STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") entered into this 22 day of
September, 2000 between all the shareholders of FIRST SECURITY BANK, a Florida
corporation, having its principal place of business at 0000 Xxxxx Xxxxxx,
Xxxxxxxx, XX 00000, whose names, addressees, and shareholdings are listed in
Exhibit [A] attached hereto, herein referred to as "Stockholders," FIRST
SECURITY BANK, a Florida banking corporation, hereinafter referred to as "First
Security," and UNITED FINANCIAL HOLDINGS, INC., a Florida corporation, having
its principal place of business at 000 Xxxxx Xxxxxx Xxxxx, Xx. Xxxxxxxxxx, XX
00000, herein referred to as "Holding Company."
RECITALS:
1. UNITED FINANCIAL HOLDINGS, INC. is a bank holding company, organized under
Florida law.
2. FIRST SECURITY BANK is a banking corporation organized under the laws of the
State of Florida, operating as a general commercial bank in Sarasota County,
Florida.
3. Holding Company desires to acquire all, and not less than all, of the issued
and outstanding shares of the capital stock of First Security so that it may
expand its commercial banking and affiliated operations into Sarasota and
adjacent Florida counties (the "Purchase").
4. The Stockholders have determined that the business of First Security will be
enhanced if Holding Company acquires it and its banking services are
supplemented by the additional services available through Holding Company
affiliates.
NOW THEREFORE, in consideration of the mutual covenants set forth
herein, and for ten dollars and other good and valuable consideration, receipt
of which is acknowledged by each party, the parties agree as follows:
SECTION I.
INCORPORATION INTO AGREEMENT
The Recitals and Exhibits are incorporated by reference into this
Agreement.
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SECTION II.
PRE-PURCHASE DUE DILIGENCE
A. RIGHT OF EXAMINATION. From and after the date of this Agreement for a
period of forty-five (45) days (the "Due Diligence Period"), Holding Company
shall have the right to examine the books and records, loan portfolio,
investments and other assets of First Security, and ask questions of the
Stockholders, directors, officers and key employees of First Security, and its
accountants and advisors, and otherwise conduct a due diligence investigation.
B. CONFIDENTIALITY. Any and all information provided to Holding Company
shall be treated as the confidential information of the person providing the
information and shall be returned to the providing person upon request. In no
event shall Holding Company have the right to examine or copy any information
related to First Security if so doing would violate any federal or state law
related to banking or bank holding companies or to the confidentiality of
customers of First Security. In the event the transaction contemplated by this
Agreement does not close, upon request, all confidential materials furnished to
Holding Company shall be returned to First Security.
C. ACCOUNTANTS EXAMINATION. Holding Company shall also have the right to
have its independent accountants make such inquiries and examinations of the
assets and liabilities and the financial books and records of First Security as
they deem appropriate to satisfy themselves as to the accuracy and completeness
thereof and to perform an audit or a review prior to Closing.
D. TERMINATION. Notwithstanding anything contained in this Agreement to the
contrary, if during the Due Diligence Period, if Holding Company determines for
any reason, with or without cause, that, as a result of its due diligence
examination, this transaction should not be consummated, it shall provide
written notice on or before the expiration of the Due Diligence Period to the
other parties and the obligations under this Agreement shall thereupon, and
without liability on the part of any party, terminate and cease.
E. DISCLOSURE SCHEDULE. To assist the Holding Company in its due diligence,
the Stockholders and First Security shall prepare and deliver to Holding Company
a "Disclosure Schedule" which shall itemize the disclosures under this
Agreement. All documents referred to in the Disclosure Schedule shall be
provided to Holding Company for timely review during the Due Diligence Period.
The Disclosure Schedule is incorporated herein by reference.
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SECTION III.
REGULATORY APPROVAL
The transactions contemplated by this Agreement are conditioned upon
"Regulatory Approval." "Regulatory Approval" includes at least the following
approvals:
A. Approval of First Security as a "member" by the Federal Reserve.
B. Approval of the transaction contemplated by this Agreement by the
Federal Reserve and the Division of Banking of the State of Florida; and
C. If required, approval of the Federal Deposit Insurance Corporation
("FDIC").
UPON THE EXECUTION OF THIS AGREEMENT, HOLDING COMPANY AND FIRST
SECURITY SHALL JOINTLY SEEK REGULATORY APPROVAL OF THIS AGREEMENT AND
TRANSACTION, WITH THE DESIRE OF CLOSING THIS TRANSACTION IN 2000. Upon approval,
the transaction shall be consummated, subject however, to the terms and
conditions of this Agreement, including without limitation satisfactory
completion of due diligence by Holding Company. If Regulatory Approval is not
obtained by March 31, 2001, either party may terminate this Agreement upon
written notice to the other party and the obligations under this Agreement shall
thereupon, and without liability on the part of any party, terminate and cease.
SECTION IV.
EFFECTIVE DATE; CERTAIN DEFINITIONS
A. EFFECTIVE DATE. If this Agreement is not otherwise terminated as
provided herein, and subject to the terms and the conditions contained herein,
as soon as practical after Regulatory Approval has been obtained, Holding
Company shall notify the Stockholders and First Security and shall designate an
Effective Date for Closing this transaction. The Effective Date shall be a date
designated by Holding Company, which unless otherwise agreed shall be on or
before March 31, 2001, and in any event within thirty (30) days after Holding
Company has received Regulatory Approval.
B. BEST EFFORTS. Subject to the terms and conditions hereof, each party
shall use its, his or her, best efforts to cause the Purchase to be consummated
as soon as practicable following the fulfillment or waiver of all conditions
contained in this Agreement on or before December 31, 2000. However, failure to
close this transaction by December 31, 2000 for any reason shall not be deemed a
breach of this Agreement.
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C. PREFERRED SHARES. To facilitate the Purchase, prior to the Effective
Date, the Board of Directors of the Holding Company will cause the "Preferred
Shares Resolution," a copy of which is attached as Exhibit [B], to be filed with
the State of Florida in accordance with applicable law and to become effective
to create the "Series One Preferred Stock" shares (herein sometimes referred to
as the "Preferred Shares") to be used in this transaction.
D. CERTAIN DEFINITIONS. As used in this Agreement and its Exhibits:
1. The term "commercial banking business" means the general commercial
banking business as defined in Section 658.12, Florida Statutes and as
permitted under Florida law.
2. The term "affiliate" means, with reference to any person, a spouse,
parent or child of such person; any director, officer, shareholder, or
employee of such person; any person of which such person is a director,
officer or employee; any person of which such person is a member, partner,
shareholder, trustee or beneficiary when the ownership interest directly or
indirectly exceeds ten percent (10%); and any person directly or indirectly
controlling or controlled by or under the direct or indirect common control
of such person.
3. The term "person" means and includes an individual, proprietorship,
corporation, trust, partnership, limited liability company, firm, company,
estate, trust, syndicate, unincorporated association, joint venture, group,
association, and any other business combination or other entity considered
a person under the laws of Florida.
4. The term "Representative" means those Stockholders who are members
of the Board of Directors of First Security, each of whom makes the
representations and warranties under this Agreement on behalf of the
Stockholders.
SECTION V.
CLOSING
Unless otherwise agreed by the parties, the closing of the Purchase
shall take place at the office of Holding Company at Nine A.M. on the Effective
Date (the "Closing").
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SECTION VI.
PURCHASE
A. CLOSING TRANSACTION. At the Closing, subject to the covenants, terms and
conditions of this Agreement:
1. PURCHASE. The Holding Company shall purchase and the Stockholders
shall sell all of the issued and outstanding shares of the capital stock of
First Security (the "First Security Shares"). The purchase and sale of the
First Security Shares pursuant to this Agreement is sometimes referred to
in this Agreement as the "Purchase."
2. CONSIDERATION. The consideration (the "Consideration") to be paid
for the First Security Shares shall be a combination of shares of Series
One Preferred Stock of the Holding Company, and cash, based on an agreed
value (the "Agreed Value") of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000) for the First Security Shares. TWO MILLION TWO HUNDRED
THOUSAND DOLLARS ($2,200,000) of the Agreed Value will be paid in cash or
acceptable funds and the balance of the Agreed Value will be by delivery of
shares of the Holding Company's Series One Preferred Stock.
3. CONSIDERATION PER EACH FIRST SECURITY SHARE. The consideration per
share (the "Per Share Price") of First Security stock shall be equal in
value to the amount determined by dividing FIVE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($5,500,000) by the number of issued and outstanding
shares comprising the First Security Shares as determined as of the Closing
Date which, based on the presently issued and outstanding shares of the
capital stock of First Security of SIX HUNDRED THOUSAND (600,000) shares
will be NINE AND 1,667/10,000 DOLLARS ($9.1667) per share.
4. SERIES ONE PREFERRED STOCK VALUE. For purpose of payment of the
Consideration for the First Security Shares, the value of each share of the
Series One Preferred Stock (the "Series One Value") shall be deemed to be
equal to EIGHT DOLLARS ($8.00) per share.
5. PAYMENT OF CONSIDERATION. At the Closing, the Consideration payable
to any Stockholder in cash shall be paid in cash based on the Per Share
Price, and the Consideration payable to any Stockholder in Series One
Preferred Stock shall be paid in such number of shares of Series One
Preferred Stock, rounded to the nearest whole share, as shall equal the Per
Share Price based on the Series One Value for each share of the Series One
Preferred Stock.
