
share of Acquired Corporation Stock (and cash for
fractional shares) as provided in section 3.1(a)
hereof.
NYSE....................... The New York Stock Exchange.
Order...................... Any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal,
state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or
Agency.
Party...................... Shall mean Acquired 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,
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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.
Shareholders Meeting....... The special meeting of shareholders of Acquired
Corporation called to approve the transactions
contemplated by this Agreement.
Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Corporation granting to
BancGroup the right to acquired up to 19% of
Acquired Corporation common stock.
Subsidiaries............... Shall mean all those corporations, banks,
associations, or other entities of which the entity
in question owns or controls 5% or more of the
outstanding equity securities either directly or
through an unbroken chain of entities as to each of
which 5% or more of the outstanding equity
securities is owned directly or indirectly by its
parent; provided, however, there shall not be
included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.
Tax or Taxes............... Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. (a) Except as otherwise provided in this Section 15.1, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that BancGroup shall bear and pay the filing
fees payable in connection with the Registration Statement and printing costs
incurred in connection with the printing of the Registration Statement.
(b) Nothing contained in this Section 15.1 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
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15.2 Benefit and Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and
assigns.
15.3 Governing Law. Except to the extent the Laws of the State of Delaware
and 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 Alabama without
regard to any conflict of Laws.
15.4 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such counterpart shall
become effective when one counterpart has been signed by each Party thereto.
15.5 Headings. The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement or considered in construing the provisions thereof.
15.6 Severability. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being severable,
shall remain in full force and effect in such circumstance or situation and the
term or provision shall remain valid and in effect in any other circumstances or
situation.
15.7 Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party's counsel has drafted any portion of this Agreement.
15.8 Return of Information. In the event of termination of this Agreement
prior to the Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public documents, work papers
and other materials obtained from the other Party in connection with the
transactions contemplated in this Agreement and shall keep such information
confidential, not disclose such information to any other person or entity, and
not use such information in connection with its business.
15.9 Equitable Remedies. The parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party may be without an
adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.
15.10 Attorneys' Fees. If any Party hereto shall bring an action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its costs and expenses incurred in
connection with such action (including fees, disbursements and expenses of
attorneys and costs of investigation).
15.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or Default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of any such right,
power or remedy, or an acquiescence in any similar breach or Default; nor shall
any waiver of any single breach or Default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
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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: UNITED AMERICAN HOLDING CORPORATION
BY: /s/ Charles Hall BY: /s/ James L. Hewitt
---------------------------------------------- ----------------------------------------------
Charles Hall James L. Hewitt
ITS: Vice President & CFO ITS: Chairman, President and CEO
---------------------------------------------- ----------------------------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
BY: /s/ Donna R. Piel BY: /s/ W. Flake Oakley, IV
---------------------------------------------- ----------------------------------------------
Donna Piel W. Flake Oakley, IV
ITS: Assistant Secretary ITS: Chief Financial Officer
---------------------------------------------- ----------------------------------------------
(CORPORATE SEAL)
</TABLE>
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APPENDIX B
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. -- The following definitions
apply to sec.sec. 607.1302 and 607.1302 and 607.1320:
(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' authorized 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 or
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
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 reduction 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 wishes 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
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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 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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APPENDIX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 8, 1997 (the "Agreement"), by
and between United American Holding Corporation, a Florida corporation
("Issuer"), and The Colonial BancGroup, Inc., a Delaware corporation
("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of September 8, 1997 (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Grantee, with Grantee as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase from time to time up to 338,124 shares (as adjusted
as set forth herein) (the "Option Shares"), of Common Stock, par value $.01
per share ("Issuer Common Stock"), of Issuer at a purchase price per Option
Share (the "Purchase Price") equal to $36.50; provided, however, that in no
event shall the number of shares for which this option is exercisable
exceed 19% of the outstanding shares of Issuer Common Stock.
