AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL ____, 2003
REGISTRATION NO. 333-103907
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
OLD FLORIDA BANKSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 6712 65-1113601
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
6321 DANIELS PARKWAY
P.O. BOX 61279
FORT MYERS, FLORIDA 33906
(239) 561-6222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
LARRY W. JOHNSON, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
6321 DANIELS PARKWAY
P.O. BOX 61279
FORT MYERS, FLORIDA 33906
(239) 415-5001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
E. L. HERBERT, ESQ. RICHARD R. CHEATHAM, ESQ.
WERNER & BLANK, LLC KILPATRICK STOCKTON LLP
7205 W. CENTRAL AVENUE 1100 PEACHTREE STREET, SUITE 2800
TOLEDO, OHIO 43617 ATLANTA, GEORGIA 30309
(419) 841-8051 (404) 815-6570
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable following the effective date of the
Registration Statement and upon the effective date of the merger of Marine
Bancshares, Inc. with and into the Registrant pursuant to the Agreement and Plan
of Merger described in the enclosed proxy statement/prospectus included as Part
I of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
CALCULATION OF REGISTRATION FEE
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering aggregate registration
securities to be registered registered (1) Price per unit offering price (2) Fee (3)
- -------------------------------- ------------------ ----------------------- ----------------------- ----------------
Common Stock, 863,675 $8,830,375 $715
$.01 par value per share N/A
(1) Represents the estimated maximum number of common shares of the Registrant
that the Registrant expects would be issuable to shareholders of Marine
Bancshares, Inc. pursuant to the terms of the Agreement and Plan of Merger
between the Registrant and Marine Bancshares, Inc., based on (i) 1,393,025
common shares of Marine Bancshares, Inc. outstanding, including common
shares issuable upon exercise of outstanding options and warrants, (ii) an
exchange ratio of .62 of a common share of Registrant for each common share
of Marine Bancshares, Inc., and (iii) the exchange of all such common
shares of Marine Bancshares, Inc. for common shares of Registrant at the
exchange ratio.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rules 457(c), 457(f)(2), and 457(f)(3) under the Securities
Act, the proposed maximum aggregate offering price is equal to the
aggregate book value of the estimated number of common shares of Marine
Bancshares, Inc. to be converted into the right to receive Registrant
common shares in the merger, computed as of December 31, 2002, and assuming
the exercise of all outstanding options and warrants to acquire common
shares of Marine Bancshares, Inc.
(3) Calculated pursuant to Rules 457(c), 457(f)(2), and 457(f)(3) under the
Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission, which includes this proxy
statement/prospectus, is effective. This proxy statement/prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Marine Bancshares
[Logo]
Dear Fellow Shareholders:
You are cordially invited to attend a special meeting of the
shareholders of Marine Bancshares, Inc. to be held on Thursday, May 29, 2003 at
6:00 p.m., local time, at 2325 Vanderbilt Beach Road, Naples, Florida. At the
special meeting you will be asked to consider and vote upon a proposal to
approve a merger agreement pursuant to which Marine Bancshares, Inc. will merge
with and into Old Florida Bankshares, Inc.
The boards of directors of Old Florida Bankshares, Inc. and Marine
Bancshares, Inc. have each unanimously approved a merger agreement to combine
our corporations. If the merger is completed, Marine will merge into Old
Florida. Each common share of Old Florida that an Old Florida shareholder holds
prior to the merger will continue to be one Old Florida common share after the
merger. EACH COMMON SHARE OF MARINE THAT A MARINE SHAREHOLDER HOLDS PRIOR TO THE
MERGER WILL BE CONVERTED INTO .62 OF AN OLD FLORIDA COMMON SHARE. Assuming the
exercise of all Marine stock options and warrants, up to a total of 863,675 Old
Florida common shares may be issued in connection with the merger. Instead of
issuing fractional shares, Old Florida will make a cash payment equal to such
fraction multiplied by $12.50. Following the merger, Marine will no longer exist
as a separate entity. Immediately after the merger, Marine's subsidiary bank,
Marine National Bank, will be merged into Old Florida Bank, which is Old
Florida's subsidiary bank.
Based on the number of outstanding common shares of each company on
April 25, 2003, and assuming no Marine shareholder exercises dissenters' rights,
immediately following the merger the former shareholders of Marine will own
approximately 37% of Old Florida's outstanding common shares. Old Florida's
premerger shareholders will own the remaining 63%.
The following table shows the public price per share of Marine's common
shares and the price per share offered by Old Florida on December 31, 2002, the
last date prior to announcement of the merger, and on April 25, 2003. The number
of Old Florida common shares to be received by Marine shareholders is based on
the fixed exchange ratio of .62 of an Old Florida common share for every Marine
common share outstanding on April 25, 2003. The Marine public price per share is
based on the most recent information available as to sales of Marine common
shares as of those dates. The price per Marine share offered by Old Florida is
based on the most recent information available as to sales of Old Florida common
shares as of those dates and the fixed exchange ratio of .62 of an Old Florida
common share for every Marine common share. The book value per share of Marine's
common shares was $6.10 on December 31, 2002.
MARINE PUBLIC PRICE PRICE PER MARINE SHARE NUMBER OF OLD FLORIDA
PER SHARE OFFERED BY OLD FLORIDA SHARES TO BE RECEIVED BY
MARINE SHAREHOLDERS
December 31, 2002 $6.25 $7.75 713,000
April 25, 2003 $7.00 $7.44 713,000
Old Florida's common shares trade infrequently. Old Florida's common
shares are not listed on any exchange or the NASDAQ. Old Florida's common shares
first became quoted on the Over-The-Counter Electronic Bulletin Board on April
25, 2003. The stock symbol for Old Florida is OFBS.OB. The stock symbol for
Marine is MBSK.PK.
MARINE SHAREHOLDERS WILL RECEIVE OLD FLORIDA COMMON SHARES IN THE
MERGER IN A TAX-FREE EXCHANGE, EXCEPT TO THE EXTENT THEY RECEIVE CASH IN LIEU OF
FRACTIONAL SHARES OR EXERCISE DISSENTERS' RIGHTS.
A majority of the 1,150,000 outstanding Marine common shares as of the
April 25, 2003 record date, or 50% of the outstanding shares plus one, must be
voted in favor of the merger for it to be approved. Marine directors holding
257,168 Marine common shares, or 22% of the 1,150,000 outstanding Marine common
shares as of the April 25, 2003 record date for the Marine special meeting, have
already agreed to vote in favor of the merger. This means that if another
317,833 Marine common shares are voted in favor of the merger, the merger will
be approved by the required vote of Marine shareholders.
Old Florida and Marine cannot complete the merger unless the
shareholders of Marine vote to adopt the merger agreement. YOUR VOTE IS VERY
IMPORTANT. IF YOU DO NOT VOTE, THE EFFECT WILL BE A VOTE "AGAINST" ADOPTION OF
THE MERGER AGREEMENT.
The accompanying document provides you with detailed information
concerning Old Florida, Marine, the merger and the merger agreement. We urge you
to read this entire document carefully together with the appendices attached to
it, which include the merger agreement. IN PARTICULAR, YOU SHOULD CAREFULLY
CONSIDER THE DISCUSSION IN THE SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE
11 IN THIS DOCUMENT.
Sincerely,
Pierce T. Neese
Chairman
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OLD FLORIDA COMMON SHARES TO BE
ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE OLD FLORIDA COMMON
SHARES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENTAL
AGENCY.
This document is dated May 5, 2003 and is first being mailed to
shareholders on or about May 5, 2003.
MARINE BANCSHARES, INC.
2325 VANDERBILT BEACH ROAD
NAPLES, FLORIDA 34109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Marine Bancshares, Inc., a Florida
corporation, will be held at 2325 Vanderbilt Beach Road, Naples, Florida, on
Thursday, May 29, 2003, at 6:00 p.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and
Plan of Merger, dated as of December 31, 2002, by and between
Marine and Old Florida Bankshares, Inc., a Florida
corporation. Subject to the terms and conditions of the merger
agreement, at the effective time of the merger, each
outstanding Marine common share (other than those as to which
dissenters' rights are perfected under the Florida Business
Corporation Act) will be converted into the right to receive
Old Florida common shares as more fully described in the
accompanying proxy statement/prospectus.
2. To transact any other business which properly comes before the
meeting or any adjournment of the special meeting.
THE BOARD OF DIRECTORS OF MARINE BANCSHARES, INC. UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF
MERGER.
We have fixed April 25, 2003 as the record date for determining those
shareholders entitled to vote at the special meeting and any adjournment of the
special meeting. Accordingly, only shareholders of record as of the close of
business on that date will be entitled to notice of, and to vote at, the special
meeting and any adjournment of the special meeting.
We cannot complete the merger unless the holders of at least a majority
of the common shares of Marine outstanding on the record date vote to approve
the merger agreement. Holders of common shares of Marine are entitled to assert
dissenters' rights with respect to the merger under Sections 607.1301, 607.1302
and 607.1320 of the Florida Business Corporation Act, as more fully described
under the section titled "Rights of Dissenting Shareholders" in this document.
Your vote is very important. Whether or not you plan to attend the
special meeting, please complete, sign and date the enclosed proxy card and
promptly return it in the accompanying envelope, which requires no postage if
mailed in the United States. You can revoke your proxy at any time before it is
voted.
By Order of the Board of Directors,
Naples, Florida
May 5, 2003 Guy Harris, Secretary
TABLE OF CONTENTS
Description Page
Questions and Answers About the Merger..........................................................................1
Summary.........................................................................................................3
Parties to the Merger......................................................................................3
Old Florida............................................................................................3
Marine.................................................................................................3
Marine Special Meeting.....................................................................................3
The Merger.................................................................................................4
Reasons for the Merger.................................................................................4
Fairness Opinion of Marine's Financial Advisor.........................................................5
Exchange of Marine Common Shares.......................................................................6
Fractional Shares......................................................................................6
Exchange of Marine Certificates........................................................................7
Accounting Treatment...................................................................................7
Federal Income Tax Consequences........................................................................7
Interests of Marine's Directors and Officers in the Merger.............................................7
Resale of Old Florida Common Shares....................................................................8
Regulatory Approvals...................................................................................8
The Merger Agreement.......................................................................................9
Representations and Warranties; Covenants..............................................................9
Conditions to the Merger...............................................................................9
Effective Time of the Merger...........................................................................9
Amendment and Termination..............................................................................9
Limitations on Considering Other Acquisition Proposals................................................10
Option Agreement......................................................................................10
Recommendation of the Board of Directors of Marine....................................................10
Treatment of Marine Stock Options and Warrants........................................................10
Rights of Dissenting Shareholders.........................................................................11
Comparison of Rights of Holders of Old Florida Common Shares and of Marine Common Shares..................11
Risk Factors...................................................................................................11
Cautionary Statement Regarding Forward-Looking Information.....................................................16
The Marine Special Meeting.....................................................................................16
Matters to be Considered at the Marine Special Meeting....................................................17
Voting at the Marine Special Meeting; Marine Record Date..................................................17
Principal Shareholders of Old Florida..........................................................................17
Principal Shareholders of Marine...............................................................................19
The Merger.....................................................................................................20
Background................................................................................................20
Reasons for the Merger....................................................................................22
Fairness Opinion of Marine's Financial Advisor ...........................................................23
Effect on Outstanding Old Florida Common Shares and Exchange of Marine Common Shares......................27
Effect on Outstanding Old Florida Common Shares.......................................................27
Exchange of Marine Common Shares......................................................................27
No Fractional Old Florida Common Shares to Be Issued..................................................27
Closing of Marine Share Transfer Books; Exchange of Certificates Evidencing Marine
Common Shares....................................................................................27
Rights of Holders of Marine Share Certificates Prior to Surrender.....................................28
Lost Share Certificates...............................................................................28
Treatment of Outstanding Marine Options and Warrants..................................................28
Post-Closing Capitalization...........................................................................28
Accounting Treatment......................................................................................29
Federal Income Tax Consequences of the Merger.............................................................29
i
Interests of Marine's Directors and Officers in the Merger................................................30
Resale of Old Florida Common Shares Received in the Merger................................................31
Regulatory Approvals......................................................................................31
Existing Relationship between Old Florida and Marine......................................................32
The Merger Agreement...........................................................................................32
The Merger................................................................................................32
Conversion of Marine Common Shares........................................................................32
Representations and Warranties............................................................................32
Conduct of Business Pending the Merger....................................................................34
Conditions to the Consummation of the Merger..............................................................36
Effective Time of the Merger..............................................................................38
Amendment and Termination.................................................................................39
Acquisition Proposals.....................................................................................40
Costs and Expenses; Indemnification.......................................................................40
Other Material Agreements Relating to the Merger...............................................................41
Option Agreement..........................................................................................41
Noncompetition Agreements.................................................................................41
Shareholder Agreement.....................................................................................41
Recommendation and Vote........................................................................................42
Rights of Dissenting Shareholders..............................................................................42
Old Florida Financial Information..............................................................................43
Old Florida Management's Discussion and Analysis of Financial Condition and Results of Operations..............44
Marine Financial Information ..................................................................................57
Marine Management's Discussion and Analysis of Financial Condition and Results of Operations...................57
Unaudited Condensed Pro Forma Combined Financial Information...................................................67
Business of Old Florida........................................................................................76
General...................................................................................................76
Properties................................................................................................77
Legal Proceedings.........................................................................................77
Management of Old Florida......................................................................................77
Board of Directors........................................................................................77
Executive Officers........................................................................................78
Old Florida Executive Compensation and Other Information.......................................................80
Description of Old Florida Shares..............................................................................83
Market for Old Florida Common Shares and Dividends.............................................................84
Market for Marine Common Shares and Dividends..................................................................85
Business of Marine.............................................................................................85
Comparison of Rights of Holders of Old Florida Common Shares and Holders of Marine Common Shares...............85
Supervision and Regulation of Old Florida and Old Florida Bank................................................89
Regulation of Old Florida.................................................................................89
Regulation of Old Florida Bank............................................................................91
Legal Matters..................................................................................................93
Experts ......................................................................................................93
Old Florida...............................................................................................93
Marine....................................................................................................94
Where You Can Find More Information............................................................................94
Old Florida and Marine Consolidated Financial Statements......................................................F-1
ii
List of Appendices
Appendix A Agreement and Plan of Merger
Appendix B Option Agreement
Appendix C Shareholder Agreement
Appendix D Fairness Opinion of T. Stephen Johnson & Associates, Inc.
Appendix E Sections of the Florida Business Corporation Act Regarding Dissenters'
Appraisal Rights
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY AM I RECEIVING THIS DOCUMENT?
A. Old Florida and Marine have agreed to the acquisition of Marine by Old
Florida under the terms of a merger agreement that is described in this
document. A copy of the merger agreement is attached and incorporated
into this document as Appendix A.
In order to complete the merger, Marine's shareholders must vote to
approve the merger agreement. Marine will hold a special meeting of its
shareholders to obtain this approval. This document contains important
information about the merger, the merger agreement and the special
meeting of Marine shareholders, and you should read it carefully. The
enclosed voting materials allow you to vote your shares without
attending the special meeting.
If the merger agreement is approved and the merger is completed, you
will receive Old Florida common shares in exchange for your Marine
common shares unless you exercise dissenters' rights. Therefore, this
document contains information about Old Florida that will be important
for you to consider in determining whether to vote to approve the
merger agreement.
Q. WHAT WILL MARINE SHAREHOLDERS RECEIVE FOR THEIR MARINE COMMON SHARES IN
THE MERGER?
A. When the merger is completed, Marine shareholders will receive .62 of
an Old Florida common share for each of their common shares of Marine.
Because the market price of the Old Florida common shares may change
from day to day, Marine shareholders cannot be sure of the market value
of the Old Florida common shares they will receive in the merger at the
time they vote their Marine common shares. The market value of an Old
Florida common share on December 31, 2002, the last trading day before
the announcement of the signing of the merger agreement, was $12.50,
based on the most recent information available as to sales of Old
Florida common shares as of that date. The market value of an Old
Florida common share on May 2, 2003, the last trading day before the
date of this proxy statement/prospectus, was $[ ], based on the most
recent information available as to sales of Old Florida common shares
as of that date. Old Florida common shares trade infrequently.
Q. WHAT WILL HAPPEN IF THE SHAREHOLDERS OF MARINE DO NOT ADOPT THE MERGER
AGREEMENT?
A. If the merger agreement is not adopted by the shareholders of Marine,
management and the board of directors of each corporation will continue
to operate Old Florida and Marine as before, and each corporation may
consider other strategic alternatives. However, Old Florida may have
the right to exercise an option to acquire 218,500 common shares of
Marine at a price of $8.00 per share if another party has publicly
announced a proposal to acquire Marine.
Q. WHAT DO I NEED TO DO NOW?
A. After you have carefully read this document, please indicate on your
proxy card how you want to vote. Sign and date the proxy card and mail
it in the enclosed prepaid return envelope marked "Proxy" as soon as
possible, so that your common shares may be represented and voted at
the Marine special meeting.
In order for us to complete the merger, the holders of at least a
majority of the issued and outstanding Marine common shares must vote
to adopt the merger agreement. THE BOARD OF DIRECTORS OF MARINE
UNANIMOUSLY RECOMMENDS VOTING "FOR" THE ADOPTION OF THE MERGER
AGREEMENT.
Q. ARE THERE ANY RISKS THAT I SHOULD CONSIDER IN DECIDING WHETHER I VOTE
APPROVAL OF THE MERGER AGREEMENT?