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B. INCENTIVE SHARES. In addition to the Consideration paid to the
Stockholders at the Closing, if the "Cumulative Net Interest Income" of First
Security for the period commencing January 1, 2002 and ending on December 31,
2005, equals or exceeds SEVENTEEN MILLION THREE HUNDRED FIVE THOUSAND DOLLARS
($17,305,000), the "Qualified Holders," as a group, shall be entitled to receive
additional shares (the "Incentive Shares") of the Holding Company's $0.01 par
value Common Stock. The number of Incentive Shares to which the Qualified
Holders, as a group, are entitled to receive will be equal to sixteen percent
(16%) of the total number of shares of Series One Preferred Stock that are
issued by the Holding Company at the Closing of the Purchase pursuant to this
Agreement.
1. The following definitions apply:
a. The term "Qualified Holders" means the owners of record of the
Series One Preferred Stock issued and outstanding as of December 31,
2005 or, if all shares of the Series One Preferred Stock shall then
have been converted into Common Stock, the term "Qualified Holders"
means the owners of record of the Series One Preferred Stock as of the
date of the conversion into Common Stock.
b. The term "Cumulative Net Interest Income" shall have the same
meaning, and shall be determined in the same manner as provided in
Exhibit 1 to the Preferred Shares Resolution, which is Exhibit B to
this Agreement.
2. The Incentive Shares shall be allocated among the Qualified Holders
in proportion to the number of shares of Series One Preferred Stock owned
by them respectively at December 31, 2005, or on the date of conversion to
Common Stock, as applicable. Fractional shares shall not be issued, and
fractional shares shall be rounded to the nearest whole share.
3. If the Qualified Holders shall be entitled to receive Incentive
Shares, the Holding Company shall advise each of the Qualified Holders of
the number of Incentive Shares to which that Qualified Holder is entitled
to receive at the time the independent accounting firm certifies or
otherwise finally reports on the Holding Company's annual financial
statements for the calendar year ending December 31, 2005, and the
Incentive Shares to which each of the Qualified Holders is entitled shall
be delivered to the Qualified Holders, without interest, on or before June
1, 2006.
C. VESTING ON CHANGE OF CONTROL. Anything contained in this Section VI to
the contrary notwithstanding, in the even there is a "Change of Control" of the
Holding Company as defined in Exhibit 1 of Exhibit B to this Agreement, a
portion of the Incentive Shares shall "vest" in accordance with the following
schedule:
1. Twenty percent (20%) if the Change of Control occurs in 2001.
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2. Forty percent (40%) if the Change of Control occurs in 2002.
3. Sixty percent (60%) if the Change of Control occurs in 2003.
4. Eighty percent (80%) if the Change of Control occurs in 2004.
5. One Hundred percent 100%) if the Change of Control occurs in 2005.
The vested Incentive Shares shall be issued within thirty (30) days thereafter.
The unvested Incentive Shares shall remain subject to the conditions of this
paragraph C.
SECTION VII.
DEFINITION OF BEST KNOWLEDGE
In the Sections that follow, First Security, Stockholders, Representatives,
and Holding Company make certain representations and warranties that are limited
to the "best knowledge" of the person making the representation or warranty. For
all purposes of this Agreement whenever a representation or warranty is limited
to the "best knowledge" of a person, or by similar language, that limitation
shall mean that the maker of the representation or warranty is not actually
aware of the falsity of the representation or warranty, and, as to First
Security and the Representatives, has also made such reasonable inquiry or
investigation regarding the same as a normal business person would make in the
ordinary course of business, and shall not imply that extraordinary searches or
investigations have been performed in order to confirm the accuracy of the
representation or warranty contained in the statement.
SECTION VIII.
COVENANTS, WARRANTIES, AND REPRESENTATIONS OF FIRST SECURITY AND THE
REPRESENTATIVES ON BEHALF OF THE STOCKHOLDERS
In addition to other covenants, warranties and representations contained in
this Agreement, First Security and the Representatives (for and on behalf of the
Stockholders) covenant, warrant and represent to Holding Company as follows, all
of which warranties and representations are true now and shall be true at the
Closing as if made at that time, and shall survive Closing:
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A. AUTHORITY. Each of the Stockholders and First Security has full
authority to enter into and perform this Agreement without the consent of any
other person, subject however, to Regulatory Approval. The execution and
delivery of this Agreement and the completion of the transactions contemplated
hereunder have been duly authorized by all necessary corporate and stockholder
action.
B. BINDING EFFECT. Except for Regulatory Approval no other approval or
action on the part of any party is necessary and this Agreement constitutes a
valid and binding obligation of First Security and the Stockholders, enforceable
in accordance with its terms, except as its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and the principles of
equity (regardless as to whether the procedure is at law or equity).
C. BROKERS. Neither First Security or any of the Stockholders, nor any of
their respective officers, directors or employees has employed any broker or
finder or investment banker or incurred any liability for any brokerage fees,
commissions, finder's fees, or similar fees in connection with this transaction,
including without limitation any obligation to pay a commission or other
compensation to any person acting as a broker or dealer within the meaning of
the Securities Exchange Act of 1934 as amended.
D. BUSINESS. First Security does not engage in any business except its
commercial banking business in the State of Florida. First Security has neither
committed nor made loans or investments in any other state. First Security has
no ownership interest in any other corporation, partnership, joint venture,
limited liability company, or other business enterprise. Except for the purchase
or sale of trading securities acquired in the ordinary course of its commercial
banking business, First Security owns no property and has engaged in no business
activities in any state except the State of Florida. Included in the Disclosure
Schedule and the documents provided thereunder is the certificate of authority
granted by the State of Florida to engage in the commercial banking business.
E. CAPITAL. First Security has an authorized capitalization of Ten Million
Dollars ($10,000,000), divided only into 2,000,000 shares of common stock, par
value Five Dollars ($5.00) per share, of which Six Hundred Thousand (600,000)
shares are fully paid and nonassessable and issued and outstanding.
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F. CHANGES. Except as set forth in the Disclosure Statements, the 1999
Financials and the 2000 Interim Statements, First Security has not:
1. Suffered any material adverse change in its financial condition,
including without limitation, its loan portfolio, investments, other
assets, loan loss reserve, other reserves or liabilities or obligations
(absolute, contingent, accrued, or due or to become due).
2. Suffered any loss, damage, destruction, or other casualty
materially and adversely affecting its assets (tangible and intangible)
whether or not covered by insurance.
3. Incurred or assumed or become subject to any debt or guaranty,
except deposit obligations incurred in the ordinary course of its
commercial banking business.
4. Permitted or allowed any liens or encumbrances on any of its
assets.
5. Written down, or off, any of its loan portfolio.
6. Incurred losses in its investment securities portfolio.
7. Paid any sum to directors or officers except for normal directors'
fees and officers' compensation paid in the ordinary course in accordance
with past practices.
8. Adopted or amended any bonus, profit-sharing, compensation,
incentive compensation, stock purchase, insurance, welfare, severance,
stock option, pension, retirement, deferred compensation, employment, or
other employee benefit plan, agreement, trust, or compensation arrangement,
or increased compensation payable to any of its officers, directors or
employees.
9. Made any capital expenditure in excess of $25,000 cumulatively.
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10. Paid any dividends or made any distributions on its capital stock
or other securities.
11. Made any changes in its accounting practices.
12. Engaged in any related-party transactions with any affiliate of
any officer, director, shareholder, or employee of First Security.
13. Been examined by, entered into any regulatory agreements with, or
been sanctioned or restrained in any way by the Division of Banking for the
State of Florida, the Federal Reserve, or the FDIC; or
14. Entered into any commitment, contract, or transaction except in
the ordinary course of its commercial banking business and consistent with
past practices that in the aggregate have or could reasonably be expected
to have a material adverse effect on the business, operations, assets or
financial condition of First Security.
G. COMPLIANCE. To the best knowledge of First Security and the
Representatives, First Security is in compliance in all material respects with
all laws, rules, regulations and orders ("Laws") material to its business,
including without limitation those regulating its commercial banking business,
and any environmental, anti-pollution, building, zoning, or health. First
Security has not received any notice that it is or may be in violation of such
Laws.
H. CONTRACTS. Except as set forth in the Disclosure Schedule:
1. All First Security contracts, agreements, understandings, and
commitments (the "Contracts") are referenced on the Disclosure Schedule and
are valid and binding and fully enforceable in accordance with their terms.
Neither First Security or any other person is in default under any of the
Contracts and no event has occurred which except for the passage of time
would constitute a default.
2. First Security has no leases, loans or other contracts with any of
its Stockholders, directors, officers or employees other than employment
agreements or with any affiliate of any Stockholder, director, officer or
employee of First Security.
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3. First Security has no written employment agreement or other
contract with any director, officer, or employee, or any written employment
agreement or other contract with any consultant or agent. All contracts of
employment are terminable at will.
4. First Security has no current compensation arrangement with any
director, officer, employee, agent or consultant to whom it is paying in
the aggregate direct and indirect compensation, including bonuses and
benefits, at an annual rate in excess of $50,000 for services rendered.
5. First Security has no contract with any director, officer,
employee, agent or consultant that contains any severance or termination
pay liabilities or obligations and no agreement or contract with a
"disqualified individual" as defined in Section 280G(c) of the Internal
Revenue Code of 1986, as amended (the "Code") that would result in a
disallowance of a deduction as an "excess parachute payment" as defined in
Section 280G(b)(1).
6. First Security is engaged solely in the commercial banking business
and has not, directly or indirectly, engaged in any securities sales,
insurance sales, or other non-commercial banking business arrangements with
any person whether or not the person is paid on commissions or as an
employee or contractor.