3. Exercise of Option
(a) Provided that (i) Grantee shall not be in material breach of
the agreements or covenants contained in this Agreement or the Merger
Agreement, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any
court of competent jurisdiction in the United States shall be in effect,
Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the Effective
Date, or (B) termination of the Merger Agreement in accordance with the
terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event, (C) termination of the Merger Agreement in
accordance with the terms thereof after the occurrence of a Purchase
Event or a Preliminary Purchase Event (other than a termination of the
Merger Agreement by Grantee due to a material breach by Issuer in
accordance with Section 13.2(b) of the Merger Agreement or a termination
due to the failure to fulfill conditions set forth in Sections 8.1,
10.1, 10.3, 10.4, 10.6, 10.7, 10.9 or 10.10 of the Merger Agreement), or
(D) eighteen months after termination of the Merger Agreement following
the occurrence of a Purchase Event or a Preliminary Purchase Event,
provided that the termination of the Merger Agreement was due to one of
the reasons listed in the parenthetical of Clause (C) above; and
provided further, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law including,
without limitation, the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). The rights set forth in Section 8 shall terminate when
the right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed, or publicly announced an
intention to authorize, recommend, or propose, or
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shall have entered into any agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect an Acquisition
Transaction (as defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation, or other business
combination involving Issuer, (B) the disposition, by sale, lease,
exchange, or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case all or substantially all of
the consolidated assets of Issuer, or (C) the issuance, sale, or
other disposition of (including by way of merger, consolidation,
share exchange, or any similar transaction) securities representing
25% or more of the voting power of Issuer; or
(ii) After the date of this Agreement, any person (other than
Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (the "1934 Act")) of or the right
to acquire beneficial ownership of, or any "group" (as such term is
defined under the 1934 Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more
of the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
1934 Act), or shall have filed a registration statement under the
1933 Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 25% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) (1) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders
held for the purpose of voting on the Merger Agreement, (2) such
meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement, (3) the Issuer's Board of
Directors or any person representing such Board shall have commenced
negotiations with any person other than Grantee regarding an
Acquisition Transaction, or (4) Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly
announced (or otherwise disclosed to the Issuer prior to such public
announcement) that any person (other than Grantee or any subsidiary
of Grantee) shall have (A) made, or disclosed to Issuer an intention
to make, a proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under the
1933 Act with respect to an Exchange Offer, or (C) filed an
application (or given a notice), whether in draft or final form,
under the BHC Act, the Bank Merger Act, or the Change in Bank Control
Act of 1978, or other appropriate banking agency, for approval to
engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the 1934 Act.
(d) In the event Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business
days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or approval of
the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or any other regulatory authority is required in
connection with such purchase, Issuer shall cooperate with Grantee in
the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).
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4. Payment and Delivery of Certificates
(a) On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account
designated by Issuer, an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased on such Closing Date, and
(ii) present and surrender this Agreement to the Issuer at the address
of the Issuer specified in Section 11(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided
in Section 4(a), (i) Issuer shall deliver to Grantee (A) a certificate
or certificates representing the Option Shares to be purchased at such
Closing, which Option Shares shall be free and clear of all liens,
claims, charges, and encumbrances of any kind whatsoever and subject to
no pre-emptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall
be endorsed with a restrictive legend which shall read substantially as
follows:
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE LAW AND THE
TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF SEPTEMBER 8, 1997. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE
ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance),
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may
be issued pursuant to Section 7 upon exercise of the Option. The shares
of Issuer Common Stock to be issued
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upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable pursuant
to Section 7, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges, and encumbrances of any kind or
nature whatsoever, including any statutory preemptive rights of any
stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the 1933 Act.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of a change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, subject to the limitation set
forth in Section 2 hereof, and proper provision shall be made in the
agreements governing such transaction so that Grantee shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Grantee would have received in respect of
Issuer Common stock if the Option had been exercised immediately prior
to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of
this Agreement (other than pursuant to an event described in the first
sentence of this Section 7(a) or a sale of the Issuer Common Stock for
cash at its fair market value or pursuant to the exercise of stock
options outstanding as of the date of this Agreement), the number of
shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, the shares of Issuer Common Stock subject to
the Option, together with any shares of Issuer Common Stock previously
issued pursuant hereto, equal 19% of the number of shares of Issuer
Common Stock then issued and outstanding.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of
its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger; (ii) to permit any person,
other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then-outstanding shares of Issuer
Common Stock shall be changed into or exchanged for stock or other
securities of the Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged company; or
(iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction
shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls
the Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), the Issuer (in each case, such person being referred to as
the "Substitute Option Issuer").