A. Yes. You should read and carefully consider the risk factors set forth
in the section in this document titled "Risk Factors" beginning on
page 11.
1
Q. WHAT HAPPENS IF I DO NOT SEND IN MY PROXY CARD, IF I DO NOT INSTRUCT MY
BROKER TO VOTE MY COMMON SHARES, OR IF I ABSTAIN FROM VOTING?
A. If you do not send in your proxy card, if you do not instruct your
broker to vote your common shares, or if you abstain from voting, it
will have the same effect as a vote "against" adoption of the merger
agreement.
Q. IF MY BROKER HOLDS MY COMMON SHARES IN "STREET NAME," WILL MY BROKER
VOTE MY COMMON SHARES FOR ME?
A. Your broker cannot vote your common shares without specific
instructions from you. Unless you follow the directions your broker
provides to you regarding how to instruct your broker to vote your
common shares, your common shares will not be voted.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at
the Marine special meeting. Just send in a later-dated, signed proxy
card or a written notice of revocation to the person to whom you
submitted your proxy card before the special meeting. You can also
change your vote by attending the special meeting and voting in person.
Your attendance at the special meeting alone will not revoke your
proxy. If you have instructed your broker to vote your common shares,
you must follow the directions received from your broker to change
those instructions.
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. Old Florida and Marine are working toward completing the merger during
the second quarter of 2003. We anticipate completing the merger shortly
after the special meeting is held, assuming that the shareholders of
Marine adopt the merger agreement.
Q. WHO CAN ANSWER ANY OTHER QUESTIONS I MAY HAVE?
A. If you have questions, you may contact Old Florida and Marine at:
Old Florida Bankshares, Inc. Marine Bancshares, Inc.
6321 Daniels Parkway 2325 Vanderbilt Beach Road
P.O. Box 61279 Naples, Florida 34109
Fort Myers, Florida 33906 Attention: James S. Weaver,
Attention: Nicholas J. Panicaro, President and Chief
Executive Vice President Executive Officer
(239) 561-6222 (877) 593-6331
2
SUMMARY
THIS SUMMARY HIGHLIGHTS MATERIAL INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU MAY
CONSIDER IMPORTANT. WE URGE YOU TO READ CAREFULLY THE ENTIRE DOCUMENT AND THE
OTHER DOCUMENTS REFERRED TO IN THIS PROXY STATEMENT/PROSPECTUS TO FULLY
UNDERSTAND THE PROPOSED MERGER. EACH ITEM IN THIS SUMMARY INCLUDES A PAGE
REFERENCE DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF THAT ITEM.
We propose a merger between Old Florida and Marine. If the holders of
at least a majority of the issued and outstanding Marine common shares adopt the
merger agreement, and if all other conditions to the consummation of the merger
are satisfied, Marine will merge into Old Florida. Simultaneously, Marine's
subsidiary, Marine National Bank, will merge with and into Old Florida Bank, a
subsidiary of Old Florida. Old Florida will continue its corporate existence
under Florida law as the surviving corporation of the merger.
PARTIES TO THE MERGER
OLD FLORIDA BANKSHARES, INC. (SEE PAGE 76)
6321 Daniels Parkway
P.O. Box 61279
Fort Myers, Florida 33906
(239) 561-6222
Old Florida is a Florida corporation registered as a financial holding
company under the Bank Holding Company Act of 1956, and subject to regulation by
the Board of Governors of the Federal Reserve System.
Through its banking subsidiary, Old Florida Bank, a Florida
state-chartered bank, Old Florida is engaged in a general commercial banking
business in Lee County, Florida.
As of December 31, 2002, Old Florida had total consolidated assets of
approximately $108.1 million, total consolidated deposits of approximately $91.9
million and total consolidated shareholders' equity of approximately $12
million.
MARINE BANCSHARES, INC. (SEE PAGE 85)
2325 Vanderbilt Beach Road
Naples, Florida 34109
(877) 593-6331
Marine, headquartered in Naples, Florida, is a Florida corporation
registered as a bank holding company under the Bank Holding Company Act and
subject to regulation by the Federal Reserve Board. Marine has one subsidiary,
Marine National Bank, a national banking association.
Through its subsidiary bank, Marine offers commercial banking services
in Collier and Lee Counties, Florida.
Marine had total consolidated assets of approximately $62.9 million,
total consolidated deposits of approximately $50.1 million and total
consolidated shareholders' equity of approximately $7 million as of December 31,
2002.
MARINE SPECIAL MEETING (SEE PAGE 16)
Marine will hold a special meeting of shareholders on Thursday, May 29,
2003, at 6:00 p.m., local time, at 2325 Vanderbilt Beach Road, Naples, Florida.
Only the holders of record of the issued and outstanding Marine common shares at
the close of business on April 25, 2003 will be entitled to notice of, and to
vote at, the Marine special meeting and any adjournment of the Marine special
meeting. As of the record date, there were 1,150,000 Marine common shares issued
and outstanding, each of which will be entitled to one vote on each matter
properly submitted for vote to the shareholders at the Marine special meeting.
3
At the Marine special meeting, Marine will ask the Marine shareholders
to consider and vote upon:
- a proposal to adopt the merger agreement; and
- the transaction of any other business that properly comes before
the Marine special meeting or any adjournment of the Marine
special meeting.
The affirmative vote of the holders of at least a majority of the
issued and outstanding Marine common shares, voting in person or by proxy, is
required to adopt the merger agreement. If a Marine shareholder abstains from
voting or fails to return a properly executed proxy card, the effect will be a
vote "AGAINST" adoption of the merger agreement. As of the April 25, 2003 record
date for the special meeting, the directors of Marine, who have agreed to vote
their shares in favor of the merger, owned 257,168 Marine common shares
(excluding shares subject to unexercised warrants and options which cannot be
voted) or 22% of the outstanding Marine common shares. This means that if
another 317,833 Marine common shares are voted in favor of the merger, the
merger will be approved by the required majority vote of the outstanding Marine
common shares.
If a Marine shareholder returns a properly executed proxy card prior to
the Marine special meeting and does not revoke the proxy prior to its use, the
Marine common shares represented by that proxy card will be voted at the Marine
special meeting, or any adjournment of the Marine special meeting. The Marine
common shares will be voted as specified on the proxy card or, in the absence of
specific instructions to the contrary, will be voted "FOR" adoption of the
merger agreement.
THE MERGER (SEE PAGE 20)
REASONS FOR THE MERGER (SEE PAGE 22)
The board of directors of Marine believes that the merger with Old
Florida is fair and in the best interests of Marine and its shareholders. In
negotiating the terms of the merger, management of Marine considered a number of
factors with a view to maximizing shareholder value in the intermediate and long
term, including:
- the overall financial terms of the merger, including the value of
the consideration to be received relative to Marine's book value
and earnings per share and historical trading prices;
- the competition and regulatory environment for Marine;
- the business and financial condition and earnings prospects of
Marine versus that of a combined institution;
- the competence, experience and integrity of Old Florida's
management;
- Marine's past performance including its operating losses; and
- alternatives to the merger, including remaining an independent
institution.
The board of directors of Old Florida believes that the merger with
Marine is fair and in the best interests of Old Florida and its shareholders. In
negotiating the terms of the merger, management of Old Florida considered a
number of factors with a view to maximizing shareholder value in the
intermediate and long term, including:
- the earnings potential of the combined business;
- the strengthened capital base of the combined business;
- the ability to achieve significant cost savings through the
operation of the business of Marine as a branch office of Old
Florida Bank;
4
- the attraction of expanding into the Naples, Florida market
through the acquisition of Marine rather than the start-up of a
new branch office in Naples;
- the growth prospects of the combined businesses within the Naples,
Florida market area;
- expansion of the community banking model successfully employed by
Old Florida; and
- the ability to carry forward the net operating loss of Marine to
use as a deduction from future taxable income of the combined
institution to reduce federal income taxes.
The board of directors of Old Florida weighed these factors, without
assigning any specific or relative weight to any factor, against potential risks
of the merger, such as the possible failure to achieve expected cost savings in
operating the business of Marine as a branch office of Old Florida Bank.
Old Florida expects that through reduction in personnel, the repricing
of higher rate certificates of deposit as they mature, and the elimination of
redundant services, such as data processing, that are required to operate Marine
as an independent entity, Old Florida can achieve a reduction in costs of
operating Marine's business of $1.1 million per year in the first year following
the merger. This reduction in costs represents 57% of the cost of operating
Marine as an independent entity in 2002. This reduction in costs would result in
the profitable operation of Marine's business as a branch of Old Florida Bank in
the first year following the merger.
Old Florida also expects that within two years following the merger it
can increase the average balances outstanding of commercial and consumer loans
associated with its new Naples, Florida branch, and related fee generating
services such as cash management, through better marketing in the Naples market.
Revenue enhancement is more uncertain than cost savings, however, and Old
Florida did not project any specific level of assumed revenue enhancements in
its evaluation of the merger. There can be no assurances that Old Florida will
achieve these results. You should read carefully the discussion of risks under
the heading "Risks Related to Old Florida's Business" beginning at page 13.
In considering the merits of a merger with Marine, the management of
Old Florida considered the management turnover at Marine, its high operating
cost structure, lack of earnings and the existence of a formal regulatory
agreement between Marine National Bank and the Office of the Comptroller of the
Currency. However, Old Florida's board of directors concluded that the merits of
the merger outweighed these factors, given that Old Florida's management will
manage the business of Marine, the projected costs savings following the merger
and that the regulatory agreement will terminate upon the merger of Marine
National Bank into Old Florida Bank at the closing of the merger.
FAIRNESS OPINION OF MARINE'S FINANCIAL ADVISOR (SEE PAGE 23)
T. Stephen Johnson & Associates, Inc. ("TSJ&A"), Marine's financial
advisor, has delivered its written opinion to the board of directors of Marine
to the effect that, as of February 28, 2003, the financial terms of Old
Florida's offer to acquire Marine were fair to Marine and its shareholders. A
copy of the opinion of TSJ&A, dated as of March 6, 2003, is attached as Appendix
D. The opinion should be read in its entirety for a description of the
procedures followed, assumptions and qualifications made and matters considered
by TSJ&A as well as for a description of the limitations of the opinion. Marine
paid $10,000 to TSJ&A for its opinion.
In reaching its opinion that the consideration to be received by Marine
shareholders in the transaction is fair from a financial point of view, TSJ&A
considered the following purchase premiums paid in other announced 2002 bank
acquisitions, where the banks also had no earnings for the prior 3 years, as
compared to the consideration being paid Marine shareholders in the merger. The
premiums are based on values as of the date of announcement of the transaction.
5
ACTUAL DEAL PRICE TO BOOK ACTUAL DEAL PRICE AS ACTUAL DEAL PRICE AS A
VALUE PERCENT OF ASSETS PERCENT OF DEPOSITS
Marine/Old Florida Merger 100.00% 11.15% 13.95%
Average 106.4% 7.36% 8.86%
Median 108.16% 4.45% 4.95%
EXCHANGE OF MARINE COMMON SHARES (SEE PAGE 27)
At the effective time of the merger, all Marine common shares that are
held by Marine as treasury shares will be canceled and retired and no Old
Florida common shares or other consideration will be delivered in exchange for
those Marine common shares. All of the remaining issued and outstanding Marine
common shares, other than those as to which the holders have properly exercised
dissenters' rights, will be converted into a number of Old Florida common shares
equal to an exchange ratio of .62 of a common share of Old Florida for every
Marine common share.
THE COMMON SHARES OF OLD FLORIDA AND THE COMMON SHARES OF MARINE TRADE
INFREQUENTLY. The following table sets forth the most recent sales price
information available for Old Florida common shares and Marine common shares as
of December 31, 2002, the last trading day prior to the joint public
announcement by Old Florida and Marine of the signing of the merger agreement.
The table also sets forth the equivalent per share value of Marine common
shares. The equivalent per share value reflects the value of the Old Florida
common stock you would receive for each share of your Marine common stock if the
merger had been completed on December 31, 2002, by multiplying the most recent
sales price of Old Florida common shares as of that date by the fixed exchange
ratio of .62 of an Old Florida share for each Marine share.
Most recent Price as of
December 31, 2002 for Old Florida
common shares:.......................... $12.50
Most recent Price as of
December 31, 2002 for Marine
common shares:.......................... $ 6.25
Equivalent per share value of Marine
common shares:.......................... $ 7.75
OF COURSE, THE MARKET PRICE OF THE OLD FLORIDA COMMON SHARES WILL
FLUCTUATE PRIOR TO THE MERGER. OLD FLORIDA AND MARINE ENCOURAGE YOU TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE OLD FLORIDA COMMON SHARES. OLD FLORIDA'S STOCK
SYMBOL IS OFBS.OB. MARINE'S STOCK SYMBOL IS MBSK.PK. WE CANNOT PREDICT THE
FUTURE PRICES FOR OLD FLORIDA COMMON SHARES.
For additional information, see "Market for Old Florida Common Shares
and Dividends" on page 76 and "Market for Marine Common Shares and Dividends" on
page 85.
FRACTIONAL SHARES (SEE PAGE 27)
Old Florida will not issue fractional common shares in the merger. In
lieu of fractional shares, Old Florida will pay to each holder of Marine common
shares who otherwise would be entitled to receive a fraction of an Old Florida
common share, an amount in cash, rounded to the nearest cent, determined by
multiplying the fractional share interest by $12.50.
EXCHANGE OF MARINE CERTIFICATES (SEE PAGE 27)
As soon as reasonably practicable after the consummation of the merger,
Old Florida Bank, exchange agent for the merger, will advise each Marine
shareholder of the merger by letter of transmittal accompanied by instructions
for surrendering the certificate or certificates evidencing the shareholder's
Marine common shares to the
6
exchange agent. CERTIFICATES FOR MARINE COMMON SHARES SHOULD NOT BE SENT TO OLD
FLORIDA BANK UNTIL AFTER RECEIPT OF THE LETTER OF TRANSMITTAL AND SHOULD NOT BE
RETURNED TO MARINE WITH THE ENCLOSED PROXY CARD.
ACCOUNTING TREATMENT (SEE PAGE 29)
The merger will be accounted for under the purchase method. The total
purchase price will be allocated to the assets acquired and liabilities assumed,
based on their fair values. It is expected that the amounts assigned to assets
acquired and liabilities assumed will exceed the cost of acquiring Marine. This
excess will be allocated on a prorata basis to reduce the amounts assigned to
premises and equipment acquired in the acquisition, in accordance with statement
of Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets." In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets", issued in July 2001, core deposits and
other intangibles with definite useful lives recorded by Old Florida in
connection with the merger will be amortized to expense in accordance with these
rules.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 29)
Werner & Blank, LLC, legal counsel to Old Florida, has delivered its
opinion to the effect that the merger will constitute a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, and that neither Old
Florida nor Marine will recognize any taxable gain or loss as a result of the
merger. Marine shareholders will not recognize a gain or loss upon the issuance
of Old Florida common shares to them. A gain or loss will be recognized,
however, in respect of cash received upon the exercise of dissenters' rights by
Marine shareholders. A gain or loss will also be recognized by Marine
shareholders with respect to any cash received in lieu of fractional shares.
Neither the opinion of counsel nor the discussion of federal income tax
consequences in this proxy statement/prospectus is binding upon either the
Internal Revenue Service or the courts. You should consult your own tax advisor
for a full understanding of the tax consequences of the merger to you.
INTERESTS OF MARINE'S DIRECTORS AND OFFICERS IN THE MERGER (SEE PAGE 30)
Some of Marine's directors and executive officers have agreements,
stock options, warrants and other benefits that provide them with interests in
the merger that are different from, or in addition to, your interests,
including:
- the accelerated vesting of all the directors' and officers'
unvested stock options under Marine's stock option plans;
- the conversion of options or warrants to buy Marine common shares
held by directors and officers of Marine into options or warrants
to buy Old Florida common shares;
- severance payments to be made to James S. Weaver, President and
Chief Executive Officer of Marine in connection with the
termination of his employment after the merger;
- two other executive officers of Marine have the right to severance
payments;
- the appointment of two directors of Marine, Pierce T. Neese and
William L. McDaniel, Jr. as directors of Old Florida; and
- the directors' and officers' receipt of indemnification and
insurance coverage with respect to acts and omissions in their
capacities as directors and officers of Marine prior to the
merger.
Following the closing of the merger, upon termination of their
employment, executive officers of Marine will be entitled to the following
severance payments: Mr. James S. Weaver, President and Chief Executive Officer,
$250,000. Mr. David Carpenter, Vice President and Loan Officer, $40,878; and Ms.
Jetta Russell, Vice President and Cashier, $34,800.
Upon the closing of the merger, the directors of Marine will hold
warrants to acquire 49,770 shares of Old Florida common stock at an exercise
price of $16.129 per share. Upon the closing of the merger, the directors and
7
executive officers of Marine will hold fully vested options to acquire 86,800
shares of Old Florida common stock at a weighted average exercise price of
$9.0968 per share.
The board of directors of Marine was aware of the foregoing interests
and other interests of directors and executive officers of Marine in the merger
and considered them, among other matters, in adopting the merger agreement and
approving the merger.
For a more detailed discussion of these interests, see the section in
this document titled "The Merger--Interests of Marine's Directors and Officers
in the Merger" beginning on page 30.