7. First Security is not a party to any open or ongoing contract for
services, licenses, leases, or for the purchase of supplies, equipment or
other assets (except loan participation or its investment securities
acquired or sold in the ordinary course of its commercial banking business
as disclosed on the Disclosure Schedule):
a. In excess of its normal, ordinary, and usual business
requirements, or
b. For periods of more than twelve months (including renewals),
or
c. Which in the aggregate exceed $25,000 in total purchase price,
or
d. Under which the consent of another person is required to
approve the Purchase.
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8. First Security is neither lessee nor lessor under any real property
or tangible personal property leases or conditional sales contracts.
9. First Security is not a licensee or licensor under any software,
technology or other intellectual property license arrangements or
agreements or under any contract with an application service provider.
10. True and complete copies of all contracts including First
Security's loan documents and investment portfolio documentation have been
furnished to or made available to Holding Company.
11. Except for a Memorandum of Understanding with the Federal Deposit
Insurance Corporation, presently in effect, a copy of which is furnished as
part of the Disclosure Documents, First Security is not a party to any
contract or understanding, including without limitation a regulatory
agreement with the Florida Division of Banking, the Federal Reserve, or the
Federal Deposit Insurance Corporation, that in any manner (a) restricts its
carrying on its commercial banking business or any part of thereof, (b)
restricts it from engaging in any other business or from competing in any
territory, or (c) requires a third-party approval of the Purchase.
12. First Security has no debt or obligation (including without
limitation, direct obligations; obligations guaranteed or contingent; or
endorser, co-signer, co-maker, indemnitor or other surety obligations), to
any person except depositors on deposit accounts, and endorsements for the
collection and payment of items incurred in the ordinary course of its
commercial banking business.
13. First Security has not agreed to indemnify any person under any
loan or deposit arrangement or other customer contract, or otherwise,
except for indemnities arising by law in connection with the endorsement,
negotiation, and presentment of items for collection and payment in the
ordinary course of First Security's commercial banking business.
14. First Security has not entered into any confidentiality contract
or understanding with any customer or other person.
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15. First Security is not a party to, and its property is not bound
under, any other contract with an affiliate of First Security or with any
of its officers, directors, employees or with any Stockholder or any
affiliate of any of the foregoing.
I. CORPORATE BOOKS AND RECORDS. The minute book and other books and records
of First Security are true, accurate, current and complete, and all such books
and records shall be made available for the inspection of Holding Company and
its accountants and attorneys during the Due Diligence Period.
J. EMPLOYMENT AND BENEFIT PLANS. Except as set forth on the Disclosure
Schedule:
1. First Security has complied in all material respects with all
applicable laws relating to employment and employment practices and with
the terms and conditions of all employment contracts or arrangements,
including but not limited to those related to wages, hours, withholding and
payment of taxes, occupational health and safety, discrimination and
harassment.
2. To the best knowledge of First Security and the Representatives
First Security is not engaged in any unfair employment practice.
3. First Security employees are not members of any union or other
labor organization and First Security is not a party to any collective
bargaining agreement.
4. First Security has written employment policies in full force and
effect as indicated on the Disclosure Schedule and copies have been
furnished to Holding Company as part of its disclosure.
5. First Security has no deferred compensation, disability, severance
or termination pay plan or obligation for any of its employees or for other
persons.
6. First Security has no stock option, stock purchase, phantom stock
or similar plan for its directors, officers or other employees.
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7. First Security does not contribute to or participate in any
voluntary employee beneficiary association within the meaning of Section
501(c)(9) of the Code.
8. First Security has no qualified pension, profit sharing, employee
stock ownership, 401K, or any health or other employee welfare plan, or any
fringe benefit or other plan classified as a retirement plan or welfare
plan under the Employee's Retirement Security Act of 1974, as amended
("ERISA").
K. FEDERAL DEPOSIT INSURANCE CORPORATION. First Security is in compliance
in all material respects with the rules and regulations of the FDIC, has paid
all deposit insurance premiums and other sums due to the FDIC, and its deposits
are insured by the FDIC to the maximum amount permitted by law.
L. FINANCIAL STATEMENTS. The Disclosure Schedule and the documents provided
include complete First Security balance sheets and related statements of
operations, stockholder's equity and changes in financial position for 1999, the
first year First Security was in business (the "1999 Financials") and for the
interim periods ending March 31, 2000 and June 30, 2000 (the "2000 Interim
Statements"). The 1999 Financials have been examined and accompanied by the
unqualified reports of Hacker, Johnson, Xxxxx & Xxxxx, PA, independent certified
public accountants. Also included are the annual comment letters from the
independent accountants and management's responses. Except as set forth on the
Disclosure Schedule, the 1999 Financials and the 2000 Interim Statements balance
sheets with notes fairly present the assets, liabilities and financial condition
of First Security and the related statements of operations, stockholder's equity
and changes in financial position with notes fairly present the results of
operations for the applicable periods, and do not contain any misstatement of a
material fact or omit to state any material fact required to prevent them from
being materially misleading.
M. HAZARDOUS SUBSTANCES AND WASTE. Neither First Security nor any
Representative has any knowledge of any storage or other presence, disposals or
releases or threatened releases of any hazardous or toxic substance, material or
waste which is regulated by any local, state or federal governmental authority,
or which may have occurred prior to First Security leasing or occupying its
facilities.
N. INSURANCE POLICIES. The Disclosure Schedule include a detailed list of
all of the insurance policies insuring First Security, its assets, business
operations and liabilities or providing employee or executive benefits. Copies
of all insurance policies have been furnished to Holding Company. First
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Security's insurance policies are in full force and effect and have been
maintained with reputable and responsible insurers licensed to engage in
business in Florida. The insurance policies insure against risks in amounts and
with coverage (by way of example, fire, general liability, theft, fidelity,
worker's compensation, employee group insurance, and directors and officers)
that are customary for the commercial banking business as carried on by
companies of the size of First Security. The insurance policies are in full
force and effect with current premiums paid; are sufficient for the requirements
of law and any contract to which First Security is a party; are valid,
outstanding, and enforceable; provide in the judgment of First Security adequate
insurance coverage for its assets and operations; and will not in any way be
adversely affected, terminate or lapse by the Purchase. First Security has not
been denied any insurance it has sought or had any insurance revoked or
rescinded except as set forth on the Disclosure Schedule.
O. INTELLECTUAL PROPERTY. Except as set forth on the Disclosure Schedule,
First Security does not own any intellectual property rights.
P. LITIGATION AND INVESTIGATION. Except as set forth on the Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim, or action of any nature, or regulatory audit or investigation of
which First Security, its officers, directors or employees has received written
notice pending or to the best knowledge of First Security and each
Representative, threatened against or involving First Security or its officers,
employees or directors, at law or equity or before any governmental agency,
board, bureau, agency or instrumentality, or to the best knowledge of First
Security and each Representative, any consent agreement, judgment, decree,
injunction, or order of any court, governmental department, commission, agency,
instrumentality, or arbitrator against First Security or any of its officers,
employees or directors, which:
1. has or is reasonably likely to have a material adverse effect on
First Security's commercial banking business, results of operations or
financial condition, or
2. questions or challenges the validity of this Agreement or the
authority of First Security to engage in the commercial banking business;
and neither First Security nor any Representative knows of any valid basis
for any such legal, administrative, arbitration or other proceeding, suit,
claim, or action of any nature or investigation.
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Q. NO NOTICE OF ADVERSE ACTION. Except as set forth in the Disclosure
Schedule (including the Memorandum of Understanding with the Federal Deposit
Insurance Corporation heretofore referenced), since the commencement of First
Security's commercial banking business, First Security has not received any
notice or inquiry from the Comptroller of the State of Florida, the Federal
Reserve, or the FDIC relating to any failure or alleged failure to comply with
any law, rule, or regulation applicable to the conduct of its commercial banking
business.
R. NO FEDERAL RESERVE MEMBERSHIP. First Security is not a member of the
Federal Reserve but is regulated by the Division of Banking for the State of
Florida and the FDIC. Included in the Disclosure Schedule and the documents
provided are the examination reports of each federal or state regulatory agency
regulating First Security together with comment letters and responses, and any
consent agreement, letter of understanding, or other instrument to which First
Security is bound relating to the conduct of its commercial banking business.
S. NON-CONTRAVENTION. Except as set forth in the Disclosure Schedule, and
subject to Regulatory Approval, the execution and delivery of this Agreement and
the consummation of the transaction contemplated hereby, will not:
1. Violate any provision of the Articles of Incorporation or By-laws
of First Security or any agreement among the Stockholders.
2. Violate, or be in conflict with, or constitute a default (or an
event which, with or without due notice or lapse of time, or both, would
constitute a default) under, or cause or permit the acceleration of the
maturity of or give rise to any right of termination, cancellation,
imposition of fees or penalties under any debt, lien, lease, license,
instrument, contract, commitment or other agreement, or order, arbitration
award, judgment or decree, to which First Security is a party or by which
it is bound or its properties are subject.
3. Result in the creation or imposition of any mortgage, lien, charge,
pledge, security interest, or encumbrance upon any properties of First
Security.
4. To the best knowledge of the Representatives and First Security,
not in any material way violate or be in conflict with any statute,
license, or regulation of any governmental authority.
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T. ORGANIZATION. First Security is duly organized, validly existing, and
with active status, under the laws of the State of Florida. First Security has
the full corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its commercial banking business as it is
now carried on. As noted on the Disclosure Schedule, First Security has
delivered to Holding Company complete and correct copies of its Articles of
Incorporation, as amended, and By-laws, as amended, and in effect on the date of
this Agreement. The Disclosure Schedule lists all of the directors and officers
of First Security.