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(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee. The Substitute
Option Issuer shall also enter into an agreement with the then-holder or
holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the
number of shares of the Issuer Common Stock for which the Option was
theretofore exercisable, divided by the Average Price (as hereinafter
defined). The exercise price of the Substitute Option per share of the
Substitute Common Stock (the "Substitute Purchase Price") shall then be
equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of the Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number
of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with the Issuer
(if other than the Issuer), (y) the Issuer in a merger in which the
Issuer is the continuing or surviving person, and (z) the transferee
of all or substantially all of the Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person after the date
hereof (other than Grantee), (y) the price per share of the Issuer
Common Stock to be paid by any person (other than the Grantee)
pursuant to an agreement with the Issuer, or (z) the highest closing
sales price per share of Issuer Common Stock quoted on the National
Association of Securities Dealers Automated Quotation National Market
System ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on the
NASDAQ/ NMS, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by
Grantee or, if there is no such information available, the value of
such shares as determined by a nationally recognized investment
banking firm selected by Grantee) within the six-month period
immediately preceding the Agreement; provided, however, that in the
event of a sale of all or substantially all of the Issuers' assets,
the Assigned Value shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets
of the Issuer as determined by a nationally recognized investment
banking firm selected by Grantee (or by a majority in interest of the
Grantees if there shall be more than one Grantee (a "Grantee
Majority")), divided by the number of shares of the Issuer Common
Stock outstanding at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger, or
sale, provided that if Issuer is the issuer of the Substitute Option,
the Average Price shall be computed with respect to a share of common
stock issued by the Issuer, the person merging into the Issuer or by
any company which controls or is controlled by such merger person, as
Grantee may elect, and provided further that if there is no such
trading information available, the price of such shares shall be
determined by a nationally recognized investment banking firm
selected by Grantee.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19% of the aggregate
of the shares of the Substitute Common Stock
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outstanding prior to exercise of the Substitute Option. In the event
that the Substitute Option would be exercisable for more than 19% of the
aggregate of the shares of Substitute Common Stock but for this clause
(f), the Substitute Option Issuer shall make a cash payment to Grantee
equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value
of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee (or a Grantee
Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assumes in writing
all the obligations of Issuer hereunder and takes all other actions that
may be necessary so that the provisions of this Section 7 are given full
force and effect (including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock are in no way
distinguishable from or have lesser economic value than other shares of
common stock issued by the Substitute Option Issuer) (other than any
diminution in value resulting from the fact that the shares of
Substitute Common Stock are restricted securities as defined in Rule 144
under the 1933 Act or any successor provision).
(h) The provisions of Sections 8, 9, and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in
such sections to "Issuer," "Option," "Purchase Price," and "Issuer
Common Stock" shall be deemed to be references to "Substitute Option
Issuer," "Substitute Option," "Substitute Purchase Price," and
"Substitute Common Stock," respectively.
8. Repurchase at the Option of Grantee
(a) Subject to the last sentence of Section 3(a), at the request of
Grantee at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) and ending 30 days immediately
thereafter, Issuer shall, to the extent permitted by applicable law,
repurchase from Grantee the Option and all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to which Grantee then
has beneficial ownership. The date on which Grantee exercises its right
under this Section 8 is referred to as the "Request Date". Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares
of Issuer Common Stock acquired pursuant to the Option with respect
to which Grantee then has beneficial ownership;
(ii) The excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase
Price (subject to adjustment pursuant to Section 7), multiplied by
the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid
(or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by
Grantee for each share of Issuer Common Stock with respect to which
the Option has been exercised and with respect to which Grantee then
has beneficial ownership, multiplied by the number of such shares.