RESALE OF OLD FLORIDA COMMON SHARES (SEE PAGE 31)
The Old Florida common shares to be issued upon consummation of the
merger have been registered with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, or the "Securities Act", and will be
freely transferable. However, common shares of Old Florida received by any
person who is deemed to be an "affiliate" (as that term is defined under the
Securities Act) of Marine prior to the merger or of Old Florida after the merger
may be resold by that person only in compliance with the volume and
manner-of-sale requirements of Rules 144 and 145 under the Securities Act or
under an exemption from the registration requirements of the Securities Act.
Affiliates of Old Florida will be governed by the additional provisions of Rule
144. Affiliates of Marine or Old Florida generally include individuals or
entities that control, are controlled by, or are under common control with, that
corporation and may include certain officers and directors of that corporation
as well as principal shareholders of that corporation. Including shares covered
by vested options and warrants held by them, affiliates of Marine will
beneficially own 265,014 Old Florida common shares following the merger that
will be subject to these resale restrictions, or approximately 13% of the Old
Florida common shares after the merger. Including shares covered by vested
options and warrants held by them, assuming the merger closes in the second
quarter of 2003, affiliates of Old Florida will beneficially own 668,468 Old
Florida common shares subject to these resale restrictions, or approximately 31%
of the Old Florida shares after the merger.
REGULATORY APPROVALS (SEE PAGE 31)
Consummation of the merger is subject to prior receipt by Old Florida
and Marine of all necessary regulatory approvals. The merger of Marine and Old
Florida is subject to prior approval by the Board of Governors of the Federal
Reserve System, unless it waives its right to approve the merger based upon the
merger of Marine National Bank and Old Florida Bank having been approved by the
Federal Deposit Insurance Corporation (the "FDIC"). The merger of Marine
National Bank and Old Florida Bank is subject to prior approval of the FDIC and
Florida Department of Financial Services.
The merger may not proceed in the absence of the required regulatory
approvals. There can be no assurance that all such regulatory approvals will be
obtained or as to the dates of such approvals. The merger may not be consummated
for a period of 30 days after receipt of the final approval under federal law,
unless no adverse comment has been received from the Department of Justice, in
which case the transaction may be consummated on or after the 15th day after
such final approval.
Old Florida Bank filed its bank merger applications with the FDIC on
March 21, 2003 and the Florida Department of Financial Services on March 24,
2003. Assuming approvals are obtained for the bank merger, Old Florida intends
promptly after obtaining the FDIC approval of the bank merger to file notice of
that approval with the Federal Reserve System, and to request in the alternative
either the waiver of the need for approval of the merger or the approval of the
merger by the Federal Reserve.
THE MERGER AGREEMENT (SEE PAGE 32)
REPRESENTATIONS AND WARRANTIES; COVENANTS (SEE PAGE 32)
In the merger agreement, Old Florida and Marine each have made
representations and warranties to the other. In addition, Old Florida and Marine
each have made covenants, including covenants related to the conduct of business
between the date of the merger agreement and the effective time of the merger.
8
CONDITIONS TO THE MERGER (SEE PAGE 36)
The consummation of the merger is subject to satisfaction or waiver of
a number of conditions. These include:
- adoption of the merger agreement by Marine shareholders;
- absence of any legal prohibitions against the merger;
- material compliance by Old Florida and Marine with their
obligations under the merger agreement;
- receipt of all required regulatory approvals and expiration of all
applicable waiting periods;
- receipt of a legal opinion regarding treatment of the merger as a
reorganization under Section 368(a) of the Internal Revenue Code;
- dissenting shares must represent no more than 20% of the
outstanding Marine common shares;
- the truth and correctness of the representations and warranties of
Old Florida and Marine in all material respects;
- the total equity of Marine (as defined in the merger agreement)
being at least $6,750,000 at month end immediately following the
later of the receipt of regulatory approvals and adoption of the
merger agreement by Marine shareholders;
- the effective registration with the SEC of the Old Florida common
shares to be offered in the merger and the receipt of all
necessary authorizations from state securities regulators for the
offer of the Old Florida common shares in the merger; and
- the receipt by each party of a legal opinion from the other
party's lawyers regarding the enforceability of the merger
agreement and other matters, and the receipt by Old Florida of
certified copies of the resolutions of Marine directors and
shareholders approving the merger.
EFFECTIVE TIME OF THE MERGER (SEE PAGE 38)
We expect that the merger will be completed as soon as practicable
following the approval of the merger agreement by the shareholders of Marine at
the special meeting, if all other conditions have been satisfied or waived. We
currently anticipate that the merger will be completed during the second quarter
of 2003, however, we cannot be certain whether or when any of the conditions to
the merger will be satisfied, or waived where permissible.
AMENDMENT AND TERMINATION (SEE PAGE 39)
Old Florida and Marine may agree in writing to amend or terminate the
merger agreement at any time without completing the merger, even after Marine
shareholders have approved it. In addition, either Marine or Old Florida may
decide to terminate the merger agreement:
- upon a breach by the other party of any representation, warranty,
covenant or other agreement in the merger agreement, if the other
party does not or cannot cure the breach within 30 days after
notice of it, and the breach is likely to have a material adverse
effect;
- if the shareholders of Marine do not approve the merger agreement
by the requisite vote of a majority of the 1,150,000 Marine common
shares outstanding at the record date;
- if the merger has not been completed by September 30, 2003, unless
the failure to complete the merger results from the conduct of the
party seeking to terminate;
9
- if a regulatory authority fails to approve the merger;
- upon the occurrence or the failure to occur of other conditions
described in the merger agreement and described in greater detail
later in this proxy statement/prospectus, including (i) the
failure of the other party to perform its obligations under the
agreement, (ii) the failure to receive the legal opinion of the
other party's counsel as to enforceability of the agreement or
(iii) if holders of more than 20% of the Marine common shares
entitled to vote for the merger exercise statutory dissenters'
rights.
- Old Florida may also terminate the agreement if Marine's
shareholders' equity is less than $6,750,000 as of month end
immediately following the later of (i) approval of the merger by
Marine's shareholders and (ii) the receipt of all required
regulatory approvals.
LIMITATIONS ON CONSIDERING OTHER ACQUISITION PROPOSALS (SEE PAGE 40)
Marine and Old Florida have each agreed not to solicit, initiate,
encourage or consider any acquisition proposal, such as a business combination
or other similar transaction, with another party while the merger is pending.
Each party also has agreed to promptly inform the other if it is approached by
any third party with any acquisition proposal or any request or inquiry that
could lead to an acquisition proposal.
OPTION AGREEMENT (SEE PAGE 41)
To induce Old Florida to enter into the merger agreement, Marine entered into an
option agreement with Old Florida, dated December 31, 2002, under which Marine
granted Old Florida an option to purchase up to 218,500 Marine common shares, or
19% of the outstanding Marine common shares, at $8.00 per share. This option may
be exercised by Old Florida upon the happening of certain events, for example,
if Marine enters into an agreement to merge with a company other than Old
Florida. Old Florida intends this option to increase the likelihood that the
merger between Old Florida and Marine will be completed in accordance with their
merger agreement. It will likely discourage competing offers for Marine.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF MARINE (SEE PAGE 42)
The board of directors of Marine believes that consummation of the
proposed merger is in the best interests of Marine and its shareholders.
Accordingly, the board of directors of Marine recommends that you vote "FOR"
adoption of the merger agreement.
TREATMENT OF MARINE STOCK OPTIONS AND WARRANTS (SEE PAGE 28)
Each option or warrant to buy Marine common shares that is outstanding
and not yet exercised immediately before the merger is completed will be
converted into an option or warrant, as the case may be, to buy Old Florida
common shares. The number of Old Florida common shares subject to each converted
option or warrant, as well as the exercise price of that option or warrant, will
be adjusted to reflect the exchange ratio. The other terms of each converted
option and warrant will be substantially the same as those of the original
Marine option or warrant.
RIGHTS OF DISSENTING SHAREHOLDERS (SEE PAGE 42)
Under applicable Florida law, you have the right to dissent from the
merger and to receive payment in cash for the appraised fair value of your
Marine common shares. In order to do this, you must:
- deliver to Marine before the special meeting written notice of
your intent to exercise your dissenters' rights with respect to
your Marine common shares if the merger becomes effective;
- not vote your shares in favor of approval of the merger agreement;
and
- follow the statutory procedures for perfecting dissenters' rights
under Florida law, which are described in the section titled
"Rights of Dissenting Shareholders" beginning on page 11.
10
Merely voting against approval of the merger agreement will not
preserve your dissenters' rights. The relevant sections of the Florida law
governing this process are reprinted in their entirety and attached to this
document as Appendix E. Your failure to comply precisely with all procedures
required by Florida law may result in the loss of your dissenters' rights.
Under the merger agreement, if the number of dissenting shares exceeds
20% of the number of outstanding Marine common shares, Old Florida and Marine
are not obligated to complete the merger.
COMPARISON OF RIGHTS OF HOLDERS OF OLD FLORIDA COMMON SHARES AND OF MARINE
COMMON SHARES (SEE PAGE 85)
After the merger, Marine shareholders will become shareholders of Old
Florida and the articles and bylaws of Old Florida will govern their rights as
shareholders. Several differences exist between the articles and bylaws of
Marine and the articles and bylaws of Old Florida which affect the rights of the
shareholders of those corporations. Examples of differences include provisions
affecting nomination of directors and voting on certain significant corporate
transactions. Since Marine and Old Florida are both Florida corporations,
Florida law will continue to govern the rights of Marine shareholders after the
merger.
RISK FACTORS
In addition to the other information included in this document and
incorporated by reference in this document, you should consider carefully the
risk factors described below in deciding how to vote on the merger proposal. You
should keep these risk factors in mind when you read forward-looking statements
in this document. Please refer to the section in this document titled
"Cautionary Statement Regarding Forward-Looking Information" beginning on page
16.
RISKS RELATING TO THE MERGER
SINCE THE MARKET PRICE OF THE OLD FLORIDA COMMON SHARES FLUCTUATES,
MARINE SHAREHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE OLD FLORIDA COMMON
SHARES THEY WILL RECEIVE IN THE MERGER.
- At the time the merger is completed, each Marine common share will
be converted into .62 of an Old Florida common share. This
exchange ratio will not be adjusted in the event of any increase
or decrease in the price of the Old Florida common shares or the
Marine common shares. As a result, the value of the Old Florida
common shares received by Marine shareholders in the merger may be
higher or lower than the market value of the Old Florida common
shares at the time the Marine shareholders vote on the merger
agreement.
THE MERGER MAY FAIL TO QUALIFY AS A REORGANIZATION FOR FEDERAL INCOME
TAX PURPOSES, RESULTING IN YOUR RECOGNITION OF TAXABLE GAIN OR LOSS IN RESPECT
OF YOUR MARINE SHARES.
- Old Florida and Marine intend the merger to qualify as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended. Although the Internal
Revenue Service, or IRS, will not provide a ruling on the matter,
as a condition to closing, Marine will obtain a legal opinion from
Werner & Blank, LLC that the merger will constitute a
reorganization for federal income tax purposes. This opinion does
not bind the IRS or prevent the IRS from adopting a contrary
position. If the merger fails to qualify as a reorganization, you
generally would recognize gain or loss on each Marine common share
surrendered in an amount equal to the difference between your
adjusted tax basis in that share and the fair market value of the
.62 of an Old Florida common share received in exchange for that
share upon completion of the merger. In addition, the merger would
be treated as a sale of all the assets of Marine to Old Florida
with a corporate level tax liability owed by Old Florida for the
period in which the merger occurs.
11
MARINE HAS A HISTORY OF LOSSES.
- Since inception, Marine has experienced operating losses. Marine
had net losses of $440,355 for the year ended December 31, 2002,
and $342,276 for the year ended December 31, 2001. Marine's
accumulated deficit as of December 31, 2002 was approximately $4
million. These losses stem in part from a thin net interest margin
and high overhead costs. While it is expected that the cost
savings and increased asset base from the merger will make the
business of Marine attain profitability in the future as a branch
office of Old Florida, uncertainties still exist.
FAILURE TO ACHIEVE EXPECTED COST SAVINGS AND UNANTICIPATED COSTS
RELATING TO THE MERGER COULD REDUCE OLD FLORIDA'S FUTURE EARNINGS PER SHARE.
- Old Florida believes that it has reasonably estimated the likely
cost savings, the likely costs of integrating the operations of
Old Florida and Marine, and the incremental costs of operating as
a combined company. However, it is possible that unexpected
transaction costs such as taxes, fees or professional expenses or
unexpected future operating expenses such as increased personnel
costs or increased taxes, as well as other types of unanticipated
adverse developments, could have a material adverse effect on the
results of operations and financial condition of the combined
company. If the expected savings are not realized or unexpected
costs are incurred, the merger could have a significant dilative
effect on the combined company's earnings per share. In other
words, if the merger is completed, the earnings per share of Old
Florida common stock could be less than they would have been if
the merger had not been completed.
FAILURE TO INTEGRATE OPERATIONS FOLLOWING THE MERGER COULD REDUCE OLD
FLORIDA'S FUTURE EARNINGS PER SHARE.
- The merger involves the integration of two companies that
previously operated independently. The difficulties of combining
the companies' operations include:
- integrating personnel with diverse business backgrounds;
- combining back-office functions; and
- combining different corporate cultures.
- As of year-end 2002, on the basis of proforma total assets, Marine
would represent approximately 37% of the total assets of the
combined institution, a substantial increase in the size of Old
Florida. Old Florida's management will be required to devote
significant attention to the integration of the two companies
following the merger, in addition to performance of their ongoing
management functions. The risks of integration will be mitigated,
however, by operating Marine as a branch of Old Florida Bank,
rather than as a stand-alone entity. Old Florida has also hired a
commercial banker with 26 years of commercial banking experience
as an Executive Vice President to oversee Old Florida Bank's
business in the Naples, Florida market following the merger,
including the integration of the two companies.
- There can be no assurance that Old Florida will be able to
integrate and manage these operations effectively or maintain or
improve the historical financial performances of Old Florida and
Marine. The failure to successfully integrate these systems and
procedures could have a material adverse effect on the results of
operations and financial condition of the combined company.
THE OPTION FOR MARINE COMMON SHARES HELD BY OLD FLORIDA AND THE
RESTRICTIONS ON SOLICITATION CONTAINED IN THE MERGER AGREEMENT MAY DISCOURAGE
OTHER COMPANIES FROM TRYING TO ACQUIRE MARINE.
- Until the completion of the merger, Marine is prohibited from
soliciting, initiating, encouraging, or with some exceptions,
entering into any discussions or inquiries or proposals that may
lead to a
12
proposal or offer for a merger or other business combination
transaction with any person other than Old Florida. In addition,
Marine has granted Old Florida an option for 218,500 Marine common
shares that is exercisable under certain circumstances. Please
read the Option Agreement attached to this document as Appendix B.
These provisions could discourage other companies from trying to
acquire Marine even though those other companies might be willing
to offer greater value to Marine shareholders than Old Florida has
offered in the merger.
RISKS RELATED TO OLD FLORIDA'S BUSINESS
If the merger is completed, you will receive Old Florida common shares
in exchange for your Marine common shares, unless you exercise statutory
dissenters' rights. As a result of the merger, Old Florida will combine its
current business with the business of Marine. Accordingly, you should consider
carefully the risks and uncertainties relating to the businesses of Old Florida
and Marine operating as a combined company following the merger.
OLD FLORIDA WILL OPERATE IN COMPETITIVE BANKING MARKETS AND IT MAY NOT
BE ABLE TO ATTRACT AND RETAIN BANKING CUSTOMERS.
- Old Florida will face significant competition for banking services
in Collier and Lee Counties, Florida, its primary market.
Competition may limit its ability to attract and retain customers.
Old Florida will face competition from the following:
- other banking institutions, including large Florida and
other commercial banking organizations;
- savings banks;
- credit unions;
- other financial institutions; and
- non-bank financial service companies serving the Fort
Myers and Naples, Florida metropolitan areas.
- In particular, Old Florida's competitors will include several
major financial companies whose greater resources may afford them
a marketplace advantage by enabling them to maintain numerous
banking locations and mount extensive promotional and advertising
campaigns. Additionally, banks and other financial institutions
with larger capitalization and financial intermediaries not
subject to bank regulatory restrictions have larger lending limits
than Old Florida Bank, which enables them to serve the credit
needs of larger customers. Areas of competition include interest
rates for loans and deposits, efforts to obtain deposits, and
range and quality of products and services provided, including new
technology-driven products and services. Old Florida Bank also
will face competition from out-of-state financial intermediaries
that have opened low-end production offices or that solicit
deposits in their respective market areas. If Old Florida Bank is
unable to attract and retain banking customers it may be unable to
continue its loan growth and level of deposits and its results of
operations and financial condition may otherwise be materially
adversely affected.
FLUCTUATIONS IN INTEREST RATES MAY NEGATIVELY IMPACT OLD FLORIDA'S
OPERATING INCOME.
- Old Florida's main source of income from operations will be net
interest income earned by its subsidiary, Old Florida Bank, which
is equal to the difference between the interest income received on
loans, investment securities and other interest-bearing assets and
the interest expense incurred in connection with deposits,
borrowings and other interest-bearing liabilities. Old Florida
Bank's net interest income can be affected by changes in market
interest rates. These rates are highly sensitive to many factors
beyond Old Florida Bank's control, including general economic
conditions, both
13
domestic and foreign, and the monetary and fiscal policies of
various governmental and regulatory authorities. Old Florida Bank
has adopted asset and liability management policies to try to
minimize the potential adverse effects of changes in interest
rates on its net interest income, primarily by altering the mix
and maturity of loans, investments and funding sources. However,
even with these policies in place, Old Florida cannot assure you
that changes in interest rates will not negatively impact its
operating results.