U. TAX RETURNS AND TAXES. First Security files its federal and state
income taxes as a "C Corporation" within the meaning of the Code. Except as set
for on the Disclosure Schedule, First Security has filed all federal, state and
local tax returns when and as due and has paid (or adequately provided for) all
taxes due of it, or as to accrued taxes not yet payable, has properly accrued
the same on the books and financial statements of First Security. None of First
Security's tax returns has been audited or adjusted by the Department of Revenue
for the State of Florida, the Internal Revenue Service or any other taxing
authority. Copies of all tax returns for the year 1999 and prior years have been
noted on the Disclosure Schedule and have been furnished to Holding Company.
Except as set forth on the Disclosure Schedule, no material tax deficiencies
have been proposed or asserted and no requests for waivers of time to assess
taxes or penalties have been made of First Security.
V. TITLE TO ASSETS. Except as set forth on the Disclosure Schedule, First
Security has good and marketable title to all of its properties and assets
(real, personal and mixed, tangible and intangible), including without
limitation all of such properties and assets shown on the balance sheet and
schedules referenced in the Disclosure Document and none of the properties or
assets is subject to any mortgage, lien, or encumbrance. All of the tangible
real, personal and mixed property and assets of First Security are in a good
state of repair and adequately and fully insured.
W. WARRANTIES, REPRESENTATIONS AND STATEMENTS. No representations or
warranties of First Security, Stockholders, or the Representatives and no
statement contained in any document (including without limitation financial
statements and the Disclosure Schedule), certificate, or other writing furnished
or to be furnished by First Security, the Representatives, or Stockholders under
this Agreement or in connection with this transaction contain or will contain
any untrue statement of a material fact, or omit, or will omit, to state any
material fact necessary in order to make the statements in this Agreement or in
the document, certificate, or other writing, in light of the circumstances under
which they are made, not misleading.
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SECTION IX.
COVENANTS, WARRANTIES, AND REPRESENTATIONS ABOUT THE FIRST SECURITY DEPOSITS,
LOAN PORTFOLIO AND INVESTMENTS
In addition to other covenants, warranties and representations contained in
this Agreement, First Security and the Representatives (on behalf of the
Stockholders) covenant, warrant and represent to Holding Company as follows, all
of which warranties and representations are true now and shall be true at the
Closing as if made at that time, and shall survive Closing. Except as disclosed
in the Disclosure Document:
A. DEPOSITS. All deposit transactions, certificates of deposit, and other
financial instruments of First Security with its Stockholders, directors,
officers and their affiliates have been entered in the ordinary course and no
preferences have been granted to any such persons, and have been made available
to Holding Company during its Due Diligence examination of First Security.
B. LOANS. To the best knowledge of First Security and the Representatives,
loans from First Security to its borrowers have been made in accordance with
applicable law, and regulation, and none of the loans are usurious.
C. LOAN FILES. First Security maintains true, accurate and fully documented
loan files on each of its loans; these files are kept in accordance with sound
banking practices, the recommendations of First Security's independent
accountants and the requirements of law and regulatory authorities.
D. LOAN LOSS ALLOWANCE OR RESERVES. To the best knowledge of First Security
and the Representatives, the allowance or reserve for loan losses established on
its books by First Security is fully adequate for its present loan portfolio and
has been established and is maintained in accordance with sound banking
practices, the recommendations of First Security's independent accountants, and
the requirements of law and regulatory authorities.
E. LOAN SALES. Any loan or interest in any of its loans, sold by First
Security to any other person has been sold without recourse of collectibility or
any agreement to repurchase the loan.
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F. LOANS TO STOCKHOLDERS, REPRESENTATIVES, OFFICERS, DIRECTORS, AND
AFFILIATES. The Disclosure Document lists each loan to a Stockholder,
Representative, Director, Officer or affiliate of First Security. All loan
transactions have been entered in the ordinary course and have granted no
preferences to any such persons, and each such loan does not violate any
applicable law, rule or regulation pertaining to loans to affiliates of First
Security, or its officers, directors or Stockholders.
G. SECURITIES. First Security has no ownership interest of any security of
another person other than its "Securities Available for Sale" as disclosed on
the 1999 Financials, the 2000 Interim Statements, and its books and records. All
of its Securities Available for Sale are readily marketable in the ordinary
course of business and have no unrealized losses, which have not been fully
reflected in those financial statements. All Securities Available for Sale are
maintained in the possession of First Security and are not pledged or
hypothecated to any person.
H. STANDBY LETTERS. The Disclosure Document includes a list of each standby
letter of credit issued by First Security.
I. UNFUNDED COMMITMENTS. The Disclosure Document includes a list of each
fully or partially unfunded loan commitment of First Security.
SECTION X.
ADDITIONAL COVENANTS, WARRANTIES, AND REPRESENTATIONS OF STOCKHOLDERS
In addition to other covenants, warranties and representations contained in
this Agreement, the Stockholders each covenant, warrant and represent to Holding
Company as follows, all of which warranties and representations are true now and
shall be true at the Closing as if made at that time, and shall survive Closing:
A. ACCREDITED INVESTOR QUALIFICATION.
1. Each Stockholder is a resident of the State of Florida.
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2. Each of the Stockholders is sufficiently experienced in financial
and business matters to be capable of utilizing the information furnished
to evaluate the merits and risks of the Purchase and the consideration to
be received in the Purchase and to make an informed decision related
thereto. Each of the Stockholder's personal financial condition is such
that the Stockholder has adequate resources for the Stockholder's current
needs and possible personal contingencies and has no need for liquidity
with respect to the Series One Preferred Shares or the Common Shares into
which they are convertible (the "Shares"). Each Stockholder further
acknowledges that the Purchase is a speculative investment that involves a
substantial degree of risk of loss by the Stockholder of its or his or her
entire investment and the Stockholder understands and takes full cognizance
of the risk factors related to the acquisition of the Shares. Each
Stockholder represents it, he or she is financially able to bear the
economic risk of an investment in the Shares, including a loss of the
investment.
3. Each of the Stockholders understands:
a. That the Shares have not been registered under any applicable
state and federal securities laws, including the Securities Act of
1933 and the Florida Securities and Investor Protection Act
(collectively, the "Securities Laws") and that the Shares will be
issued to the Stockholders in reliance on exemptions from registration
contained in the Securities Laws, and in reliance, in part, on each
Stockholder's representations, warranties, and agreements set forth in
this Agreement.
b. That the Shares can only be transferred under an exemption
from registration under the Securities Laws.
c. That Holding Company has no obligation to register the Shares
under the Securities Laws and that such registration is unlikely.
Provided, however, if the Holding Company registers any of its
authorized but unissued Common Stock with the Securities & Exchange
Commission for a sale by a public offering, the Holding Company shall
provide written notice of the planned or pending registration to the
Stockholders who are then holders of record of Holding Company Common
Shares received on conversion of their Series One Preferred Shares. If
a Stockholder receiving the notice holds Holding Company Common Shares
that exceed the number of Common Shares that can then be transferred
or sold under Rule 144 of the Securities & Exchange Commission in a
single transaction, the Stockholder may elect to offer his or her
Common Shares for sale as a secondary offering with the planned
offering of the Holding Company, subject to the terms of this
provision. The Stockholder making the election shall notify the
Holding Company within fifteen days following notice of the offering
20
from the Holding Company. Provided however, the Holding Company shall
not be obligated to include the Common Shares of Stockholder in a
secondary offering if the underwriter for the Holding Company refuses
to include the secondary offering with the planned offering. Provided
further that the Holding Company shall not be obligated to offer any
Stockholder the right to include his or her shares of Common Stock in
more than one offering approved by the underwriter of an offering. Any
Stockholder who elects to offer his or her Holding Company Common
Shares in a secondary offering shall be subject to the terms and
conditions of the offering, including the price of the Shares and
payment of commissions on the sale of such Shares. The expenses of the
offering shall be paid from the proceeds of the offering and allocated
pro rata among all the securities sold in the offering; however, if
the offering does not close, the Holding Company shall be solely
responsible for payment of the expenses of the offering, except
however, each Stockholder shall be solely responsible for its, his or
her personal expenses, including without limitation the expense of
its, his or her personal counsel.
d. That except for Regulatory Approval no state or federal agency
has reviewed the Purchase or passed on the Purchase or the merits of
the Purchase or the Shares.
e. That the Shares will contain a standard legend referencing
that they are not registered under Securities Laws and that the
transferability of the Shares is restricted by Securities Laws.
f. That each Share is a "restricted security" under the
Securities Act in that each Share will be acquired from the Holding
Company in a transaction not involving a public offering, that the
Shares may be resold without registration under the Securities Act
only in certain limited circumstances, and that otherwise the Shares
must be held indefinitely.
g. That the Holding Company and its shareholders are under
obligation to register or qualify any Shares under the Securities Act
or under any state securities law, or to assist law, or to assist the
Stockholder in complying with any exemption from registration and
qualification.
h. That there are substantial restrictions on the transferability
of the Shares pursuant to this Agreement and applicable law, that
there is no public market for the Shares or other securities of the
Holding Company and none is expected to develop, and that,
accordingly, it may not be possible for any Stockholder to liquidate
its or his investment in the Holding Company.