(b) If Grantee exercises its right under this Section 8, Issuer
shall, to the extent permitted by applicable law, within 10 business
days after the Request Date, pay the Section 8 Repurchase Consideration
to Grantee in immediately available funds, and contemporaneously with
such payment Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership,
and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of
all liens, claims, charges, and encumbrances of any kind
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whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Board of Governors of the Federal
Reserve System or other regulatory authority is required in connection
with the payment of all or any portion of the Section 8 Repurchase
Consideration, Grantee shall have the ongoing option to revoke its
request for repurchase pursuant to this Section 8, in whole or in part,
or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or application
and the obtaining of any such approval). If the Board of Governors of
the Federal Reserve System or any other regulatory authority disapproves
of any part of Issuer's proposed repurchase pursuant to this Section 8,
Issuer shall promptly give notice of such fact to Grantee. If the Board
of Governors of the Federal Reserve System or other agency prohibits the
repurchase in part but not in whole, then Grantee shall have the right
(i) to revoke the repurchase request, or (ii) to the extent permitted by
the Board of Governors of the Federal Reserve System or other agency,
determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Grantee shall thereupon
have the right to exercise the Option as to the number of Options Shares
for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment
has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased.
Grantee shall notify Issuer of its determination under the preceding
sentence within five (5) days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of the
Grantee's rights under this Section 8 shall terminate on the date of
termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock
paid for any such share by the person or groups described in Section
8(d)(i); (ii) the price per share of Issuer Common Stock received by
holders of Issuer Common Stock in connection with any merger or other
business combination transaction described in Section 7(b)(i), 7(b)(ii)
or 7(b)(iii); or (iii) the highest closing sales per share of Issuer
Common Stock quoted on the NASDAQ/NMS (or if Issuer Common Stock is not
quoted on the market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee and
reasonably acceptable to Issuer) during the 60 business days preceding
the Request Date; provided, however, that in the event of a sale of less
than all of Issuer's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by Grantee, divided by the
number of shares of the Issuer Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm selected
by Grantee and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of the Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-3
promulgated under the 1934 Act), or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the 1934
Act) shall have been formed which beneficially owns or has the right the
acquire beneficial ownership of, 50% or more of the then outstanding
shares of Issuer Common Stock, or (ii) any of the transactions described
in Section 7(b)(i), 7(b)(ii), or 7(b)(iii) shall be consummated.
(e) In connection with the application of the provisions of this
Section 8, Grantee acknowledges that Issuer's ability to fund the
Section 8 Repurchase Consideration in accordance with the provisions of
this Section 8 may be dependent upon the ability of Issuer to obtain the
prior approval of the Board of Governors of the Federal Reserve System
and applicable provisions of Florida law
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and that, unless there has been an agreement of the type described in
Section 7(b), Issuer's obligations under this Section 8 do not impose on
the Issuer an obligation to otherwise finance the payment of the Section
8 Repurchase Consideration through the incurrence of indebtedness or the
issuance of capital instruments or securities by Issuer in either case
sufficient in amount to satisfy the payment of the Section 8 Repurchase
Consideration. Accordingly, Issuer shall not be deemed to be in breach
of this Section 8 if, after making its best efforts to obtain regulatory
authorization for a capital distribution required to pay the Section 8
Repurchase Consideration, it is unable to do so.
9. Quotation: Listing. If the Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized
for quotation or trading or listing on the NASDAQ/NMS or any securities
exchange, Issuer, upon the request of Grantee, will promptly file an
application, if required, to authorize for quotation or trading or listing
shares of Issuer Common Stock or other securities to be acquired upon
exercise of the Option on the NASDAQ/NMS or such other securities exchange
and will use its best efforts to obtain approval, if required, of such
quotation or listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the Option of the Grantee,
upon presentation and surrender of this Agreement at the principal office
of Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any other Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Agreement, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of the Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
11. Miscellaneous
(a) Expenses. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of
its own financial consultants, investment bankers, accountants and
counsel.