- An increase in interest rates could have a negative impact on Old
Florida's business by reducing the ability of borrowers to repay
their current loan obligations to Old Florida Bank, which could
result in increased loan defaults, foreclosures and write-offs,
necessitating further increases to Old Florida Bank's allowance
for loan losses. Increases in interest rates also may reduce the
demand for loans and, as a result, the amount of loan and
commitment fees. Continued decreases in rates beyond current
levels may also negatively impact Old Florida's business by
reducing net interest margins because Old Florida Bank may be
unable to reduce deposit or lending rates on deposits or loans any
further. To the extent such a decrease in rates causes the average
yield on assets to decrease, Old Florida's net interest margin may
also decrease. In addition, fluctuations in interest rates may
result in disintermediation, which is the flow of funds away from
depository institutions into direct investments that pay a higher
rate of return, and may affect the value of Old Florida Bank's
investment securities and other interest-earning assets.
DEFAULTS IN THE REPAYMENT OF LOANS COULD ADVERSELY AFFECT OLD FLORIDA'S
PROFITABILITY.
- If Old Florida Bank's customers default in the repayment of their
loans its profitability could be adversely affected. A borrower's
default on its obligations under one or more of Old Florida Bank's
loans may result in lost principal and interest income and
increased operating expenses as a result of the allocation of
management time and resources to the collection and work-out of
the loan. If collection efforts are unsuccessful or acceptable
work-out arrangements cannot be reached, Old Florida Bank may have
to write-off the loan in whole or in part. Although Old Florida
Bank may acquire any real estate or other assets that secure the
defaulted loan through foreclosure or other similar remedies, the
amount owed under the defaulted loan may exceed the value of the
assets acquired.
OLD FLORIDA BANK MAY NEED TO INCREASE ITS ALLOWANCE FOR LOAN LOSSES AT
SOME POINT IN THE FUTURE.
- Old Florida's management periodically evaluates its allowance for
loan losses based on available information, including the quality
of its loan portfolio, economic conditions, the value of the
underlying collateral and the level of its non-accruing loans. The
amount of the allowance for loan losses is inherently based on
current material estimates made by management as to these factors.
Increases in this allowance results in an expense for the period.
If, as a result of a deterioration in general economic conditions
or an increase in non-performing loans, management determines that
an increase in Old Florida's allowance for loan losses is
necessary, Old Florida would incur additional expenses.
A DOWNTURN IN THE LOCAL ECONOMIES OR REAL ESTATE MARKETS COULD
NEGATIVELY IMPACT OLD FLORIDA'S BUSINESS.
- Because Old Florida serves primarily individuals and smaller
businesses located in Collier and Lee Counties, Florida, the
ability of its customers to repay their loans is impacted by the
economic conditions in these areas. In addition, a substantial
portion of Old Florida's loans are secured by real estate.
Consequently, Old Florida's ability to continue to originate real
estate loans may be impaired by adverse changes in local and
regional economic conditions in the real estate markets. These
events also could have an adverse effect on the value of Old
Florida's collateral and, due to the concentration of its
collateral in real estate, on its financial condition.
14
REGULATION AND LEGISLATION MAY ADVERSELY AFFECT OLD FLORIDA'S BANKING
OPERATIONS.
- Financial holding companies and state and federally chartered
banks operate in a highly regulated environment and are subject to
supervision and examination by federal and state regulatory
agencies. Old Florida is subject to the Bank Holding Company Act
of 1956, as amended, and to regulation and supervision by the
Federal Reserve Board. Old Florida Bank is subject to regulation
and supervision by the Federal Deposit Insurance Corporation, or
FDIC, and the Florida Department of Financial Services. The cost
of compliance with regulatory requirements may adversely affect
Old Florida's results of operations or financial condition.
Federal and state laws and regulations govern numerous matters
including:
- changes in the ownership or control of banks and bank
holding companies;
- maintenance of adequate capital;
- the financial condition of a financial institution;
- permissible types, amounts and terms of extensions of
credit and investments;
- permissible activities;
- the level of reserves against deposits; and
- restrictions on dividend payments.
- The Federal Reserve, FDIC and Florida Department of Financial
Services possess cease and desist powers to prevent or remedy
unsafe or unsound practices or violations of law by bank holding
companies and banks subject to their regulation. These and other
restrictions limit the manner in which Old Florida may conduct its
business and obtain financing.
- Furthermore, Old Florida's banking business will be affected not
only by general economic conditions, but also by the monetary
policies of the Federal Reserve. Changes in monetary or
legislative policies may affect the interest rates Old Florida
must offer to attract deposits and the interest rates Old Florida
can charge on its loans, as well as the manner in which Old
Florida offers deposits and makes loans. These monetary policies
have had, and are expected to continue to have, significant
effects on the operating results of depository institutions,
including Old Florida Bank.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains forward-looking statements about the merger and
about Old Florida's and Marine's respective financial condition, results of
operations, plans, objectives, future performance and business. This includes
information relating to:
- benefits, revenues and earnings estimated to result from the
merger; and
- estimated costs of combining Old Florida and Marine.
It also includes statements using words like "believes," "expects,"
"intends," "anticipates" or "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties.
Actual results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including those
discussed under "Risk Factors" above and the following:
15
- income, interest and non-interest, following the merger is lower
than expected;
- the costs of providing compensation and benefits to Old Florida's
employees increase;
- competition increases in the banking industry or Old Florida's
markets;
- costs or difficulties related to the integration of Marine's
business are greater than expected;
- there are adverse changes in general economic conditions;
- technological changes are more difficult or expensive to implement
than anticipated;
- there are adverse changes in the securities markets; and
- Old Florida suffers the loss of key personnel.
There is also the risk that Old Florida incorrectly analyzes these
risks and forces, or that the strategies Old Florida develops to address them
are unsuccessful.
Because these forward-looking statements involve risks and
uncertainties, actual results may differ significantly from those predicted in
these forward-looking statements. You should not place a lot of weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable
to Old Florida or Marine or any person acting on behalf of Old Florida or Marine
are qualified by the cautionary statements in this section. Old Florida and
Marine have no obligation to revise these forward-looking statements.
THE MARINE SPECIAL MEETING
This proxy statement/prospectus is furnished to the shareholders of
Marine in connection with the solicitation on behalf of the board of directors
of Marine of proxies for use at the Marine special meeting to be held at 2325
Vanderbilt Beach Road, Naples, Florida, on Thursday, May 29, 2003 at 6:00 p.m.,
local time, or any adjournment of the Marine special meeting. This proxy
statement/prospectus and the accompanying form of proxy card were first mailed
to Marine shareholders on or about May 5, 2003.
MATTERS TO BE CONSIDERED AT THE MARINE SPECIAL MEETING
At the Marine special meeting, Marine shareholders will be asked to
consider and vote upon the adoption of the merger agreement. Marine shareholders
also will consider and vote upon any other business which properly comes before
the Marine special meeting.
The Marine board of directors has unanimously approved the merger
agreement and recommends that the Marine shareholders vote "FOR" adoption of the
merger agreement.
VOTING AT THE MARINE SPECIAL MEETING; MARINE RECORD DATE
Only holders of record of Marine common shares at the close of business
on April 25, 2003 will be entitled to notice of, and to vote at, the Marine
special meeting. As of that date, there were 1,150,000 Marine common shares
issued and outstanding. Each Marine common share entitles the holder to one vote
on each matter to be submitted to the Marine shareholders at the Marine special
meeting. A majority of the issued and outstanding Marine common shares
constitutes a quorum for the Marine special meeting.
Marine common shares represented by signed proxy cards or voting
instructions that are returned to Marine will be counted toward the quorum in
all matters. Broker non-votes will also count toward the establishment of a
16
quorum. BECAUSE THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF
THE ISSUED AND OUTSTANDING MARINE COMMON SHARES IS REQUIRED TO ADOPT THE MERGER
AGREEMENT, THE EFFECT OF AN ABSTENTION OR BROKER NON-VOTE IS THE SAME AS A "NO"
VOTE.
If a Marine shareholder signs and returns the accompanying proxy card
to Marine prior to the Marine special meeting and does not revoke it, the proxy
will be voted in accordance with the instructions contained on the card. If a
Marine shareholder does not give any instructions, the individuals designated as
proxies in the accompanying proxy card will vote "FOR" adoption of the merger
agreement. In that event, the Marine shareholder will not have the right to
dissent from the merger and demand payment of the "fair cash value" of that
shareholder's Marine common shares.
The Marine board of directors is not currently aware of any matters
other than those referred to above which will come before the Marine special
meeting. If any other matter should be presented at the Marine special meeting
for action, the individuals named in the accompanying proxy card will vote the
Marine common shares represented thereby in their own discretion.
A Marine shareholder may revoke a proxy at any time before it is
actually voted at the Marine special meeting by delivering written notice of
revocation to the Secretary of Marine, 2325 Vanderbilt Beach Road, Naples,
Florida 34109, by submitting a later-dated proxy, or by attending the Marine
special meeting and voting in person. ATTENDANCE AT THE MARINE SPECIAL MEETING
WILL NOT, IN AND OF ITSELF, CONSTITUTE A REVOCATION OF A PROXY.
Old Florida and Marine will share the cost of preparing, printing and
mailing proxy materials to the Marine shareholders. Proxies may be solicited
personally or by telephone, mail or telegraph. Officers or employees of Marine
may assist with personal or telephone solicitation and will receive no
additional compensation for doing so. Marine will also reimburse brokerage
houses and other nominees for their reasonable expenses in forwarding proxy
materials to beneficial owners of Marine common shares.
PRINCIPAL SHAREHOLDERS OF OLD FLORIDA
The following table provides information regarding the beneficial
ownership of Old Florida common shares as of April 25, 2003, for each of the
current directors of Old Florida, each of the named executive officers of Old
Florida, all directors and executive officers of Old Florida as a group, and
each person known by Old Florida to beneficially own more than 5% of the
outstanding Old Florida common shares. As of April 25, 2003, none of the
directors or executive officers of Old Florida held Marine common shares.
Amount and Nature of Beneficial Ownership (1)
Old Florida Common
Shares Which Can Be
Acquired Upon
Name of Beneficial Old Florida Exercise of Options
Owner or Number of Common Shares Exercisable
Of Persons in Group Presently Held Within 60 Days Total Percent of Class (2)
- ------------------- -------------- -------------- ----- --------------------
Charles C. Bundschu III 35,000 6,480 41,480 3.39%
Joseph E. D'Jamoos 35,000 6,480 41,480 3.39%
Frank H. Galeana 232,000 29,353 261,353 20.98%
Elmo J. Hurst 76,090 15,869 91,959 7.46%
Karl L. Johnson 22,000 5,517 27,517 2.25%
Larry W. Johnson 21,250 29,751 51,001 4.09%
Nicholas J. Panicaro 2,500 15,000 17,500 1.42%
All current directors and 423,840 108,450 532,290 40.17%
officers as a group
(8 persons)
17
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the Old Florida common shares reflected in the
table. All fractional Old Florida common shares have been rounded to the
nearest whole common share.
(2) The percent of class is based on 1,216,595 Old Florida common shares
outstanding and entitled to vote on April 25, 2003, and the number of Old
Florida common shares, if any, as to which the named individual has the
right to acquire beneficial ownership upon the exercise of options
exercisable within 60 days of that date.
18
PRINCIPAL SHAREHOLDERS OF MARINE
The following table furnishes information regarding the beneficial
ownership of Marine common shares as of April 25, 2003, for each of the current
directors of Marine, each of the executive officers of Marine, all directors and
executive officers of Marine as a group, and each person known by Marine to
beneficially own more than 5% of the outstanding Marine common shares. As of
April 25, 2003, none of the directors or executive officers of Marine held Old
Florida common shares.
Amount and Nature of Beneficial Ownership (1)
Marine
Common Shares
Which Can Be
Acquired Upon
Exercise of
Name of Beneficial Marine Options or Warrants Percentage
Owner or Number Common Shares Exercisable Ownership
of Persons in Group Presently Held Within 60 Days Total of Marine (2)
------------------- -------------- -------------- ----- -------------
Pierce T. Neese 109,668 (3) 76,975 186,643 15.21%
Earl G. Hodges 50,000 32,500 82,500 6.98%
William L. McDaniel, Jr. 20,000 13,000 33,000 2.84%
Donald W. Ketterhagen, M.D. 9,000 7,800 16,800 1.45%
Donald T. Keeter 63,500 63,500 5.52%
John P. Hurley 5,000 5,000 2.54%
James S. Weaver 30,000 30,000 1.71%
David Carpenter 20,000 20,000 1.71%
Jetta Russell 20,000 20,000 1.71%
Guy Harris 20,000 20,000 1.71%
All current directors and 257,168 220,275 477,443 34.84%
executive officers as a group
(10 persons)
- ------
* Represents ownership of less than 1% of the outstanding common shares
of Marine.
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the Marine common shares reflected in the
table.
(2) The percentage of Marine common shares owned is based on 1,150,000 Marine
common shares outstanding and entitled to vote on April 25, 2003, and the
number of Marine common shares, if any, as to which the named individual
has the right to acquire beneficial ownership upon the exercise of options
or warrants exercisable within 60 days of that date.
(3) Includes 62,298 shares subject to shared voting or investment power.
19
THE MERGER
This section of the proxy statement/prospectus contains a summary of
the material terms of the merger. The following description summarizes all of
the material terms of the merger; however, we do not address every provision of
the merger agreement and qualify our description by reference to the merger
agreement. A copy of the merger agreement is attached and incorporated into this
document as Appendix A. Old Florida and Marine urge you to read the merger
agreement in its entirety.
Under the terms of the merger agreement, at the effective time of the
merger, Marine will merge into Old Florida and the separate existence of Marine
will end. At that time, each issued and outstanding Marine common share, other
than those as to which dissenters' rights are perfected, will be converted into
..62 of an Old Florida common share. Any Marine common shares owned by Marine as
treasury shares will be canceled and retired and no Old Florida common shares or
other consideration will be delivered in exchange for those Marine common
shares. For more information, see "The Merger -- Effect on Outstanding Old
Florida Common Shares and Exchange of Marine Common Shares -- Exchange of Marine
Common Shares" on page 27. As discussed further below, the consideration to be
received by the Marine shareholders in the merger was determined by arm's-length
negotiations between the management of Old Florida and Marine.
BACKGROUND
The following describes the discussions, negotiations and events that
led up to the merger agreement.
As part of its ongoing strategic planning, Old Florida's board of
directors has periodically reviewed options for enhancing shareholder value,
including, among other things, continued independence, expansion of the
franchise through branching, acquisition of banking and banking-related
businesses, and mergers with other financial institutions. Since the bank was
formed in 1998, Old Florida has opened one branch, purchased the deposits of a
branch office of another financial institution and formed Old Florida Capital.
Since its inception, Old Florida has planned to enter the Naples market
with a physical presence. Several directors and many shareholders of Old Florida
reside in the Naples market. Naples is a logical and attractive area for
expansion, given the natural geographic fit with Fort Myers and Bonita Springs.
Old Florida acquired undeveloped real estate located on Immokalee Road, east of
I-75 in Naples, for future branch expansion during 1999. As a result of this
opportunity to merge with Marine, Old Florida is selling that property and has
entered into a contract for its sale.
In January 2001, Old Florida's board of directors authorized Austin
Associates, Old Florida's investment banker, to contact Ewing Associates,
Marine's former investment banker, to explore whether Marine had any interest in
merging with Old Florida. Old Florida's board of directors had an interest in a
merger with Marine, given its size relative to Old Florida, and its presence as
a community bank in Naples. Austin Associates contacted Ewing Associates and, as
a result, a January 31, 2001 meeting was held at a hotel in Fort Myers among
Pierce T. Neese, Chairman of Marine, Earl T. Hodges, and William McDaniel,
Marine directors, Ewing Associates, Marine's investment banker at the time,
Larry Johnson and Nick Panicaro, directors and Chief Executive Officer and Chief
Financial Officer respectively of Old Florida, and Austin Associates, Old
Florida's investment banker. At that meeting, the participants discussed the
characteristics and operating results of the two companies, what each might
contribute to a merger, and the possible structure of the merger in conceptual
terms. The discussion did not include specifics as to price. Following the
meeting, Ewing Associates informed Austin Associates that Marine was not
interested in pursuing a merger of the two companies at that time.
Mr. Johnson continued to keep in touch with Mr. McDaniel through
periodic telephone calls.
At its September 2002 strategic planning meeting, Old Florida's board
of directors revisited the subject of expanding to Naples through acquisition
rather than building a new branch. Old Florida's Board was aware of the lack of
earnings and management turnover at Marine, but believed that loan quality at
Marine would not be a negative factor. Old Florida's Board authorized Austin
Associates to evaluate and advise the Board as to the potential acquisition of
Marine. Following Austin Associates' preliminary analysis, Old Florida's Board
authorized Mr. Johnson to contact Marine to renew discussions regarding the
possible merger of Old Florida and Marine and to explore its interest in a
merger.