21
4.
a. Each of the Stockholders, directly and through authorized
representatives, has been afforded ample opportunity to ask
questions and receive answers from the appropriate executive
officers of Holding Company concerning each of them and the
Shares and to obtain any additional information the Holding
Company possess or can acquire without unreasonable effort or
expense. Any questions raised by a Stockholder or a
representative of a Stockholder about the Holding Company has
been satisfactorily answered. Each Stockholder has been advised
to consult with its or his own legal counsel and financial
advisors regarding all legal and financial matters concerning an
investment in the Holding Company and the tax and other
consequences of participating in the Holding Company and
acquiring and owning the Shares, and has done so, to the extent
that the Stockholder considers necessary. The decision of each
Stockholder to enter into this transaction has been independently
made and based upon a personal evaluation of the risks and merits
of the Purchase. No Stockholder has requested or desires any
further information from the Holding Company about either of
them, the Shares or the Purchase. Each Stockholder has received
and reviewed all information that it or he considers necessary or
appropriate for deciding whether to acquire and commit to acquire
the Shares.
b. Neither the Holding Company nor any representative of the
Holding Company nor any other Person, has at any time expressly
or implicitly represented, guaranteed, or warranted to the
Stockholder that it or he or she may freely Transfer any Shares,
that a percentage of profit and/or amount or type of
consideration will be realized as a result of an investment in
the Shares, that past performance or experience on the part of an
Person in any way indicates the predictable results of the
ownership of those Shares or of the Holding Company's business,
that any cash distributions from the Holding Company's operations
or otherwise will be made to the owners of Shares by any specific
date or will be made at all, or that any specific tax benefits
will accrue as a result of an investment in the Holding Company.
5. Each of the Stockholders meets one or more of the following tests:
a. He or she is a natural person whose individual net worth
or joint net worth with his or her spouse exceeds $1 million.
b. He or she is a natural person who had an individual
income in excess of $200,000 in each of the two most recent years
or a joint income with his or her spouse in excess of $300,000 in
each of those years, and has a reasonable expectation of reaching
the same income level in the current year.
22
6. The Shares shall be held by Stockholders for investment and not
with a view to, or for sale in connection with, any distribution of such
Shares. Each of the Stockholders represents that he or she has no present
plans or intentions to sell any Shares. No person other than the
Stockholder will have any direct or indirect beneficial interest in or
right to the Shares.
7. Each Stockholder has not seen received, been presented with, or
been solicited by any leaflet, public promotional meeting, newspaper or
magazine article or advertisement, radio or television advertisement, or
any other form of advertising or general solicitation, with respect to the
issuance of the Shares.
8. Each Stockholder agrees that it, he or she will not make any
disposition of all or any part of the Shares which will result in the
violation by it or him or her or by the Holding Company of the Securities
Act, or any other applicable securities law.
B. NON-DISPOSAL OF FIRST SECURITY SHARES. No Stockholder shall sell,
transfer or otherwise dispose of his or her shares of First Security stock, or
any interest therein, prior to the effectiveness of the Purchase.
C. OWNERSHIP OF FIRST SECURITY. The Stockholders are the sole owners of all
of the issued and outstanding shares of stock of First Security, and no other
person has any interest or right, legal or equitable in First Security or its
assets or stock. There are no liens, pledge, options, contracts, calls,
commitments or preemptive rights or demands of any nature related to the stock
or securities issued or authorized by First Security.
D. TAX MATTERS. Each Stockholder acknowledges that the tax consequences to
it or him of acquiring and owning the Shares will depend on its or his or her
particular circumstances, and neither the Holding Company nor any representative
of the Holding Company nor any other Person will be responsible or liable for
the tax consequences that Stockholder of an investment in the Holding Company.
Each Stockholder will look solely to, and rely upon, its or his or her own
advisors with respect to the tax consequences of this investment. The
Stockholder acknowledges that there can be no assurance that the Code or Unites
States Treasury Regulations or any other laws, rules or regulations will not be
amended or interpret din the future in such a manner so as to deprive the
Holding Company and its stockholders of some or all of the tax benefits they
might receive, nor that some of the deductions claimed by the Holding Company or
23
the allocations of items of income, gain, loss, deduction, or credit among the
Holding Company's stockholders may not be challenged by the Internal Revenue
Service or any other taxing authority.
SECTION XI.
COVENANTS, WARRANTIES AND REPRESENTATIONS OF HOLDING COMPANY
In addition to the other covenants, warranties and representations
contained in this Agreement, Holding Company covenants, warrants and represents
as follows, all of which warranties and representations are true now and shall
be true at the Closing as if made at that time, and shall survive Closing:
A. AUTHORITY. Subject to the following:
1. Regulatory Approval,
2. approval of lender to the Holding Company, and
3. ratification of this Agreement by the Board of Directors of Holding
Company and the transactions contemplated hereby,
Holding Company has full authority to enter into and perform this Agreement
without the consent of any other person.
B. APPROVAL. Upon the execution hereof, Holding Company shall promptly
submit this Agreement to its Board of Directors for ratification and final
approval.
C. BINDING EFFECT. Subject to Section XI (A) above, this Agreement
constitutes a valid and binding obligation of Holding Company, enforceable in
accordance with its terms, except as its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and the principles of
equity (regardless as to whether the procedure is at law or equity).
24
D. BROKERS. Neither the Holding Company nor any of its officers, directors
or employees has employed any broker or finder or investment banker or incurred
any liability for any brokerage fees, commissions, finder's fees, or similar
fees in connection with this transaction, including without limitation any
obligation to pay a commission or other compensation to any person acting as a
broker or dealer within the meaning of the Securities Exchange Act of 1934 as
amended.
E. COMPANY INFORMATION. Holding Company has previously furnished First
Security and the Stockholders with copies of its 1999 Annual Report, including
its Form 10-KSB, its Form 10-QSB for the first and second quarter of 2000 and
its Proxy Statement dated March 27, 2000 (the "Company Information").
F. DELIVERY OF PREFERRED SHARES. Holding Company has full right and
authority to issue and deliver the Preferred Shares, as provided herein; and on
such delivery, the Stockholders will receive the Preferred Shares as fully paid
and nonassessable, free and clear of all liens, encumbrances, and claims
whatsoever, subject however to applicable Securities Laws transfer restrictions.
G. HOLDING COMPANY AUTHORIZED CAPITAL STOCK. Holding Company has
authorized: (i) 20,000,000 shares of common stock, par value $0.01 per share, of
which 4,192,771 shares were issued and outstanding as of December 31, 1999, (ii)
150,000 shares of 7% convertible preferred stock, par value $10.00 per share, of
which 10,000 shares were issued and outstanding as of December 31, 1999, (iii)
70,000 shares of 6% convertible preferred stock, par value $10.00 per share, of
which no shares were issued and outstanding as of December 31, 1999, and (iv)
10,000,000 shares of convertible preferred stock, par value $0.01, of which no
shares were issued and outstanding as of December 31, 1999.
H. INTERIM COMPANY INFORMATION. When available to its present stockholders,
Holding Company will provide Stockholders and First Security with its September
Form 10-QSB (and if available, any other then current filings with the U.S.
Securities and Exchange Commission not included in the Company Information).
I. NO ADVERSE ACTIONS. To the best knowledge of the Holding Company, there
is no adverse action by any banking or other governmental administrative or
regulatory body pending or threatened against Holding Company or any Holding
Company subsidiary, and there is no litigation pending or threatened against
Holding Company or any Holding Company subsidiary.
25
J. NON-CONTRAVENTION. Subject to receipt of the approvals stated in
paragraph A of this Section, the execution and delivery of this Agreement and
the consummation of the transaction contemplated hereby by Holding Company will
not:
1. Violate any provision of the Articles of Incorporation or By-laws
of Holding Company.
2. Violate, or be in conflict with, or constitute a default (or an
event which, with or without due notice or lapse of time, or both, would
constitute a default) under, or cause or permit the acceleration of the
maturity of or give rise to any right of termination, cancellation,
imposition of fees or penalties under any debt, lien, lease, license,
instrument, contract, commitment or other agreement, or order, arbitration
award, judgment or decree, to which Holding Company is a party or by which
it is bound or its properties are subject; or
3. To the best knowledge of the Holding Company in any material way
violate or be in conflict with any statute, license, or regulation of any
governmental authority.
K. ORGANIZATION. Holding Company is duly organized, validly existing, and
with active status, under the laws of the State of Florida. Holding Company has
the full corporate power and authority to own, lease or operate all of its
properties and assets and to carry on its business as it is now carried on.
L. REPRESENTATIONS, WARRANTIES AND STATEMENTS. No representations or
warranties of Holding Company and no statement contained in any document
(including without limitation the Company Information), certificate, or other
writing furnished or to be furnished by Holding Company under this Agreement or
in connection with this transaction contain or will contain any untrue statement
of a material fact, or omit, or will omit, to state any material fact necessary
in order to make the statements in this Agreement or in the document,
certificate, or other writing, in light of the circumstances under which they
are made, not misleading.
26
SECTION XII.
CONDUCT OF FIRST SECURITY BUSINESS PENDING CLOSING
Until the Purchase is effective, First Security and the Stockholders
covenant and agree that without the prior written consent of Holding Company:
A. AMENDMENTS. The Articles of Incorporation and Bylaws of First Security
will not be amended.
B. ANNOUNCEMENT. Neither First Security nor its Stockholders shall make any
public announcement of the Purchase unless the Holding Company first approves
the announcement. (Nothing contained herein shall prohibit Holding Company from
making any public or private announcement pursuant to the requirements of law
and regulatory authority.) First Security shall furnish Holding Company all
information concerning First Security and its Stockholders required for
inclusion in any statement or application made by Holding Company to any
governmental body in connection with this transaction or in any filing under
Securities Laws. The parties understand that Holding Company will file a timely
Form 8K about this transaction.