(b) Waiver and Amendments. Any provision of this Agreement may be
waived at any time in writing by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered, or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Entire Agreement: No Third-Party Beneficiary:
Severability. This Agreement, together with the Merger Agreement and
the other documents and instruments referred to herein and therein,
between Grantee and Issuer (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and
(b) is not intended to confer upon any person other than the parties
hereto (other than any transferee of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any terms, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction or a federal
or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired, or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to
Acquire, or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer
to allow Grantee to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible without any amendment or
modification hereof.
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(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Alabama without regard to
any applicable conflicts of law rules.
(e) Descriptive Headings. The description headings contained
herein are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), or mailed by registered or certified
mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
<TABLE>
<S> <C>
If to Issuer to: United American Holding Corporation
105 West Colonial Drive
Orlando, Florida 32801
Telecopy Number: (407) 839-0646
Attention: James L. Hewitt
Chairman, President and Chief Executive Officer
with a copy to: Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
Citrus Center, Suite 800
255 South Orange Avenue
Orlando, Florida 32801
Telecopy Number: (407) 843-2448
Attention: John P. Greeley, Esq.
If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36101
Telecopy Number: (334) 240-5069
Attention: W. Flake Oakley, IV
Chief Financial Officer
with a copy to: Miller, Hamilton, Snider & Odom, L.L.C.
Suite 802
One Commerce Street
Montgomery, Alabama 36104
Telecopy Number: (334) 265-4533
Attention: Hugh C. Nickson, III
</TABLE>
(g) Counterparts. This Agreement and all amendments hereto may be
executed in two counterparts, each of which shall be considered one and
the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign
the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder or under the Option shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except
that Grantee may assign this Agreement to a wholly owned subsidiary of
Grantee. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided
for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief, and other equitable relief. Both parties
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<PAGE> 168
further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief
and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
<TABLE>
<S> <C>
UNITED AMERICAN HOLDING
ATTEST: CORPORATION
By: /s/ CHARLES W. HALL By: /s/ JAMES L. HEWITT
---------------------------------------- -------------------------------------------------
Charles W. Hall James L. Hewitt
Vice President and Chairman
Chief Financial Officer
[CORPORATE SEAL]
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ DONNA R. PIEL By: /s/ W. FLAKE OAKLEY, IV
------------------------------------- -------------------------------------------------
Donna R. Piel W. Flake Oakley, IV
Assistant Secretary Chief Financial Officer
[CORPORATE SEAL]
</TABLE>
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SOLICITED BY
THE BOARD OF
DIRECTORS
PROXY
UNITED AMERICAN HOLDING CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 2, 1998
The undersigned hereby appoints James L. Hewitt and James P. Caruso, and
either of them, or such other persons as the board of directors of United
American Holding Corporation ("United American"), may designate, proxies for the
undersigned, with full power of substitution, to represent the undersigned and
to vote all of the shares of common stock of United American at the special
meeting of shareholders to be held on February 2, 1998, and at any and all
adjournments thereof.
1. To ratify, adopt, and approve the Agreement and Plan of Merger dated as of
September 8, 1997, pursuant to which United American will be merged with and
into The Colonial BancGroup, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, to vote on such other matters as may properly come
before the meeting and to vote upon matters incident to the conduct of the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNITED
AMERICAN AND WILL BE VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE
PROXY HOLDERS RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING AND TO VOTE UPON MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL
MEETING.
Dated: , 1998
-------------------
Phone No:
---------------------
------------------------------
(Signature of Shareholder)
------------------------------
Signature of Shareholder, if
more than one)
Please sign exactly as your
name appears on the envelope
in which this material was
mailed. If shares are held
jointly, each shareholder must
sign. Agents, executors,
administrators, guardians and
trustees must give full title
as such. Corporations should
sign by their president or
authorized officer.