20
In September 2002, following the Old Florida board of directors'
meeting, Larry Johnson, Chief Executive Officer of Old Florida, telephoned
William McDaniel, a Marine director, to set a meeting to discuss a possible
merger. Mr. Johnson and Mr. McDaniel met for lunch on October 11, 2002 at a Fort
Myers restaurant to explore a possible business combination between Marine and
Old Florida. Neither pricing nor the form of any transaction was discussed at
this meeting. Shortly after this meeting, Mr. Neese telephoned Mr. Johnson to
express Marine's interest in continuing discussions about a merger. Mr. Johnson
and Mr. Neese scheduled a meeting for October 22, 2002 to discuss Old Florida's
proposal for a merger of the two companies.
On October 22, 2002, Messrs. Johnson and Panicaro, along with Elmo
Hurst, an Old Florida director, met with Mr. Neese and Donald Keeter, a Marine
director, at a Bonita, Florida restaurant to continue discussions of a merger.
Old Florida proposed the concept of a "book for book" share exchange in a merger
with Marine whereby shareholders of Marine would receive Old Florida common
shares in the merger in the same proportion as the book value of Marine in
relation to the book value of the combined company. Old Florida proposed this
pricing concept so that Old Florida would be protected in the exchange ratio
against future losses at Marine prior to the merger, in that any losses would
reduce Marine's book value. Old Florida proposed that it would be the surviving
corporation in the merger, that two of Marine's directors would be appointed to
Old Florida's board of directors in connection with the merger and that Old
Florida would assume Marine's outstanding stock options and warrants, which
would be converted to options and warrants for Old Florida common shares. The
participants at this meeting agreed to continue discussions and to arrange for
the companies to conduct due diligence reviews of one another.
On October 29, 2002, Marine and Old Florida entered into a mutual
confidentiality agreement, and subsequently exchanged financial and other
information for the purpose of evaluating the potential transaction. That same
day, Messrs. Johnson, Panicaro, Neese, McDaniel, Keeter, met again at a hotel in
Bonita, along with Frank Galeana, Chairman of the Board of Directors of Old
Florida, and John Hurley, another Marine director, so that these additional
directors of Old Florida and Marine could meet and get to know one another. At
this meeting, Marine also proposed that three, rather than two directors of
Marine be named to the Old Florida Board in connection with the merger. The Old
Florida directors expressed their disinterest in the addition of more than two
Marine directors to Old Florida's Board. The parties settled on adding two
Marine directors to Old Florida's Board in connection with the merger. The group
determined that any merger agreement would provide for Messrs. Neese and
McDaniel to become Old Florida directors following the merger.
At its November 18, 2002 meeting, Old Florida's board of directors
received a report on the results of the due diligence review of Marine from Old
Florida's management, Austin Associates and Old Florida's counsel. Austin
Associates reviewed with the Board the pricing and related terms of the proposed
merger, and the financial impact of the proposed merger. The Board authorized
the terms and form of the transaction as proposed, and authorized Mr. Johnson to
negotiate the final terms of the merger agreement. Later that day, Messrs.
Johnson, Hurst and Panicaro telephoned Messrs. Pierce and Keeter to inform them
that the Old Florida Board had authorized negotiation of a definitive agreement.
Marine's board of directors reviewed the terms and form of the transaction at a
board of directors' meeting on November 19, 2002 and authorized Mr. Neese to
negotiate the final terms of the merger agreement. The parties, along with their
legal counsel, and Austin Associates as financial advisor to Old Florida, began
negotiating the terms of a definitive merger agreement.
On December 13, 2002, Mr. Neese telephoned Mr. Johnson regarding the
proposed pricing for the transaction. Mr. Neese communicated the desire of
Marine's Board that the price be based on a fixed exchange ratio of an Old
Florida common share for each share of Marine common stock, rather than an
exchange ratio based on the proportional book values of the two companies at the
time of the merger, as had been proposed by Old Florida. Old Florida indicated
it would be willing to consider a fixed exchange ratio of .62 of an Old Florida
common share for each common share of Marine, so long as Old Florida's
obligation to complete the merger would be subject to Marine having a minimum
net worth of $6,750,000 at month end prior to closing.
During the balance of December 2002, Messrs. Johnson and Panicaro and
Mr. Neese, along with Old Florida and Marine's legal advisors, continued their
negotiation of a definitive merger agreement.
At a December 16, 2002 meeting of Old Florida's board of directors,
legal counsel reviewed the terms of the transaction and the definitive merger
agreement. Following questions and discussion, Old Florida's board of directors
approved the definitive merger agreement at that meeting and authorized
management, in consultation with legal counsel, to finalize and execute the
merger agreement. Marine's board of directors approved the merger
21
agreement on December 31, 2002. Marine and Old Florida executed the merger
agreement in the afternoon of December 31, 2002. On January 2, 2003, Old Florida
and Marine issued a joint press release announcing the merger.
REASONS FOR THE MERGER
The decision of the Old Florida board of directors and the Marine board
of directors to approve the merger agreement and the decision of the Marine
board of directors to recommend that Marine's shareholders adopt the merger
agreement is the result of each board of directors' individual assessment of the
opportunities to enhance shareholder value as a result of the merger.
The board of directors of Marine believes that the merger with Old
Florida is fair and in the best interest of Marine and its shareholders and
recommends that the Marine shareholders vote "FOR" adoption of the merger
agreement. The Marine board of directors considered all of the following factors
in approving the merger agreement and believes that each of the factors
represents an important reason why it is recommending that its shareholders vote
in favor of adopting the merger agreement:
- the overall financial terms of the merger, including the value of
the consideration to be received relative to Marine's book value
and earnings per share and historical trading prices;
- the competition and regulatory environment for Marine;
- the business and financial condition and earnings prospects of
Marine versus that of a combined institution;
- the competence, experience and integrity of Old Florida's
management;
- Marine's past performance including its operating losses; and
- alternatives to the merger, including remaining an independent
institution.
In negotiating the terms of the merger, management of Old Florida
considered a number of factors with a view to maximizing shareholder value in
the intermediate and long term, including:
- the earnings potential of the combined business;
- the strengthened capital base of the combined business;
- the ability to achieve significant cost savings through the
operation of the business of Marine as a branch office of Old
Florida Bank;
- the attractiveness of expanding into the Naples, Florida market
through the acquisition of Marine rather than the start-up of a
new branch office in Naples;
- the growth prospects of the combined businesses within the Naples,
Florida market area;
- expansion of the community banking model successfully employed by
Old Florida; and
- the ability to carry forward the net operating loss of Marine
incurred prior to the merger to use as a deduction against future
taxable income of the combined institution to reduce federal
income taxes.
Old Florida believes that significant cost savings will be achieved
following the merger. During 2002, Marine National Bank recorded total operating
expenses of $1,946,000. This amount consisted of personnel, occupancy and other
operating costs. Following the merger, Old Florida will operate the present main
office of Marine National Bank as a branch office of Old Florida. Old Florida
projects that this structure will result in annual
22
operating cost savings of $1.1 million from the 2002 level. Old Florida projects
a cost structure of $850,000 for its new Naples branch in the first year
following the merger. Old Florida also believes that significant revenue
enhancements will be achieved through expansion into the Naples market. Old
Florida has a capital base that can support deposit and loan growth, and will
strive to increase its market share in Naples. An increased market share should
result in higher revenue levels. Revenue enhancement is more uncertain than cost
savings, however, and Old Florida did not project any specific level of assumed
revenue enhancements in its evaluation of the merger.
In considering the merits of a merger with Marine, the management of
Old Florida considered the management turnover at Marine, its high operating
cost structure, lack of earnings and the existence of a formal regulatory
agreement between Marine National Bank and the Office of the Comptroller of the
Currency. However, Old Florida's board of directors concluded that the merits of
the merger outweighed these factors, given that Old Florida's management will
manage the business of Marine, projected costs savings following the merger and
that the regulatory agreement will terminate upon the merger of Marine National
Bank into Old Florida Bank at the closing of the merger.
Old Florida's management believes the Naples, Florida market served by
Marine has similar potential for product and service delivery. Old Florida's
management expects that Marine's Naples, Florida market will be receptive to the
Old Florida approach to banking and accordingly, will provide levels of
profitability comparable to those of Old Florida Bank in its existing market.
The Naples, Florida market has enjoyed a similar growth rate as the
current market served by Old Florida Bank, and is a desirable market area
extension for Old Florida.
The combined capital base of the corporations should allow for
significant and necessary investment in evolving technology. In order to remain
competitive with regional and super regional banking companies, Old Florida and
Marine believe it is critical to have the capacity to invest in computer
hardware and software, physical facilities and other delivery methods in order
to attract and retain customers. Such investments, made within the context of a
larger organization, would be shared by a larger base of customers, and the
investments on a relative basis would be more affordable. Old Florida and Marine
expect to realize economies of scale and to enhance shareholder value by the
combination.
FAIRNESS OPINION OF MARINE'S FINANCIAL ADVISOR
Marine has engaged T. Stephen Johnson & Associates, Inc. ("TSJ&A") to
serve as its financial advisor and to render its opinion as the fairness, from a
financial point of view, of the consideration to be received by shareholders of
Marine pursuant to the merger agreement. TSJ&A is an investment banking and
financial services firm located in Atlanta, Georgia. As part of its investment
banking business, TSJ&A engages in the review of the fairness of bank
acquisition transactions from a financial perspective and in the valuation of
banks and other businesses and their securities in connection with mergers,
acquisitions and other transactions. Neither TSJ&A nor any of its affiliates has
had a material financial interest in or any material association with Marine or
Old Florida within the past two years. TSJ&A was selected to advise Marine's
board of directors based upon its familiarity with Marine, the regional
community banking industry and its knowledge of the banking industry as a whole.
No instructions were given or limitations imposed by Marine's board of directors
upon TSJ&A regarding the scope of its investigation or the procedures it
followed in rendering its opinion. TSJ&A did not determine nor recommend the
amount of consideration to be paid.
TSJ&A has rendered its opinion to the board of directors of Marine that
the consideration to be received by the holders of Marine common stock under the
merger agreement is fair to such shareholders from a financial point of view. A
copy of the fairness opinion, which sets forth certain assumptions made, matters
considered and limitations on the review undertaken, is attached as Appendix D
to this proxy statement and should be read in its entirety. The summary of the
fairness opinion set forth herein is qualified in its entirety by reference to
the text of the fairness opinion. TSJ&A has been paid a fee of $10,000 for
rendering this opinion.
In arriving at its fairness opinion, TSJ&A reviewed the merger as
described below. TSJ&A also reviewed certain publicly available business and
unaudited financial information relating to Marine and Old Florida. TSJ&A
considered the financial terms of certain other recent comparable community bank
acquisition transactions, as further discussed below. TSJ&A also considered such
other information, financial studies, analyses and
23
investigations and financial, economic and market criteria that it deemed
relevant. In connection with its review, TSJ&A did not independently verify the
foregoing information and relied on such information as being complete and
accurate in all material respects. TSJ&A did not make an independent evaluation
or appraisal of the assets of Marine or Old Florida.
In connection with rendering the fairness opinion, TSJ&A performed the
financial analyses summarized below. TSJ&A did not find any specific factors
that did not support its opinion. The summary set forth below does not purport
to be a complete description of the analyses performed by TSJ&A in this regard.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of these methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. Accordingly, notwithstanding
the separate factors summarized below, TSJ&A believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. In
performing its analyses, TSJ&A made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond Marine's or Old Florida's control. The analyses performed by
TSJ&A are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses. No
company or transaction considered as a comparison in the analyses is identical
to Marine, Old Florida or the Merger. Accordingly, an analysis of the results of
such comparisons is not mathematical: rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of companies and other factors that could affect the public trading value of the
companies involved in such comparisons. In addition, the analyses do not purport
to be appraisals or reflect the process by which or the prices at which
businesses actually may be sold or the prices at which any securities may trade
at the present time or at any time in the future.
MERGER ANALYSIS
The merger consideration to be received by Marine shareholders is based
on an exchange ratio of .62 shares of Old Florida common shares for each share
of Marine owned. This transaction value equals 1.00 times December 31, 2002 book
value and 11.15 percent of assets and 13.98 percent of deposits as of
December 31, 2002.
COMPARABLE TRANSACTIONS ANALYSIS
TSJ&A reviewed the merger as of March 1, 2003, for the purpose of
determining purchase premiums that could be used in comparing the merger with
other announced transactions. TSJ&A reviewed the purchase premiums paid in
transactions that were announced since January 1, 2002 involving selling
institutions with that have reported a net loss for each of the last three years
in an effort to review transactions involving banks that have reported losses
over an extended period of time, like Marine. Below is a listing of the
comparable transactions. On average, the comparable transactions reported an
announced deal price to book value of 1.064 times, a purchase as a percent of
assets of 7.36 percent and a purchase price as a percent of deposits of 8.86
percent. Median figures of the comparable transactions reported an announced
deal price to book value of 1.0816 times, a purchase price as a percent of
assets of 4.45 percent and a purchase price as a percent of deposits of 4.95
percent. The merger ranks well within the range of the comparable transactions.
24
Price/ Price/
Price/ Tangible LTM Price/ Price/ Equity/
Book Book Earnings Assets Deposits Net Income Assets
Buyer/Target Target City Announce (%) (%) (x) (%) (%) Recent 2001 2002 (%)
------------ ----------- -------- --- --- --- --- --- ------ ---- ---- ---
2002
acquisition of
Banks with no
earnings
during the
last three
years
Old Florida Naples, FL 12/31/2002 126.81 126.81 NM 14.18 17.59 -60 -333 -1,579 10.57
Bankshares,
Inc./Marine
Bancshares
Inc. (as
publicly
reported)
CBS Bolivar, TN 12/17/2002 70.82 70.82 NM 3.48 3.76 -397 -1,906 -83 6.91
Banc-Corporation/
Community
Financial
Services
Synergy Finl North 10/11/2002 69.15 69.15 NM 3.56 3.78 -346 -1,722 -264 5.15
Group Inc. Brunswick, NJ
(MHC)/
First Bank of
Central Jersey
NASB Financial Excelsior 09/05/2002 108.16 108.16 NM 13.64 17.54 -598 -954 -217 12.55
Inc./CBES Springs, MO
Bancorp Inc.
Adbanc Colorado 07/15/2002 186.44 186.44 NM 10.32 13.96 -234 -1,299 -756 5.54
Inc./VBI Inc. Springs,
CO
Legacy Bank of Towanda, 07/10/2002 144.67 145.25 NM 16.66 19.55 -115 -1,343 -1,477 11.52
Harrisburg/ PA
Northern State
Bank
25
Price/ Price/
Price/ Tangible LTM Price/ Price/ Equity/
Book Book Earnings Assets Deposits Net Income Assets
Buyer/Target Target City Announce (%) (%) (x) (%) (%) Recent 2001 2002 (%)
------------ ----------- -------- --- --- --- --- --- ------ ---- ---- ---
Omaha, 05/20/2002 32.10 32.10- NM 1.80 2.56 -293 -644 -805 5.62
Beresford NE
Bancorporation,
Inc./First
American SB,
FSB
Garfield Cincinnati, 05/03/2002 150.00 150.00 NM 11.15 12.16 -92 -393 -938 7.43
Acquisition OH
Corp./
Findlay
Savings Bank
First Federal Ironton, OH 04/25/2002 85.14 85.14 NM 4.45 4.95 -22 -53 -169 5.23
Finl Bncp Inc./
Lincoln
S&LA
Berkshire Philadelphia,
Financial PA 03/11/2002 111.11 113.21 NM 1.21 1.46 -5,449 -9,665 -2,490 1.06
Holdings/
USA
BancShares.com
Inc.
Average (1) 106.40 106.70 NM 7.36 8.86 6.78
Median (1) 108.16 108.16 NM 4.45 4.95 5.62
Old Florida Naples, Actual (2) 100.00 100.00 NM 11.15 13.98 11.15
Bankshares, FL
Inc./Marine
Bancshares Inc.
(1) Does not include reported Old Florida/Marine Numbers which are based on
September 30, 2002 financial information.
(2) Actual numbers based on December 31, 2002 financial information.
26
ENTERPRISE ANALYSIS
TSJ&A reviewed the financial results for Old Florida and also developed
a combined balance sheet and income statement as of December 31, 2002 of the two
companies. Old Florida has a history of positive earnings and on a combined
basis the two companies would have reported a net loss of only $.03 per share
for the year. Based on this review, TSJ&A determined the Marine shareholders
would have a better chance of future success combined with Old Florida rather
than remaining independent.
Combined Income Statements (as of 12/31/2002)
Old Florida Marine Combined
Net Income $ 389 $ (440) $ (51)
Shares for Basic EPS 1,216,595 1,150,000 1,929,595
Shares for Diluted EPS 1,230,523 1,150,000 1,943,523
Basic EPS $ 0.32 $ (0.38) $ (0.03)
Diluted EPS $ 0.32 $ (0.38) $ (0.03)
Combined Shares based on .62:1 share exchange
EFFECT ON OUTSTANDING OLD FLORIDA COMMON SHARES AND EXCHANGE OF MARINE COMMON
SHARES
EFFECT ON OUTSTANDING OLD FLORIDA COMMON SHARES
Each issued and outstanding Old Florida common share will continue to
be one Old Florida common share after consummation of the merger.
EXCHANGE OF MARINE COMMON SHARES
At the effective time of the merger, any Marine common shares that are
held by Marine as treasury shares will be canceled and retired and no Old
Florida common shares or other consideration will be delivered in exchange for
those Marine common shares. All of the remaining Marine common shares, other
than those as to which the holders have properly exercised dissenters' rights,
will be converted into Old Florida common shares.