C. CAPITAL EXPENDITURES. First Security shall not make any capital
expenditures or commitments except usual and customary repairs and replacements
of equipment incurred in the ordinary course of business.
D. COMPENSATION. First Security shall not adopt or amend any compensation
or employee benefit plan, including a qualified plan, or increase the
compensation of any director, officer, employee, agent or consultant.
E. COMPLIANCE. First Security shall comply in all material respects with
the laws, rules and regulations applicable to its properties, operations, and
commercial banking business.
F. CONTRACT BREACH. First Security shall not do any act, or omit to do any
act, or permit any act or omission that will cause a material breach of any
material contract of First Security.
27
G. CONTRARY TRANSACTIONS. First Security shall not enter into any contract
or transaction that would cause any of the representations or warranties of
First Security or the Stockholders contained in this Agreement not being true
and correct when made or as of the Closing if made at the Closing.
H. DEFAULT. First Security shall not default in any material way in any of
its contracts or obligations with other parties.
I. DISCHARGE LIABILITIES. First Security shall not discharge or release any
liabilities owed to it except in the ordinary course of its commercial banking
business.
J. DIVIDENDS OR DISTRIBUTIONS. First Security shall not declare or pay any
dividends, whether from earnings or capital or make and distributions with
respect to the First Security Shares.
K. INSURANCE POLICIES. First Security shall maintain all insurance policies
in full force and effect.
L. INVESTMENTS. First Security shall make no investment or commitment to
invest in any other business.
M. ISSUE SECURITIES. First Security will not issue or sell any shares of
its stock or other securities, including any securities convertible into stock.
N. ORDINARY COURSE. The business of First Security shall be conducted only
in the usual, regular and ordinary manner and substantially in the same manner
as previously conducted, and consistent with the foregoing First Security shall
use its best efforts to maintain its corporate existence and authority to carry
on its commercial banking business; preserve its present business organization
and goodwill; preserve and maintain its present relationships with customers and
others having a business relationship with it; and keep available the services
of its present officers and employees.
O. PURCHASE. First Security shall not merge or consolidate with any other
corporation.
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P. RELATED PARTY TRANSACTIONS. First Security shall not enter into any
contract or arrangement with any officer, director, Stockholder, or affiliate of
any of them, or release any officer, director, Stockholder, or affiliate of any
of them, from an existing contract except upon full payment of any of their
loans in the ordinary course of its commercial banking business.
Q. SALE OF ASSETS. First Security shall not sell or dispose of any assets
not in the ordinary course of business, or cancel any license agreement or its
rights to engage in the commercial banking business.
R. TAXES. First Security shall prepare and file all state, federal, and
other tax returns, and amendments thereto, to be filed between the date of this
Agreement and the Closing and shall pay all taxes due when and as due. Copies of
all such returns shall be promptly furnished to Holding Company.
S. STANDSTILL AGREEMENT. Prior to the Purchase being effective or the
earlier termination of this Agreement in accordance with its terms, neither
First Security or the Stockholders shall solicit or initiate discussions or
negotiations with, or provide any nonpublic information to, or enter into any
agreement with any corporation, partnership, entity, group or other person (or
their representatives) concerning the merger, consolidation, or sale of First
Security or its commercial banking business or the issuance of securities by
First Security.
SECTION XIII.
CONDITIONS PRECEDENT TO CLOSING BY HOLDING COMPANY
Holding Company's obligation to close the Purchase under the terms of this
Agreement are subject to the following conditions precedent which shall inure
solely to the benefit of, and may only be waived by, the Holding Company in
writing:
A. ACCOUNTANT'S COMFORT LETTER. Independent accountants for the Holding
Company shall have furnished a comfort letter, dated as of the Closing, in form
and substance satisfactory to Holding Company, that the accountant's examination
of the books and records of First Security did not reveal any information or
indication that said books and records were not substantially accurate and
correct or that any representation or warranty of First Security or any
Stockholder was inaccurate, misleading in any material way, or incomplete.
29
B. APPROVAL. Regulatory Approval and the other approvals required under
this Agreement have been obtained without condition or qualification.
C. COMPLIANCE. First Security and Stockholders shall have complied with,
and performed, all of the their obligations and covenants of this Agreement,
which are to be complied and performed by any of them prior to Closing.
D. DUE EXECUTION. This Agreement shall have been duly executed and
delivered on behalf of Stockholders and First Security and shall constitute a
legal, valid, and binding obligation, enforceable in accordance with its terms.
E. FAIRNESS OPINION. At its own expense, Holding Company has received a
fairness opinion in form and substance satisfactory to it from a recognized
investment-banking firm of its choice.
F. FULL DISCLOSURE. As of the Closing date, Representatives and First
Security, to the best of their knowledge shall have disclosed all material facts
and transactions that Representatives or First Security know, or reasonably
should know, that are pertinent to this transaction.
G. GOOD STANDING. The Secretary for the State of Florida shall have
certified that the status First Security is active and First Security shall also
be duly licensed or otherwise authorized to engage in its commercial banking
business.
H. NO LITIGATION OR AUDIT. Neither First Security nor any of its
Stockholders shall be parties in any litigation or subject to any threats of
litigation or examination or audit in regard to First Security by any
governmental authority.
I. NO MATERIAL CHANGES. The commercial banking business, assets, and
properties of First Security shall not have been materially and adversely
affected or diminished in any way between the date of this Agreement and the
Closing.
J. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Stockholders and First Security, as set forth herein, must be true in all
material respects as of the date of Closing as if made again on that date.
30
K. SATISFACTORY DOCUMENTATION. All Closing papers, documentation,
instruments must be reasonably acceptable to counsel for Holding Company.
L. STOCKHOLDERS DELIVERIES. Stockholders shall have delivered to Holding
Company at the Closing:
1. FIRST SECURITY SHARES. Their First Security Shares, duly endorsed,
free and clear of liens, encumbrances and the rights and interests of
others.
2. CLOSING CERTIFICATE. Their certificates, and a certificate of the
Officers of First Security (on behalf of First Security), certifying in as
much detail as Holding Company may reasonably specify, the fulfillment of
the conditions, representations, warranties, and covenants required of any
of them under this Agreement.
3. CERTIFIED COPIES OF AUTHORITY. Certified copies of the minutes of
meetings of the Board of Directors and Stockholders of First Security
authorizing the execution, delivery and performance of this Agreement and
its Exhibits.
4. OPINION. A written opinion of counsel for Stockholders and First
Security, satisfactory to Holding Company, that:
a. First Security is a banking corporation validly existing and
with active status under the laws of Florida, and has all of the
requisite corporate power under its certificate of incorporation and
the laws of Florida to own, lease, and operate its properties and to
carry on its commercial banking business as conducted prior to the
effectiveness of this transaction;
b. First Security has the full corporate power to carry out this
transaction; and
c. all corporate and shareholder actions required to be taken by
or on the part of First Security and the Stockholders to authorize the
execution and delivery of this Agreement and its Exhibits have been
duly and validly taken. and this Agreement is a valid and binding
Agreement, subject to applicable bankruptcy and reorganization laws.
31
5. OFFICERS AND DIRECTORS RESIGNATIONS. The delivery to Holding
Company of the full resignation without liability to Holding Company or
First Security of the officers and directors of First Security designated
by the Holding Company at or prior to the Effective Date,
M. OTHER REQUIREMENTS. All other conditions precedent to the obligations of
the Holding Company under this Agreement shall have been satisfied in full, and
all other requirements for the valid consummation of the Purchase shall have
been fulfilled.
SECTION XIV.
CONDITIONS PRECEDENT TO CLOSING BY STOCKHOLDERS AND FIRST SECURITY
Stockholders' and First Security's duty to close under the terms of this
Agreement are subject to the following conditions precedent:
A. APPROVAL. Regulatory Approval and the other approvals required under
this Agreement have been obtained without condition or qualification.
B. COMPLIANCE. Holding Company has complied with, and performed, all of its
obligations and covenants of this Agreement, which are to be complied and
performed by it prior to Closing.
C. DELIVERABLES. Holding Company has delivered to Stockholders and First
Security at the Closing:
1. CLOSING CERTIFICATE. A certificate of the Chairman and President of
Holding Company certifying in as much detail as Stockholders may reasonably
specify, the fulfillment of the conditions, representations, warranties,
and covenants required of Holding Company under this Agreement.
2. CERTIFIED COPIES. Certified copies of the minutes of meetings of
the Board of Directors of Holding Company authorizing the execution,
delivery and performance of this Agreement and its Exhibits.
32
3. OPINION. An opinion of counsel for Holding Company, satisfactory to
Stockholders, that:
a. Holding Company is a corporation validly existing and with
active status under the laws of Florida, and has all of the requisite
corporate power under its certificate of incorporation and the laws of
Florida to own, lease, and operate its properties and to carry on its
business as conducted prior to the effectiveness of this transaction;
and
b. Holding Company has the full corporate power to carry out this
transaction;
c. all corporate action required to be taken by or on the part of
Holding Company to authorize the execution and delivery of this
Agreement and its Exhibits have been duly and validly taken. and this
Agreement is a valid and binding Agreement, subject to applicable
bankruptcy and reorganization laws.
4. CONSIDERATION. The Preferred Shares and Cash Consideration due at
Closing are delivered at Closing.
D. DUE EXECUTION. This Agreement shall have been duly executed and
delivered on behalf of Holding Company.
E. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Holding Company, as set forth herein, must be true in all material respects as
of the Effective Date, as if made as of that Date, and Holding Company shall
have performed all acts in accordance with its covenants as set forth herein.
SECTION XV.
CONFIDENTIALITY
The parties shall treat the information contained herein as confidential
information, and no announcement of the transaction contemplated herein shall be
made by a party without the consent of the other parties to this Agreement. This
33
covenant shall survive any termination of this Agreement. Provided, however,
this provision shall not restrict Holding Company from making an announcement or
disclosure about this transaction to the extent required by law.
SECTION XVI.
STOCKHOLDERS' WAIVERS AND WRITTEN ACTION
Each of the Stockholders agrees to the terms, conditions and consideration
for the First Security Shares stated herein and waives any appraisal or other
dissenters' rights granted by law. The execution of this Agreement by the
Stockholders constitutes the unanimous written action of the Stockholders under
Chapter 607 Florida Statutes approving this Agreement.
SECTION XVII.
NOTICES
Any notification to be given pursuant to this Agreement shall be deemed to
have been duly given when such notification is deposited in the mails or with a
telegraph company, with all charges of transmittal prepaid, and properly
addressed to:
STOCKHOLDERS or FIRST SECURITY BANK at: 000 Xxxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxx, XX 00000, in care of Xxxxx Band, but to the attention of
Stockholders
UNITED FINANCIAL HOLDINGS, INC. at: 000 Xxxxx Xxxxxx Xxxxx, Xx. Xxxxxxxxxx,
XX 00000, attention Xxxx Xxxxxx, Chief Executive Officer.
with copies to: Xxxxxxx X. Xxxxxx, Esquire, Holland & Knight LLP, Xxxxx
0000, Xxx Xxxxxxx Xxxxxxx Xxxxxx, Xx. Xxxxxxxxxx, XX 00000.
34
SECTION XVIII.
SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
The covenants, representations and warranties contained in this Agreement
shall survive the Closing and the Purchase for a period of fifteen (15) months,
provided however, representations and warranties about First Security taxes, tax
returns and tax matters shall survive for the applicable statute of limitations
under the Code for such matters.
SECTION XIX.
SUCCESSORS AND ASSIGNS
This Agreement and all the terms hereof shall be binding on and inure to
the benefit of the parties hereto, and to their respective legal
representatives, successors, or assigns, as the case may be, with the same force
and effect as if specifically mentioned in each instance where a party hereto is
named.
SECTION XX.
INTERPRETATION OF AGREEMENT
A. This Agreement and the Exhibits attached hereto constitute the entire
agreement between the parties concerning the transaction contemplated by this
Agreement.
B. Issues of formation, interpretation, and performance of this Agreement
are to be resolved in accordance with the laws of the State of Florida.
C. The headings of this Agreement are for convenience of reference only and
shall not limit or otherwise affect or be used in construing any of the terms
hereof.
D. Waiver or forbearance by a party to require the performance of any
provision of this Agreement shall not constitute or be deemed a waiver by that
party of any other provision or the right to enforce any provision of this
Agreement, whether or not of the same nature.
35
E. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but together shall constitute one agreement.
F. This Agreement has been prepared by counsel for the Holding Company, but
has been independently reviewed and negotiated on behalf of the Stockholders and
First Security by their counsel. Neither this Agreement, nor its Exhibits, nor
any other agreement, instrument, certificate, resolution or document executed or
delivered in connection with this transaction, shall be interpreted or construed
against the interests of Holding Company because of such preparation.
SECTION XXI.
FURTHER INSTRUMENTS
If at any time Holding Company shall consider or be advised that any
further assignment or assurances in law are necessary or desirable to vest or to
perfect or confirm of record the title to any property or rights of First
Security or to otherwise carry out the provisions hereof, the proper officers
and directors of First Security as of the Effective Date shall execute and
deliver any and all proper assignments and assurances in law, and do all things
necessary or proper to vest, perfect, or confirm title to such property or
rights and to otherwise carry out the provisions hereof.
SECTION XXII.
EXPENSES
Each party shall pay its own expenses of the Purchase. First Security shall
not pay any of the Stockholder's expenses.
SECTION XXIII.
ATTORNEY FEES AND COSTS
In the event any litigation between the parties arises out of or is related
to this Agreement, its Exhibits (including without limitation the Disclosure
Schedules and Disclosure Documents), or any of the covenants, representations or
warranties contained herein, the prevailing party shall be reimbursed by the
non-prevailing party for all of its out of pocket costs, including without
limitation court costs and legal fees through all proceedings, trials and
appeals.
36
SECTION XXIV.
COUNTERPARTS
Each of the parties to this Agreement may execute this Agreement in one or
more counterparts, which, taken together shall constitute the entire Agreement
and shall be fully binding upon all of the parties. The Holding Company and
First Security have executed this Agreement on the date first above written. IF
THIS AGREEMENT IS NOT ALSO EXECUTED BY ALL OF THE STOCKHOLDERS BY OCTOBER 15,
2000, THEN, UPON WRITTEN NOTICE FROM HOLDING COMPANY, THIS AGREEMENT SHALL BE
NULL AND VOID AND NO PARTY SHALL HAVE ANY FURTHER OBLIGATIONS TO THE OTHER.
[Signatures Commence the Next Page]
37
[SIGNATURE PAGES, WHICH MAY BE EXECUTED IN COUNTERPARTS]
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate at St.
Petersburg, Florida, the day and year first above written.
FIRST SECURITY BANK
By: __/s/ D.B. Briggs________
UNITED FINANCIAL HOLDINGS, INC.
By: __/s/ Xxxx X. Savage_____
[Signatures Continued Next Page]
38
[Signatures Continued]
EACH OF THE STOCKHOLDERS, BY HIS OR HER SIGNATURE ACKNOWLEDGES RECEIPT OF,
REVIEW OF, AND AGREEMENT TO, THE STOCK PURCHASE AGREEMENT; THAT HE OR SHE AGREES
TO BE BOUND BY THE COVENANTS, TERMS, REPRESENTATIONS, WARRANTIES AND CONDITIONS
THEREOF; THAT HE OR SHE IS AN "ACCREDITED INVESTOR" AS DEFINED IN SECTION X OF
THAT AGREEMENT; THAT HE OR SHE HAS RECEIVED AND REVIEWED THE "COMPANY
INFORMATION" FURNISHED UNDER THAT AGREEMENT AND THAT HE OR SHE HAS RECEIVED ALL
OF THE INFORMATION DESIRED.
SIGNATURES OF STOCKHOLDERS NUMBER OF FIRST AMOUNT OF CASH
SECURITY SHARES TO BE
OWNED BY RECEIVED BY
STOCKHOLDER STOCKHOLDER
================================================================================
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
______________________________ _______________________ $___________________
39
Exhibit A
Stockholders
40
Exhibit B
Preferred Shares Resolution
AMENDMENT TO ARTICLES OF INCORPORATION
OF
UNITED FINANCIAL HOLDINGS, INC.
Pursuant to the provisions of Sections 607.0602, of the Florida Business
Corporation Act, this corporation, UNITED FINANCIAL HOLDINGS, INC. (the
"Corporation") adopts the following Articles of Amendment to its Articles of
Incorporation, filed with the Secretary of State for the State of Florida on
_________, as document number ______________. The Board of Directors of this
Corporation has approved this resolution. Shareholder approval is not required.
1. NAME OF CORPORATION: United Financial Holdings, Inc.
2. TEXT OF AMENDMENT ADOPTED PURSUANT TO FLORIDA STATUTES 607.0602
Pursuant to the authority granted to the Board of Directors in Article
Four, Paragraph (d), the Certificate and Articles of Incorporation and Florida
Statutes Section 607.0602, the Board of Directors adopts the following Amendment
to the Articles of Incorporation of this Corporation, defining a new series of
preferred stock, to be known as "Series One Preferred Stock:"
1. SEVEN HUNDRED FIFTY THOUSAND (750,000) shares of the $0.01 par
value Preferred Stock of this Corporation are classified as "Series One
Preferred Stock," to be issued hereafter.
2. Each share of the Series One Preferred Stock shall have the
following preferences, limitations and relative rights:
A. LIQUIDATION PREFERENCE. In the event of the liquidation of
the Corporation, the holders of shares of the Series One
Preferred Stock shall be entitled, after the debts of the
Corporation have been paid, to receive, out of the assets
remaining, $8.00 per share whether or not earned or
declared, before any payment is made or assets set apart for
payment to the holders of the Common Stock or any class or
series of stock having preferential rights that are inferior
to those of the Series One Preferred Stock, and shall be
entitled to no further payments or distributions except any
declared and unpaid dividends which shall be paid on par
with dividends on the Corporation's Common Stock. The
Corporation reserves the right to issue one or more
additional classes or series of Preferred Stock
41
with a lesser preference to the net assets of the
Corporation upon liquidation, but in no event shall a class
or series of Preferred Stock subsequently approved by the
Corporation have a liquidation preference greater than the
Series One Preferred Stock shares. If upon liquidation the
net assets remaining after payment of the corporate debts be
insufficient to pay the full amount of the liquidation
preference on all classes or series of stock (including
Series One Preferred Stock) having the same priority and
preference as the Series One Preferred Stock, such net
assets as remain shall be divided among the holders of the
Series One Preferred Stock and each other series or class of
Preferred Stock with the same liquidation preference on a
pro rata basis in proportion to the relative aggregate
dollar amount of the liquidation preference of each such
class or series then issued and outstanding.