Each outstanding share of Marine will entitle the holder to receive .62
of an Old Florida share in the merger. At December 31, 2002, there were
1,150,000 Marine common shares outstanding. The merger agreement prohibits
Marine from issuing any additional common shares, except for the 243,025 Marine
common shares that are subject to outstanding options and warrants. If
necessary, the exchange ratio will be proportionately adjusted to prevent
dilution as a result of a share split, share dividend, recapitalization or
similar transaction with respect to the outstanding Old Florida common shares
prior to the effective date of the merger.
NO FRACTIONAL OLD FLORIDA COMMON SHARES TO BE ISSUED
Old Florida will not issue scrip or fractional interests in Old Florida
common shares in the merger. In lieu of fractional interests, Old Florida will
pay the cash value of the fraction to each holder of Marine common shares who
otherwise would have been entitled to a fraction of a Old Florida common share,
upon surrender of the holder's certificates representing Marine common shares.
The shareholder will receive an amount of cash, rounded to the nearest cent,
determined by multiplying the fractional share interest by $12.50.
CLOSING OF MARINE SHARE TRANSFER BOOKS; EXCHANGE OF CERTIFICATES EVIDENCING
MARINE COMMON SHARES
Marine will close its share transfer books in respect of the Marine
common shares beginning three business days prior to the effective date of the
merger.
27
As soon as practicable after the effective time of the merger, each
Marine shareholder will be advised of the effectiveness of the merger by letter
accompanied by a letter of transmittal and instructions for use to surrender the
certificate or certificates representing Marine common shares to Old Florida's
exchange agent, Old Florida Bank.
The letter of transmittal will be used to exchange Marine certificates
for Old Florida common shares and cash in lieu of any fractional share interest.
If any certificate representing Old Florida common shares is to be issued in a
name other than that in which the Marine certificate surrendered for exchange is
registered, the certificate so surrendered must be properly endorsed or
otherwise in proper form for transfer and the person requesting the exchange
must pay to Old Florida or Old Florida Bank, any applicable transfer or other
taxes required by reason of the issuance of the Old Florida certificate.
CERTIFICATES FOR MARINE COMMON SHARES SHOULD NOT BE FORWARDED TO OLD FLORIDA
UNTIL AFTER RECEIPT OF THE LETTER OF TRANSMITTAL AND SHOULD NOT BE RETURNED TO
MARINE WITH THE ENCLOSED PROXY CARD.
RIGHTS OF HOLDERS OF MARINE SHARE CERTIFICATES PRIOR TO SURRENDER
Upon surrender to Old Florida of Marine certificates and a properly
completed letter of transmittal, the holder of the Marine certificates will be
entitled to receive in exchange for the Marine certificates a certificate or
certificates representing the Old Florida common shares, and cash in lieu of any
resulting fractional share interest, to which the holder is entitled. Unless and
until the shareholder surrenders the Marine certificates together with a
properly completed letter of transmittal, no dividend payable to holders of
record of Old Florida common shares as of any time after the effective time of
the merger will be paid to that holder. Upon surrender of the holder's
outstanding Marine certificates to Old Florida Bank together with a properly
completed letter of transmittal, the former Marine shareholder will receive the
dividends, without interest, that have become payable as of that time with
respect to the Old Florida common shares to be issued upon surrender and
conversion.
LOST SHARE CERTIFICATES
Any Marine shareholder who has lost or misplaced a certificate for any
of the holder's Marine common shares should immediately call Guy Harris at (239)
593-6300 for information regarding the procedures to be followed in order to
obtain Old Florida common shares in exchange for the holder's Marine common
shares.
TREATMENT OF OUTSTANDING MARINE OPTIONS AND WARRANTS
As of April 25, 2002, there were eleven unexercised Marine stock
options and warrants outstanding covering an aggregate of 243,025 Marine common
shares. Each option and warrant to acquire Marine common shares outstanding and
unexercised immediately prior to the effective time of the merger will be
converted automatically upon the completion of the merger into an option or
warrant to purchase Old Florida common shares, with the following adjustments:
- the number of Old Florida common shares subject to the converted
options and warrants will be equal to the number of Marine common
shares subject to the original option multiplied by the exchange
ratio of .62; and
- the exercise price per Old Florida common share subject to the
converted option and warrant will be equal to the exercise price
under the original Marine option or warrant divided by the
exchange ratio of .62.
The other terms and conditions of each converted option and warrant
will be the same as the original Marine option or warrant.
POST-CLOSING CAPITALIZATION
Following the merger, Old Florida will have approximately 1,929,595
million common shares outstanding. Shareholders of Old Florida before the merger
will own approximately 63% of the total shares outstanding after the merger and
Marine's current shareholders will own approximately 37%. These percentages do
not take into account
28
the exercise of any outstanding stock options or warrants that would result in
the issuance of additional common shares of Old Florida.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of
accounting under accounting principles generally accepted in the United States
of America. Under this method, Marine's assets and liabilities as of the date of
the merger will be recorded at their respective fair values and added to those
of Old Florida. It is expected that the amounts assigned to assets acquired and
liabilities assumed will exceed the cost of acquiring Marine. This excess will
be allocated on a prorata basis to reduce the amount assigned to premises and
equipment acquired in the acquisition, in accordance with Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets." Core
deposit and other intangibles with definite useful lives recorded by Old Florida
in connection with the merger will be amortized to expense in accordance with
the new rules. The financial statements of Old Florida issued after the merger
will reflect the results attributable to the acquired operations of Marine
beginning on the date of completion of the merger. The unaudited per share pro
forma financial information contained herein has been prepared using the
purchase method of accounting. See "Unaudited Condensed Pro Forma Combined
Financial Information" on page 61.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Based on facts and representations and assumptions regarding factual
matters that were provided by Old Florida and Marine and that are consistent
with the state of facts that Old Florida and Marine believe will exist at the
time of the merger, Werner & Blank, LLC, counsel to Old Florida, is of the
opinion that the merger, when consummated in accordance with the terms of the
merger agreement, will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. If the merger is treated as a reorganization, neither Old Florida nor
Marine will recognize any taxable gain or loss as a result of the merger.
For federal income tax purposes, shareholders of Marine who exchange
their Marine common shares solely for Old Florida common shares in the merger
will not recognize any gain or loss, except to the extent that those
shareholders receive cash in lieu of a fractional share. The shareholder's tax
basis in the Old Florida common stock received pursuant to the merger will equal
such shareholder's tax basis in the shares of Marine common stock being
exchanged, reduced by any amount allocable to a fractional share of Old Florida
common stock for which cash is received. The holding period of Old Florida
common stock received will include the holding period of the shares of Marine
common stock being exchanged.
The merger agreement provides that neither Old Florida nor Marine will
intentionally take or cause to be taken any action, whether before or after the
effective time of the merger, which would disqualify the merger as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Werner & Blank, LLC based its opinion on facts, representations and
assumptions set forth in the opinion, the merger agreement and certificates of
officers of Marine and Old Florida, which have not have been independently
investigated or verified.
A dissenting shareholder of Marine who receives payment for common
shares in cash will recognize capital gain or loss, if the common shares were
held as a capital asset at the effective time of the merger, equal to the
difference between the cash received and the holder's basis in the common
shares, provided the payment is not essentially equivalent to a dividend within
the meaning of Section 302 of the Internal Revenue Code. A sale of common shares
pursuant to an exercise of dissenters' rights will not constitute a "dividend"
if, as a result of the exercise, the shareholder owns no common shares in Old
Florida as the surviving corporation in the merger, either actually or
constructively within the meaning of Section 318 of the Internal Revenue Code.
If you are not in favor of the merger but do not wish to exercise
dissenters' rights, you may, in the alternative, attempt to sell your Marine
common shares in the open market at the then current market price.
THIS DISCUSSION DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE
MERGER OR THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS WHO MAY BE SUBJECT
TO SPECIAL RULES, INCLUDING, FOR EXAMPLE, FOREIGN SHAREHOLDERS. THIS DISCUSSION
IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE INTERNAL REVENUE CODE, EXISTING
AND PROPOSED TREASURY REGULATIONS UNDER THE INTERNAL REVENUE CODE AND CURRENT
ADMINISTRATIVE
29
RULINGS AND COURT DECISIONS. THE OPINION OF COUNSEL DESCRIBED ABOVE IS NOT
BINDING UPON THE INTERNAL REVENUE SERVICE, AND THE PARTIES WILL NOT SEEK OR
OBTAIN ANY RULINGS OF THE INTERNAL REVENUE SERVICE. OLD FLORIDA AND MARINE CAN
PROVIDE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL AGREE WITH THE TAX
CONSEQUENCES OF THE MERGER DESCRIBED ABOVE. ALL OF THE FOREGOING IS SUBJECT TO
CHANGE AND ANY CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A MARINE SHAREHOLDER WHO
ACQUIRED MARINE COMMON SHARES UPON EXERCISE OF A STOCK OPTION OR OTHERWISE AS
COMPENSATION. OLD FLORIDA AND MARINE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS
CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND ANY
PROPOSED CHANGES IN THOSE TAX LAWS.
INTERESTS OF MARINE DIRECTORS AND OFFICERS IN THE MERGER
Some of the members of Marine's management and board of directors may
be deemed to have interests in the merger that are in addition to their
interests as shareholders of Marine generally. The board of directors was aware
of these interests and considered them in recommending that Marine shareholders
approve the merger agreement and the transactions contemplated by the merger
agreement.
AGREEMENTS WITH EXECUTIVE OFFICERS OF MARINE
Employment Agreement. Prior to the merger, James S. Weaver, president
and chief executive officer of Marine and Marine National Bank, entered into an
employment agreement with Marine National Bank, dated March 15, 2002. Under this
agreement, Mr. Weaver is currently paid an annual base salary of $125,000. The
agreement is for a term ending March 31, 2005, but with the approval of
two-thirds of its directors, Marine National Bank may terminate the employment
of Mr. Weaver at its discretion, on the condition that Mr. Weaver will be
entitled to a lump sum payment equal to six months' base salary. The agreement
further provides that in the event of a change in control (which would include
consummation of the proposed merger with Old Florida) followed by notice from
Mr. Weaver within thirty days of the closing of the merger, Mr. Weaver may elect
to terminate the agreement and receive a severance payment equal to twice the
sum of this annual base salary and any bonus received in the year preceding the
merger.
It is anticipated that the employment of Mr. Weaver will terminate upon
consummation of the merger. The value of the severance payment under the
employment agreement to Mr. Weaver is approximately $250,000. Marine National
Bank has also entered into agreements with Mr. David Carpenter and Ms. Jetta
Russell under which each is entitled to a lump sum severance payment equal to
six months base salary on termination of employment following the merger. The
amounts of these payments would be $40,878 for Mr. Carpenter and $34,800 for Ms.
Russell.
OTHER BENEFITS
Stock Options and Warrants. The directors and executive officers of
Marine hold stock options or warrants to acquire a total of 220,275 Marine
common shares. These options or warrants have vested or will vest in connection
with the closing of the merger. Each option or warrant to purchase Marine common
shares that is outstanding immediately before the merger is completed will be
converted into an option or warrant to buy Old Florida common shares as
described above at page 26 under "Treatment of Outstanding Marine Options and
Warrants".
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
Old Florida has agreed to indemnify each of the officers, directors and
employees of Marine and each Marine subsidiary to the full extent Marine or any
Marine subsidiary would have been required to indemnify that individual under
Florida law and the governing documents of Marine and the Marine subsidiaries.
The merger agreement also provides for the continuation of director and officer
liability insurance for these individuals for a period of three years. For more
information, see "The Merger Agreement -- Costs and Expenses; Indemnification"
on page 38.
30
BOARD OF DIRECTORS
Old Florida has agreed in the merger agreement to appoint Pierce T.
Neese and William L. McDaniel, Jr., to the board of directors of Old Florida and
Old Florida Bank promptly following the effective time of the merger.
RESALE OF OLD FLORIDA COMMON SHARES RECEIVED IN THE MERGER
The Old Florida common shares to be received by Marine shareholders in
the merger have been registered under the Securities Act on the registration
statement of which this document is a part and, except as described in this
paragraph, may be freely traded without restriction. The Old Florida common
shares to be issued in the merger and received by persons who are considered to
be "affiliates," as that term is used in Rule 145 under the Securities Act, of
Marine before the merger may be resold by them only in transactions permitted by
the resale provisions of Rule 145 under the Securities Act, or pursuant to an
exemption from the registration requirements of the Securities Act. Affiliates
of Marine for this purpose include individuals or entities that control, are
controlled by, or are under common control with, Marine and are expected to
include the directors and executive officers of Marine and certain entities
affiliated with these directors and executive officers. These affiliates or
their brokers risk being characterized as "underwriters" when they sell Old
Florida common shares received in the merger. The U.S. securities laws require
registration of shares sold by underwriters. An affiliate and its broker can
avoid being characterized as an underwriter and, therefore, avoid the Securities
Act registration requirements by selling shares in compliance with Rule 145.
This document does not cover resales of Old Florida common shares received by
any person upon the effectiveness of the merger, and no person is authorized to
make any use of this document in connection with any such resale.
Marine has agreed to use its reasonable best efforts to cause each
person who may be deemed an affiliate of Marine for purposes of Rule 145 to
deliver Old Florida a letter agreement intended to ensure compliance with the
Securities Act.
PERSONS WHO MIGHT BE DEEMED AFFILIATES OF MARINE SHOULD CONSULT WITH
THEIR LEGAL ADVISORS PRIOR TO MAKING ANY OFFER OR SALE OF OLD FLORIDA COMMON
SHARES RECEIVED IN THE MERGER.
REGULATORY APPROVALS
Consummation of the merger is subject to prior receipt by Old Florida
and Marine of all necessary regulatory approvals. The Federal Reserve Board must
approve the merger of Marine into Old Florida, unless it waives the right to
approve the merger, which it may do based on the approval of the subsidiary
banks' merger by the FDIC.
The approval of an application means only that the regulatory criteria
for approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by Marine
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the merger.
Old Florida and Marine will not complete the merger before they receive
all requisite regulatory approvals and all applicable waiting periods have
expired and any conditions imposed in the regulatory approvals have been
complied with. Old Florida and Marine cannot guarantee that they will obtain all
approvals or that those approvals will not impose conditions which would have a
material adverse effect on the business, operations, assets or financial
condition of Old Florida and the Old Florida subsidiaries taken as a whole or
otherwise materially impair the value to Old Florida of Marine and Marine
National Bank as a whole. If a regulatory agency imposes this type of condition,
the merger agreement permits the boards of directors of Old Florida and Marine
to abandon the merger.
Old Florida and Marine cannot assure you as to when, or if, they will
obtain necessary regulatory approvals. If the merger is not completed by
September 30, 2003, either Old Florida or Marine may terminate the merger
agreement. For more information, see "The Merger Agreement -- Amendment and
Termination" on page 37.
31
EXISTING RELATIONSHIP BETWEEN OLD FLORIDA AND MARINE
Except in connection with the merger agreement and the transactions
contemplated by the merger agreement, Marine has not conducted business with,
nor has it had any business relationship with, Old Florida prior to the
transactions described in the merger agreement, other than the purchase and sale
of loan participation interests in the ordinary course of business on terms that
are customary for such transactions.
THE MERGER AGREEMENT
THE MERGER
The merger agreement provides that, subject to the adoption of the
merger agreement by the shareholders of Marine and the satisfaction or waiver of
the other conditions to the merger, Marine will merge into Old Florida.
Following completion of the merger, Marine will no longer exist as a separate
corporation. The merger agreement provides for Old Florida and Marine to
implement the merger by causing a certificate of merger to be filed with the
Florida Department of State, consistent with the applicable provisions of the
merger agreement.
The material provisions of the merger agreement are briefly summarized
below. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the merger agreement, which is
reprinted as Appendix A to this proxy statement/prospectus and incorporated in
this proxy statement/prospectus by this reference. Old Florida and Marine urge
you to read the merger agreement in its entirety for a more complete description
of the merger.