B. CONTINGENT AUTOMATIC CONVERSION. Exhibit 1 to this Amendment
sets forth the conversion terms for the Series One Preferred
Stock. Upon one or more of the events described in Exhibit 1
all or the specified portion of the Series One Preferred
Stock shall convert to Common Stock of the Corporation, on a
share-for-share basis. (One share of Series One Preferred
Stock shall convert into one share of Common Stock of the
Corporation.) Provided, however if a Common Stock stock
dividend, stock split, share combination, exchange of
shares, recapitalization, consolidation, reorganization, or
liquidation of or by this Corporation shall occur prior to
the conversation of all of the Series One Preferred Stock
into Common Stock of the Corporation, the Corporation shall
adjust the Common Stock conversion ratio of the remaining,
unconverted shares of the Series One Preferred Stock to the
extent the Board of Directors of the Corporation in good
faith determines appropriate to reflect the equity of the
applicable transaction. The Corporation shall notify each
holder of the Series One Preferred Stock of the conversion.
Upon notification, each holder shall promptly surrender his
or her shares to the Corporation or to the Corporation's
designated transfer agent, duly endorsed with signatures
guaranteed. However, surrender of Series One Preferred Stock
shall not be necessary to effectuate a conversion pursuant
to Exhibit 1. In the event less than all of the outstanding
shares of the Series One Preferred Stock automatically
convert under paragraph 2 of Exhibit 1 at the end of a
calendar year the conversion shall be pro rata among all of
the outstanding shares.
C. REDEMPTION RIGHT. The Corporation may, at any time and from
time to time after December 31, 2007, at the option of the
Board of Directors, redeem the whole or any part of the
42
outstanding and unconverted Series One Preferred Stock on
any December 31st after the issuance thereof (the designated
date is the "Redemption Date"), by paying a price for each
of the Series One Preferred Stock shares that is equal to
150% of the value ascribed to each share when the
Corporation purchased First Security Bank, together with the
sum equivalent to all unpaid dividends accrued thereon, upon
sixty (60) days notice by mail to the holders of record
thereof. If less than all the shares of the Series One
Preferred Stock are to be redeemed, the shares to be
redeemed shall be selected pro rata among the holders, as
Board of Directors shall determine. At any time prior to the
Redemption Date, the holder of the shares of the Series One
Preferred Stock to be redeemed may exercise his or her right
to convert such Preferred Stock into Common Stock, as
heretofore provided.
D. VOTING RIGHTS. Each share of the Series One Preferred Stock
issued and outstanding shall entitle the holder to one vote
on all matters coming before the shareholders of the
Corporation on parity with each of the shares of Common
Stock issued and outstanding. In addition, the holders of
the Series One Preferred Stock shall have any special voting
rights reserved to them under applicable Florida Law.
E. DIVIDEND RIGHTS. Except as provided in this paragraph, the
Series One Preferred Stock shall not have a preference as to
dividends but shall participate on parity with any dividend
payable on the Common Stock, as and when declared. Anything
contained herein to the contrary notwithstanding, if, and
only if:
1. The "Target Level" of $2,460,000 specified in
Exhibit 1 hereto as the first target causing a conversion of
the Series One Preferred Shares is not achieved by December
31, 2002, the Series One Preferred Shares outstanding on
January 31, 2003 shall thereafter (until the earlier of
their redemption, conversion or January 1, 2004) have an
annual cumulative dividend preference on each outstanding
Share over the Common Stock (the "Preference Dividend") in
the amount of $0.32 per Share, and shall also participate
with any dividend payable on the Common Stock, with the
participation fixed at two-thirds (2/3) of the dividend
amounts paid on the shares of Common Stock.
2. The "Target Level" of $6,030,000 specified in
Exhibit 1 hereto as the second target causing a conversion
of the Series One Preferred Shares is not achieved by
December 31, 2003, the Series One Preferred Shares
outstanding on January 31, 2004 shall thereafter (until the
earlier of their redemption, conversion or January 1, 2005)
have an annual cumulative dividend preference on each
43
outstanding Share over the Common Stock (the "Preference
Dividend") in the amount of $0.64 per Share, and shall also
participate with any dividend payable on the Common Stock,
with the participation fixed at one-third (1/3) of the
dividend amounts paid on the shares of Common Stock.
3. The "Target Level" of $10,980,000 specified in
Exhibit 1 hereto as the third target causing a conversion of
the Series One Preferred Shares is not achieved by December
31, 2004, the Series One Preferred Shares outstanding on
January 31, 2005 shall thereafter (until the earlier of
their redemption or conversion) have an annual cumulative
dividend preference on each outstanding Share over the
Common Stock (the "Preference Dividend") in the amount of
$0.96 per Share, and shall also participate with any
dividend payable on the Common Stock, but without
participation in the dividend amounts paid on the shares of
Common Stock.
The Preference Dividend shall be paid in the discretion of
the Board of Directors of the Corporation, but shall cumulate
until paid in full. Any shares of the Series One Preferred
Stock converted or redeemed during a fiscal year shall
participate in the Preference Dividend for that year and any
unpaid cumulated dividends shall be paid at the time of
redemption or conversion.
During the time the Series One Preferred Shares participate
in dividends on parity with the Common Stock, no dividend in
cash or property may be paid upon the Common Stock unless a
like dividend "per share" is paid on each share of the Series
One Preferred Stock then issued and outstanding. During the
time the Series One Preferred Shares are entitled to a
dividend preference, no dividend shall be paid on the Common
Stock unless and until the preference dividends have been
first fully paid.
3. DATE ADOPTED: These Articles of Amendment were adopted ________________,
2000.
4. APPROVAL BY BOARD OF DIRECTORS: These Articles of Amendment have been
approved by the Board of Directors of this Corporation and are filed pursuant to
Florida Statutes 607.0602. The vote of the Board of Directors was unanimous and
sufficient to carry this Amendment.
44
IN WITNESS WHEREOF, the undersigned, as President, has executed this Amendment
on behalf of this corporation this _______ day of ________, 2000.
President
45
EXHIBIT 1
AMENDMENT TO ARTICLES OF INCORPORATION
UNITED FINANCIAL HOLDINGS, INC.
SERIES ONE PREFERRED STOCK
This Exhibit sets for the conversion terms applicable to each share of the
Series One Preferred Stock issued by United Financial Holdings, Inc. (the
"Corporation").
1. AUTOMATIC CONVERSION ON CHANGE OF CONTROL. Upon any Change of Control of the
Corporation, each share of the Series One Preferred Stock then issued and
outstanding shall automatically be converted into and become one (1) share of
the $0.01 par value Common Stock of the Corporation. For purposes of this
Agreement, a "Change of Control" shall be deemed to occur if prior to January 1,
2006 a holding company change in control application filed with the Federal
Reserve is finally approved by all federal and state agencies having
jurisdiction thereof, permitting the direct or indirect transfer of fifty-one
percent (51%), or more, of the voting common stock of United Financial Holdings,
Inc., from its shareholder group, as that group exists on December 31, 2000 and
the shares of United Financial Holdings, Inc., representing such Change of
Control have in fact been lawfully transferred to the control group designated
in the application.
2. AUTOMATIC CONVERSION BASED ON TARGET. If at any time after the later of
January 1, 2001 or the date the Corporation's purchase of First Security Bank is
closed, but prior to redemption of the Series One Preferred Shares by the
Corporation (herein referred to as the "Reference Period"), the Cumulative Net
Interest Income of First Security Bank, calculated through the Reference Period
(after all proper adjustments) equals one or more "Target Level," the
"Applicable Percentage" of the initially issued and outstanding shares of the
Series One Preferred Stock shall automatically be converted as of the end of the
calendar month following the month in which a Target Level was met. Upon meeting
the Target Level, the Applicable Percentage of the Series One Preferred Stock
shall automatically convert and become one (1) share of the Corporation's $0.01
par value Common Stock, rounded in each case to the nearest whole share. The
Target Levels and Applicable Percentages for this purpose are as set forth in
the following table:
TARGET LEVEL APPLICABLE PERCENTAGE
--------------------------------------------------------
$ 2,460,000 THIRTY-THREE PERCENT (33%)
$ 6,030,000 ADDITIONAL THIRTY THREE PERCENT (33%)
$10,980,000 CUMULATIVE ONE HUNDRED PERCENT (100%)
The term "Cumulative Net Interest Income" is the cumulative amount of interest
income earned by First Security during the Reference Period through the date the
46
year-end Target Level is being calculated from its loans and investments reduced
by the cumulative amount paid or accrued by First Security Bank during the
Reference Period of (i) any interest paid or accrued on any indebtedness of
First Security Bank, including without limitation, deposit liabilities and
obligations to the Corporation, (ii) any interest paid or accrued by the
Corporation on any indebtedness for borrowed money that is allocable to funds
invested as capital in First Security, and (iii) any additions (as determined
and prescribed by the Corporation) that are made to First Security's loan loss
reserve during the Reference Period.
The Cumulative Net Interest Income earned by First Security calculated during
the Reference Period shall be determined by the Corporation on a consistent
basis, without audit, in accordance with generally accepted accounting
principles, on a consolidating basis (as opposed to a consolidated basis).
Within thirty (30) days after the Cumulative Net Interest Income as of the close
of a calendar month within the Reference Period equals a Target Level, the
Corporation shall send written notice to each holder of the Series One Preferred
Stock. In the event of any dispute as to the amount of the Cumulative Net
Interest Income, such dispute shall be resolved by the Holding Company's
independent firm of Certified Public Accountants, and the determination of the
accountants, unless patently erroneous, shall be final, and binding on all
parties.
47