CONVERSION OF MARINE COMMON SHARES
At the effective time of the merger, each Marine common share
outstanding immediately prior to the effective time of the merger, other than
those as to which dissenters' rights are perfected, will be converted into
approximately .62 of an Old Florida common share. All Marine common shares owned
by Marine as treasury shares will be canceled and retired, and no Old Florida
common shares or other consideration will be delivered in exchange for those
shares. For more information, see "The Merger -- Effect on Outstanding Old
Florida Common Shares and Exchange of Marine Common Shares" on page 25.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Marine has made representations and warranties
concerning the following items:
- due organization, good standing and authority to carry on business
of Marine and Marine National Bank;
- capital structure of Marine;
- corporate power and authority to enter into the merger agreement
and consummate the merger and enforceability of the merger
agreement and related matters;
- financial statements and reports and absence of undisclosed
liabilities;
- absence of any material adverse change to Marine or its
subsidiaries;
- loans;
- allowance for loan losses;
- regulatory filings by Marine and its subsidiaries;
- taxes of Marine and its subsidiaries;
- property of Marine and its subsidiaries;
- legal proceedings involving Marine or its subsidiaries;
- absence of regulatory proceedings involving Marine or its
subsidiaries;
- absence of conflicts of the merger agreement with applicable laws,
contracts and corporate documents;
- no commissions, finder's fees or similar payments payable in
connection with the merger (Old Florida provided to Marine a
waiver of certain provisions of the merger agreement so that
Marine could obtain the fairness opinion of its financial
advisor.);
- employment agreements and compliance with employment laws;
32
- employee benefit plans and compliance with provisions of the
Employee Retirement Income Security Act of 1974;
- compliance with laws;
- accuracy and completeness of information supplied by Marine for
inclusion in the registration statement on Form S-4 of which this
proxy statement/prospectus is a part;
- insurance;
- required governmental and third-party proceedings in connection
with the merger;
- material contracts and absence of defaults;
- environmental matters;
- compliance with takeover laws;
- risk management instruments;
- complete and accurate books and records;
- repurchase agreements;
- accuracy of representations and warranties;
Old Florida has made representations and warranties concerning the
following items:
- due organization, good standing and authority to carry on business
of Old Florida and Old Florida Bank;
- capital structure of Old Florida;
- corporate power and authority to enter into the merger agreement
and consummate the merger and enforceability of the merger
agreement and related matters;
- financial statements and reports and absence of undisclosed
liabilities;
- absence of any material adverse change to Old Florida or its
subsidiaries;
- loans;
- allowance for loan losses;
- regulatory filings by Old Florida and its subsidiaries;
- taxes of Old Florida and its subsidiaries;
- property of Old Florida and its subsidiaries;
- legal proceedings involving Old Florida or its subsidiaries;
- absence of regulatory proceedings involving Old Florida or its
subsidiaries;
- absence of conflicts of the merger agreement with applicable laws,
contracts and corporate documents;
- no commissions, finder's fees or similar payments payable in
connection with the merger, other than to Austin Associates, LLC;
- employment agreements and compliance with employment laws;
- employee benefit plans and compliance with provisions of the
Employee Retirement Income Security Act of 1974;
- compliance with laws;
- accuracy and completeness of information supplied by Old Florida
for inclusion in the registration statement on Form S-4 of which
this proxy statement/prospectus is a part;
- insurance;
- required governmental and third-party proceedings in connection
with the merger;
- material contracts and absence of defaults;
- environmental matters;
- compliance with takeover laws;
- risk management instruments;
- complete and accurate books and records;
- repurchase agreements;
- accuracy of representations and warranties;
Old Florida and Marine believe that the representations and warranties
contained in the merger agreement are customary in transactions similar in
nature to the merger. For more information, see Article V of the merger
agreement, which is attached as Appendix A to this document.
33
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement requires Marine to conduct its business and the
business of Marine National Bank in the ordinary and usual course consistent
with past practice. Under this covenant, the merger agreement specifically
prohibits Marine from:
- taking any action which would be inconsistent with any
representation or warranty of Marine in the merger agreement; and
- engaging in any lending activities other than in the ordinary
course of business.
The merger agreement also requires Marine not to take, and to cause
Marine National Bank not to take, any of the following actions without the
consent of Old Florida:
- selling, transferring, mortgaging, pledging, encumbering or
subjecting to any lien, any of its assets, except in the ordinary
course of business;
- making any capital expenditures which individually exceed $5,000
or $15,000 in the aggregate;
- conducting its business other than in the ordinary course or
taking any action which would have an adverse effect upon its
ability to perform its obligations under the merger agreement;
- declaring, paying or setting aside for payment any dividends or
making any distributions on its capital shares, other than
dividends from Marine National Bank to Marine;
- purchasing, redeeming, or otherwise acquiring any of its common
shares;
- issuing or granting any option or other right to acquire any of
its shares;
- effecting any split, recapitalization, readjustment or other share
reclassification;
- amending its governing documents;
- merging or consolidating with any other person or otherwise
reorganizing, except for the merger;
- acquiring all or any portion of, the assets, business, deposits or
properties of any other entity, except by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in the
ordinary course of business and consistent with past practices;
- entering into, establishing, adopting or amending any pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement, or similar arrangement,
related to the plan or arrangement, in respect of any director,
officer or employee of Marine or its subsidiaries, or taking any
action to accelerate the vesting or exercisability of stock
options, restricted stock or other compensation or benefits
payable under those plans or arrangements. Marine, however, may:
- take any of these actions in order to satisfy either
applicable law or previously disclosed contractual obligations
existing as of December 31, 2002 or regular annual renewal of
insurance contracts; and
- terminate its defined contribution 401(k) retirement plan at
any time before the effective time of the merger, with benefit
distributions deferred until the Internal Revenue Service
issues a favorable determination with respect to the
terminating plan's tax-qualified status upon
34
termination. In this event, Marine and Old Florida will
cooperate in good faith to apply for approval and to agree
upon associated plan termination amendments that will, among
other things, provide for the application of all assets of a
terminating plan for its participants, and allow plan
participants not only to receive lump-sum distributions of
their benefits, but also to transfer those benefits to the Old
Florida 401(k) plan that Old Florida maintains for its
employees and employees of its subsidiaries;
- paying any wage or salary increase or bonus, other than normal pay
increases to employees whose annual base salary does not exceed
$40,000 consistent with past practices, or entering into or
amending or renewing any employment, consulting, severance or
similar agreements or arrangements with any officer, director or
employee, except, in each case, for changes required by law or to
satisfy previously disclosed contractual obligations existing as
of December 31, 2002;
- entering into or terminating any contracts, other than loan and
deposit contracts, requiring the payment or receipt of $5,000 or
more in any 12-month period, or amending or modifying in any
material respect any of its existing material contracts;
- incurring any indebtedness for money borrowed or incurring any
material obligation or liability other than in the ordinary course
of business;
- implementing or adopting any change in its accounting principles,
practices or methods, other than as required by generally accepted
accounting principles;
- taking any action that would result in:
- any of its representations and warranties set forth in the
merger agreement being or becoming untrue in any material
respect at or prior to the effective time of the merger,
- any of the conditions to the merger not being satisfied, or
- a violation of any provision of the merger agreement, except
as required by law or regulation;
- except as required by applicable law or regulation:
- implementing or adopting any material change in its interest
rate risk management and other risk management policies,
procedures or practices,
- failing to follow its existing policies or practices with
respect to managing its exposure to interest rate and other
risk, or
- failing to use reasonable means to avoid any material increase
in its aggregate exposure to interest rate risk;
- entering into any agreement to do any of the foregoing.
The merger agreement also requires Marine and Marine National Bank to:
- maintain their property and facilities in their present condition
and working order, ordinary wear and tear excepted;
- use commercially reasonable efforts to maintain and preserve their
respective business organizations intact, and maintain the
respective relationships of employees, customers, suppliers, and
others having business relationships with them;
35
- maintain insurance coverage with reputable insurers, which in
respect of amounts, types and risks insured, were maintained by
them as of December 31, 2002;
- provide reasonable access by Old Florida to information of Marine
and Marine National Bank;
- timely file all tax returns and pay any tax shown on those tax
returns as due;
The merger agreement requires each of Old Florida and Marine:
- to use their reasonable best efforts to take all actions necessary
to satisfy all of the conditions to the merger, to comply with all
applicable legal requirements, to make all necessary filings, to
obtain all necessary governmental and third party consents and to
otherwise consummate the merger;
- to take all necessary steps to exempt the agreement and the merger
from the requirements of any takeover law;
- to notify the other party in writing if it becomes aware of any
fact, condition or occurrence that would:
- cause or constitute a breach of any representation, warranty
or covenant in the merger agreement; or
- have a material adverse effect on the company providing the
notification, either individually or in the aggregate, with
other facts, conditions or occurrences.
- not to take any action subsequent to the date of the merger
agreement that would adversely affect the characterization of the
merger as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code.
Old Florida also has agreed:
- to provide reasonable access by Marine to information of Old
Florida and each of its subsidiaries; and
- to indemnify the officers, directors and employees of Marine and
each of Marine's subsidiaries and to provide certain employee
benefits, as described below.
After the effective time of the merger, employees of Marine and Marine
National Bank who continue their employment with Old Florida or Old
Florida Bank will be entitled to participate in Old Florida's employee
benefit plans of general applicability. Old Florida will give those
employees credit for years of service for purposes of eligibility and
vesting, but not for benefit accrual purposes, in Old Florida's
employee benefit plans, and the employees will not be subject to any
exclusion or penalty for pre-existing conditions, any waiting period or
similar limitations, except to the extent that they also apply to
employees of Old Florida and Old Florida Bank. Old Florida will honor
all employment agreements that were disclosed to it by Marine in
connection with entering into the merger agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligation of each of Old Florida and Marine to consummate the
merger is subject to a number of conditions, including the following:
- the adoption of the merger agreement by the requisite vote of the
Marine shareholders, with dissenting shares representing no more
than 20% of the Marine common shares;
- all necessary regulatory approvals have been obtained in
connection with the merger and all statutory waiting periods have
expired;
36
- no regulatory approvals contain any conditions, restrictions or
requirements which either Old Florida or Marine reasonably
determines would either before or after the effective time of the
merger, have a material adverse effect on Old Florida or prevent
Old Florida from realizing the economic benefits of the merger and
related transactions;
- no court or other governmental or regulatory authority has issued,
enforced, threatened or commenced a proceeding with respect to any
statute, rule, regulation, or entered any judgment, decree,
injunction or other order prohibiting or delaying consummation of
the transactions contemplated by the merger agreement;
- the Form S-4 registration statement of which this proxy
statement/prospectus forms a part has become effective and no stop
order suspending the effectiveness of the registration statement
has been issued and no proceedings for that purpose initiated or
threatened by the SEC;
- all permits and other authorizations required under state
securities laws to consummate the transactions contemplated by the
merger agreement and issue the Old Florida common shares to be
issued in the merger have been received;
The obligation of Old Florida to consummate the merger is also subject
to a number of additional conditions, including the following:
- the representations and warranties of Marine contained in the
merger agreement are true and correct in all material respects as
of the closing of the merger, or in the case of representations
and warranties made as of a specified date earlier than the
closing date of the merger, on and as of that date, and Marine has
delivered a certificate to Old Florida to that effect;
- Marine has performed all obligations required by Marine under the
merger agreement and Marine has delivered a certificate to Old
Florida to that effect;
- Old Florida has received the opinion of Kilpatrick Stockton LLP,
legal counsel to Marine, stating that:
- Marine is a corporation duly incorporated and in good standing
under the laws of the State of Florida;
- the merger agreement was duly executed by Marine and with
stated exceptions, constitutes the binding obligation of
Marine and is enforceable in accordance with its terms against
Marine; and
- assuming Marine shareholders approval of the merger, upon the
filing of the articles of merger with the Florida Department
of State, the merger will become effective.
- Old Florida has received articles of merger signed by Marine in
appropriate form for filing with the Florida Department of State.
- Old Florida has received certificates from Marine regarding
authorization of the merger by its directors and shareholders.
- Marine's total shareholders' equity is not less than $6,750,000 as
of the month end immediately following the later to occur of
receipt of regulatory approval for the merger and Marine
shareholder approval.
The obligation of Marine to consummate the merger is also subject to a
number of additional conditions, including the following:
- the representations and warranties of Old Florida contained in the
merger agreement are true and correct in all material respects as
of the closing of the merger, or in the case of representations
and
37
warranties made as of a specified date earlier than the closing
date of the merger, on and as of that date, and Old Florida has
delivered a certificate to Marine to that effect;
- Old Florida has performed all obligations required by Old Florida
under the merger agreement and Old Florida has delivered a
certificate to Marine to that effect;
- Marine has received the opinion of Werner & Blank, LLC, legal
counsel to Old Florida, stating that the merger constitutes a tax
free "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code and no gain or loss will be recognized by
shareholders of Marine who receive Old Florida common shares in
exchange for Marine common shares and cash in lieu of fractional
share interests, other than the gain or loss to be recognized as
to cash received in lieu of fractional share interests;
- Marine has received the opinion of Werner & Blank, LLC, legal
counsel to Old Florida, stating that:
- Old Florida is a corporation duly incorporated and in good
standing under the laws of the State of Florida;
- the merger agreement was duly executed by Old Florida and with
stated exceptions, constitutes the binding obligation of Old
Florida and is enforceable in accordance with its terms
against Old Florida;
- the Old Florida common shares issued in the merger will be
duly authorized, fully paid and nonassessible; and
- upon the filing of the articles of merger with the Florida
Department of State, the merger will become effective.
Where the law permits, Old Florida or Marine could decide to complete
the merger even though one or more conditions was not satisfied. By law, neither
Old Florida nor Marine can waive (1) the condition of adoption of the merger
agreement by Marine's shareholders or (2) any court order or law having the
effect of making illegal or otherwise prohibiting the consummation of the
merger. Whether any of the conditions would be waived would depend upon the
facts and circumstances as determined by the reasonable business judgment of the
board of directors of Old Florida or Marine.
EFFECTIVE TIME OF THE MERGER
Upon satisfaction or waiver of all conditions under the merger
agreement, Old Florida and Marine will cause an appropriate certificate of
merger to be filed with the Florida Department of State. The merger will become
effective upon the filing of the certificate of merger or at a time after the
filing that Old Florida and Marine agree to in writing and state in the
certificate of merger. Old Florida and Marine anticipate that the merger will be
completed by the end of the second quarter of 2003.
The closing of the transactions contemplated by the merger agreement
will take place on a day designated by Old Florida which is not:
- earlier than the third business day after the last of the
conditions described in the merger agreement has been satisfied or
waived in accordance with the terms of the merger agreement, or
- later than the last business day of the month in which that third
business day occurs.
However, the date chosen by Old Florida may not fall after September 30, 2003 or
after the date or dates on which any regulatory authority approval or extension
expires. Old Florida and Marine are also free to agree to close the transactions
on a different date.
38
AMENDMENT AND TERMINATION
Old Florida and Marine may amend the merger agreement at any time
before or after the Old Florida special meeting or the Marine special meeting.
However, after approval of the matters to be considered at the Marine special
meeting of shareholders, Marine may not make an amendment which by law requires
further approval by the Marine shareholders, unless that further approval is
obtained.
Old Florida and Marine may agree in writing to terminate the merger
agreement at any time before completion of the merger, even if the shareholders
of both Old Florida and Marine have adopted it.
Either Marine or Old Florida may decide to terminate the merger
agreement if:
- the merger has not been completed by September 30, 2003, unless
the failure to complete the merger arises out of or results from
the knowing action or inaction of the party seeking to terminate;
- the shareholders of Marine fail to adopt the merger agreement by
the requisite vote at the Marine special meeting of shareholders
or an adjournment of the Marine special meeting;
- a governmental authority fails to approve the merger; or
- conditions to the party's obligation to complete the merger are
not met as required by the merger agreement.
Old Florida may decide to terminate the merger agreement if Marine breaches any
representation, warranty, covenant or other agreement contained in the merger
agreement and does not cure the breach within 30 days following receipt of
written notice of the breach, or cannot cure the breach within that time, except
that the breach individually or in the aggregate, must have or be reasonably
likely to have a materially adverse effect.
Marine may decide to terminate the merger agreement if Old Florida breaches any
representation, warranty, covenant or other agreement in the merger agreement
and does not cure the breach within 30 days following receipt of written notice
of the breach, or cannot cure the breach within that time, except that the
breach, individually or in the aggregate, must have or be reasonably likely to
have a materially adverse effect.
In the event of termination, the merger agreement will become void
except that provisions regarding the accuracy of information provided for this
document, press releases, confidentiality, and the effect of termination of the
merger agreement will survive termination. The Option Agreement between Marine
and Old Florida will terminate in accordance with its terms. See the section in
this document titled "Other Material Agreements Related to the Merger" beginning
at page 39.
39
ACQUISITION PROPOSALS
Marine and Old Florida have each agreed, during the term of the merger
agreement, that it will not and will not permit its or any of its subsidiaries'
directors, officers, employees, agents or other representatives to, directly or
indirectly:
- solicit or encourage any inquiries or the making of any offer or
proposal regarding an acquisition proposal; or
- participate in any discussions or negotiations with, or provide
any confidential information to any person (other than the other
party to this agreement), concerning an acquisition proposal
Notwithstanding the prohibitions described above, Marine and Old
Florida each may furnish information to, and negotiate or otherwise engage in
discussions with any person with respect to an acquisition proposal if its board
of directors determines in good faith, after consultations with independent
legal counsel, that it is required by its fiduciary duties to do so.
Under the merger agreement, each of Marine and Old Florida is obligated
to notify the other promptly in writing of the receipt of any acquisition
proposal (including the substance of the proposal and the identity of the other
individual or entities involved). In addition, each of Marine and Old Florida
must promptly inform the other of any material developments with respect to the
acquisition proposal.
Under the merger agreement an "acquisition proposal" is defined as to
both Marine and Old Florida:
- a tender or exchange offer involving Marine or any of its
subsidiaries, or Old Florida or any of its subsidiaries;
- a proposal for a merger, consolidation or other business
combination involving Marine or any of its subsidiaries, or Old
Florida or any of its subsidiaries; or
- a proposal or offer to acquire 10% or more of the common shares,
assets or deposits of Marine or any of its subsidiaries, or Old
Florida or any of its subsidiaries.
COSTS AND EXPENSES; INDEMNIFICATION
Whether or not the merger is consummated, all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring those
costs and expenses, except that Old Florida and Marine will share all expenses
incurred in connection with filing, printing and mailing this proxy
statement/prospectus equally and Old Florida will pay all fees due to regulatory
authorities and the SEC in connection with the transactions contemplated by the
merger agreement.
Following the merger, Old Florida has agreed to indemnify the present
officers, directors and employees of Marine and each Marine subsidiary against
costs and expenses incurred in relation to claims arising before the merger to
the fullest extent Marine or any Marine subsidiary would have been permitted to
indemnify that person under Florida law and the governing documents of Marine.
In addition, for a period of three years after the effective time of the merger,
Old Florida will provide directors' and officers' liability insurance on terms
no less favorable than those in effect as of December 31, 2002, to indemnify the
present and former officers and directors of Marine and the Marine subsidiaries
with respect to claims against those individuals arising from facts or events
which occurred prior to the effective time of the merger. Old Florida will not
be required to pay more than 200% of the amount spent by Marine as of December
31, 2002, in order to maintain or procure that insurance, but if that limit is
met, Old Florida must use its reasonable best efforts to maintain or obtain as
much comparable insurance as can be obtained up to the 200% limit.
40
OTHER MATERIAL AGREEMENTS RELATING TO THE MERGER
OPTION AGREEMENT
To induce Old Florida to enter into the merger agreement, Marine
granted Old Florida an option to purchase up to 218,500 Marine common shares, or
19% of Marine's outstanding common shares, at $8.00 per share. Marine granted
this option to Old Florida under an option agreement dated as of December 31,
2002. The option will likely discourage competing offers for Marine. Old Florida
obtained it to increase the likelihood that the merger with Marine will be
completed. Old Florida may exercise the option if:
- any person, group or entity commences a tender offer or files a
registration statement for an exchange offer that if completed,
would enable it to own or control 10% or more of Marine's common
shares;
- Marine proposes to enter into or enters into an agreement (i) to
merge with someone other than Old Florida, (ii) to sell 10% or
more of its assets, or (iii) to issue shares representing 10% or
more of its shareholder voting power;
- another person acquires 10% or more of Marine's common shares; or
- the Marine shareholders do not approve the merger at the special
meeting of Marine shareholders, the meeting is not held, or
Marine's board of directors withdraws its unanimous recommendation
of the merger to Marine's shareholders in a manner adverse to Old
Florida, in each case after another person publicly announces its
proposal to merge with Marine or acquire 10% or more of its shares
or assets, or files a regulatory application for that purpose.
The option terminates on September 30, 2003, or earlier upon the
occurrence of certain events, such as denial of regulatory approval for the
merger.
You are urged to read the option agreement in its entirety. The option
agreement is attached to this document as Appendix B.
NONCOMPETITION AGREEMENTS
Each director of Marine (except Mr. Weaver who owns no outstanding
shares) has entered into a shareholder noncompetition agreement with Old Florida
dated as of December 31, 2002. Under the noncompetition agreement, each of those
Marine directors has agreed not to compete with Old Florida in Collier and Lee
Counties, Florida, for a period of one year following the merger. Mr. Weaver's
employment agreement with Marine contains similar provisions prohibiting him
from competing in Collier and Lee Counties for one year following termination of
his employment.
SHAREHOLDER AGREEMENT
In connection with the execution of the merger agreement, Marine's
directors entered into a shareholder agreement with Marine and Old Florida dated
as of December 31, 2002. In the shareholder agreement, each of Marines'
directors (with the exception of Mr. Weaver who owns no outstanding Marine
common shares) agreed to vote all of his Marine common shares:
- in favor of the adoption of the merger agreement and the approval
of the merger; and
- against any proposal or transaction that would impede the merger.
In the shareholder agreement, each of Marine's directors (with the
exception of Mr. Weaver who owns no outstanding Marine shares) also agreed not
to dispose of or encumber his Marine common shares and to cooperate with and
assist Old Florida and Marine to obtain all regulatory approvals required to
complete the merger, and to use his best efforts to cause Marine to perform its
obligations under the merger agreement and to recommend the approval of the
merger and the merger agreement to shareholders of Marine. Marine's directors
owned approximately 22% of the total outstanding Marine common shares as of
the record date for the special meeting of Marine's shareholders. This excludes
additional shares covered by unexercised warrants and options held by Marine's
directors, which are beneficially owned by them but cannot be voted for the
merger.
41
You are urged to read the shareholder agreement in its entirety. The
shareholder agreement is attached to this document as Appendix C.
RECOMMENDATION AND VOTE
The board of directors of Marine believes that the consummation of the
proposed merger is in the best interest of Marine and its shareholders. The
affirmative vote of the holders of a majority of the outstanding Marine common
shares is required for the merger agreement to be adopted.
THE MARINE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE MARINE
SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
RIGHTS OF DISSENTING SHAREHOLDERS
The following discussion is not a complete description of the law
relating to appraisal rights available under Florida law. This description is
qualified by the full text of the relevant provisions of the Florida Business
Corporation Act, which are reprinted in their entirety as Appendix E to this
proxy statement/prospectus. If you desire to exercise appraisal rights, you
should review carefully the Florida Business Corporation Act and are urged to
consult a legal advisor before electing or attempting to exercise these rights.
Under the Florida Business Corporation Act ("FBCA"), shareholders of
Marine have the right to dissent from the merger, and obtain payment of the fair
value of their shares. If the merger is completed, holders of Marine common
shares as of [The Record Date] who follow the procedures specified by Florida
law will be entitled to receive in cash the "fair value" of their shares as of
the day before the special meeting. Such value is exclusive of any appreciation
in anticipation of the merger, unless such exclusion would be inequitable, but
includes "a fair and equitable" rate of interest thereon. Shareholders who elect
to follow such procedures are called "dissenting shareholders" in this document.
A shareholder need not vote against the merger in order to exercise
dissenters' rights. However, voting in favor of the merger agreement will result
in the waiver of your right to demand payment for your shares under Florida law.
Under Florida law, a shareholder of Marine may dissent from the merger
by following the procedures described below:
- the dissenting shareholder must deliver to Marine, prior to the
special meeting called for the approval of the merger, written
notice of his or her intent to demand payment for his or her
shares;
- the dissenting shareholder must refrain from voting in favor of
the merger;
- within ten (10) days after the date of the special meeting, Marine
will give written notice of authorization of the merger by the
shareholders to such dissenting shareholder; and
- within twenty (20) days after the giving of notice to the
dissenting shareholder, the dissenting shareholder must file with
Marine a notice of election and a demand for payment of the fair
value of his or her shares.
Any dissenting shareholder filing an election to dissent shall deposit
his or her certificates for Marine common shares with Marine simultaneously with
the filing of the election to dissent. A shareholder may dissent as to less than
all of the Marine common shares held by him or her, and in such event, he or she
is treated as two separate shareholders. Once Marine offers to pay the
dissenting shareholder for his or her shares, the notice of election cannot be
withdrawn, except with the consent of Marine. However, the right of a dissenting
shareholder to be paid the fair value of his or her shares will cease if:
- the demand is withdrawn;
- the proposed merger is abandoned;
42
- no demand or petition for determination of fair value by a court
has been made or is filed within the time provided by law; or
- a court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by Florida law.
Within ten (10) days after the later of the expiration of the period in
which the dissenting shareholder may file his or her notice of election to
dissent or the effective time of the merger, Marine is required to make a
written offer to each dissenting shareholder to purchase the Marine common
shares at a price deemed by the surviving corporation to be the fair value of
those shares.
If, within thirty (30) days after the making of that offer, any
shareholder accepts the offer, payment will be made within ninety (90) days
after the later of the date the offer was made or the consummation of the
merger. However, if within that thirty (30) day period the surviving corporation
and the dissenting shareholder are unable to agree on a price, then the
surviving corporation, within thirty (30) days after receipt of written demand
from such dissenting shareholder given within sixty (60) days after the
effective time of the merger, shall, or at its election within such period may,
file an action in a court of competent jurisdiction in the county in which
Marine maintained its registered office, requesting that the fair value of the
shares of Marine common stock be determined. If Marine or the surviving
corporation fails to file such proceedings, any dissenting shareholder may do so
in the name of Marine. All dissenting shareholders, except for those that have
agreed upon a value with the surviving corporation, are deemed to be parties to
the proceeding. In such proceeding, the court may, if it so elects, appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The surviving corporation shall pay each dissenting
shareholder the amount found to be due within ten (10) days after final
determination of the proceedings. Upon payment of such judgment, the dissenting
shareholder will cease to have any interest in the shares of Marine common
shares.
Any judgment rendered in any dissent proceeding may, at the discretion
of the court, include an allowance for interest at such rate as the court may
deem fair and equitable. The court will determine the cost and expense of any
such dissent proceeding and such costs and expenses will be assessed against the
surviving corporation. However, all or any part of such cost and expense may be
apportioned and assessed against the dissenting shareholders, in such amount as
the court deems equitable, if the court determines that the surviving
corporation made an offer to the dissenting shareholders and the shareholders'
failure to accept such offer was arbitrary, vexatious or not in good faith. The
expenses awarded by the court shall include compensation for, and reasonable
expenses of, any appraiser but shall not include the fees and expenses of
counsel or experts employed by any party. If the fair value of the shares of
Marine common stock, as determined by the proceeding, materially exceeds the
amount which the corporation initially offered to pay, or if no offer was made,
the court, in its discretion, may award to any shareholder who is a party to the
proceeding such sum as the court may determine to be reasonable compensation for
any expert attorney or expert employed by the shareholder in the proceeding.
OLD FLORIDA FINANCIAL INFORMATION
Old Florida's audited consolidated balance sheets as of December 31,
2002 and 2001, and its audited consolidated statements of earnings, cash flows
and changes in stockholders' equity for the years then ended are set forth
beginning at page F-2 of this proxy statement/prospectus.
43
OLD FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of Old Florida's financial
condition and results of operation for its fiscal years ended December 31, 2002
and 2001, is set forth below. This discussion and analysis is intended to assist
you in understanding Old Florida's financial condition and results of
operations. You should read this commentary in conjunction with the consolidated
financial statements and the related notes and the other statistical information
included elsewhere in this document.
GENERAL
Old Florida Bank is a state-chartered commercial bank incorporated
under the laws of the State of Florida. The deposits of the bank are insured by
the FDIC. The bank currently provides a variety of banking services to small and
middle-market businesses and individuals through its two banking offices located
in Lee County, Florida.
Old Florida Bankshares, Inc. was incorporated on July 1, 2001. The
bank's stockholders exchanged their common shares for shares of Old Florida as
the holding company for the bank. As a result, all of the previously issued $5
par value common shares of the bank were exchanged for 1,216,595 shares of the
$0.01 par value common shares of Old Florida. The holding company's acquisition
of Bank was accounted for similar to a pooling of interests and, accordingly,
the financial data for periods presented include the results of the bank.
CRITICAL ACCOUNTING POLICIES
Management of Old Florida believes that the determination of the
allowance for loan losses represents a critical accounting policy. Old Florida
maintains an allowance for loan losses to absorb probable loan losses inherent
in the portfolio. The allowance for loan losses is maintained at a level
management considers to be adequate to absorb probable loan losses inherent in
the portfolio, based on evaluations of the collectibility and historical loss
experience of loans. Credit losses are charged and recoveries are credited to
the allowance. Provisions for loan losses are based on management's review of
the historical loan loss experience and such factors which, in management's
judgment, deserve consideration under existing economic conditions in estimating
probable credit losses. The allowance is based on ongoing assessments of the
probable estimated losses inherent in the loan portfolio. Old Florida's
methodology for assessing the appropriate allowance level consists of several
key elements, is described below.
Larger commercial loans that exhibit probable or observed credit
weaknesses are subject to individual review. Where appropriate, reserves are
allocated to individual loans based on management's estimate of the borrower's
ability to repay the loan given the availability of collateral, other sources of
cash flow and available legal options. Included in the review of individual
loans are those that are impaired as provided in Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended. Any specific reserves for impaired loans are measured based
on the fair value of the underlying collateral. Old Florida evaluates the
collectibility of both principal and interest when assessing the need for a
specific reserve. Historical loss rates are applied to other commercial loans
not subject to specific reserve allocations.
Homogenous loans, such as consumer installment and residential mortgage
loans, are not individually reviewed by management. Reserves are established for
each pool of loans based on the expected net charge-offs. Loss rates are based
on the average 4-year net charge-off history by loan category.
Historical loss rates for commercial and consumer loans may be adjusted
for significant factors that, in management's judgment, reflect the impact of
any current conditions on loss recognition. Factors which management considers
in the analysis include the effects of the local economy, trends in the nature
and volume of loans (delinquencies, charge-offs, nonaccrual and problem loans),
changes in the internal lending policies and credit standards, collection
practices, and examination results from bank regulatory agencies and the
Company's internal credit review function.
An unallocated reserve is maintained to recognize the imprecision in
estimating and measuring loss when evaluating reserves for individual loans or
pools of loans.
44
Specific reserves on individual loans and historical loss rates are
reviewed throughout the year and adjusted as necessary based on changing
borrower and collateral conditions and actual collection and charge-off
experience.
Old Florida has not substantively changed any aspect of its overall
approach in the determination of the allowance for loan losses since January 1,
2002. There have been no material changes in assumptions or estimation
techniques as compared to prior years that impacted the determination of the
allowance during 2002.
Based on the procedures discussed above, management believes the
allowance for loan losses was adequate to absorb estimated loan losses
associated with the loan portfolio at December 31, 2002. Actual results could
differ from these estimates.
LIQUIDITY AND CAPITAL RESOURCES
A state-chartered commercial bank is required under Florida law and
FDIC regulations to maintain a liquidity reserve of at least 15 % of its total
transaction accounts and 8 % of its total nontransaction accounts subject to
certain restrictions. The reserve may consist of cash-on-hand, demand deposits
due from correspondent banks, and other investments and short-term marketable
securities. At December 31, 2002, The bank significantly exceeded its regulatory
liquidity requirements.
The bank's primary source of funds during the year-ended December 31,
2002, was from:
- An increase in deposits of $11 million, which are used primarily
to originate net loans of $14 million.
At December 31, 2002, The bank had outstanding commitments to originate
loans totaling $2 million and commitments to borrowers under available lines of
credit totaling $18 million.
The bank's primary source of funds during the year ended December 31,
2001, was from:
- Proceeds from Federal Home Loan Bank advances of $3 million; and
- An increase in deposits of $1 million, which were used primarily
to originate net loans of $6 million.
At December 31, 2001, the bank had outstanding commitments to originate loans
totaling $8 million.
CREDIT RISK
The bank's primary business includes making commercial loans, primarily
secured by commercial real estate, and to a lesser extent single family
residential loans and consumer loans. That activity entails potential loan
losses, the magnitude of which depends on a variety of economic factors
affecting borrowers which are beyond the control of the Bank. While underwriting
guidelines and credit review procedures have been instituted to protect the bank
from avoidable credit losses, some losses will inevitably occur. At December 31,
2002, the bank had no nonperforming loans and no foreclosed real estate.
The following table sets forth information with respect to activity in
the bank's allowance for loan losses (dollars in thousands):
YEAR ENDED
DECEMBER 31,
------------
2002 2001
------ ------
Average loans outstanding................................................ 77,430 69,834
====== ======
Allowance at beginning of period......................................... $ 825 $ 745
Charge-offs:
Commercial...................................................... 0 0
Residential real estate......................................... 0 0
Consumer........................................................ $ 9 0
------- -------
Total loans charged-off ........................................ $ 9 0
Recoveries............................................................... 0 0
------- -------
Net (charge-offs) recoveries............................................. ($9) 0
Provision for loan losses charged to operating expenses.................. $ 149 $ 80
------- -------
Allowance at end of period............................................... $ 965 $ 825
======= =======
Net (charge-offs) recoveries to average loans outstanding................ .01 0
======= =======
Allowance as percent of total loans...................................... 1.09% 1.11%
======= =======
Allowance as percent of nonperforming loans.............................. N/A N/A
Total loans at end of period............................................. $88,533 $74,034
======= =======
45
The following table presents information regarding the total allowance
for loan losses as well as the allocation of such amounts to the various
categories of loans (dollars in thousands) for the dates indicated:
At December 31,
----------------------------------------------------------
2002 2001
----------------------------- ----------------------------
% of Loans to % of Loans to
Amount Total Loans Amount Total Loans
----------- ----------------- ----------- ----------------
Commercial real estate 714 89% 577 84%
Commercial 89 4% 95 6%
Residential real estate 70 5% 68 8%
Equity lines of credit and second mortgages 54 1% 50 1%
Consumer 38 1% 35 1%
----------- ----------------- ----------- ----------------
Total allowance for loan losses 965 100% 825 100%
----------- ----------------- ----------- ----------------
MANAGEMENT'S METHODOLOGY FOR DETERMINING THE ALLOWANCE FOR LOAN LOSSES
Federal regulations and generally accepted accounting principles
require that Old Florida establish prudent allowances for loan losses. Old
Florida maintains an allowance for loan losses to absorb probable loan losses
inherent in the portfolio, based on evaluations of the collectibility and
historical loss experience of loans. Loan losses are charged and recoveries are
credited to the allowance. Provisions for loan losses are based on management's
review of the historical loan loss experience and such factors which, in
management's judgment, deserve consideration under existing economic conditions
in estimating probable loan losses. The allowance is based on ongoing
assessments of the probable estimated losses inherent in the loan portfolio. Old
Florida's methodology for assessing the appropriate allowance level consists of
several key elements, described below.
Larger commercial loans that exhibit probable or observed credit
weaknesses are subject to individual review. Where appropriate, reserves are
allocated to individual loans based on management's estimate of the borrower's
ability to repay the loan given the availability of collateral, other sources of
cash flow and available legal options. Included in the review of individual
loans are those that are impaired as provided in Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended. Any specific reserves for impaired loans are measured based
on the fair value of the underlying collateral. Old Florida evaluates the
collectibility of both principal and interest when assessing the need for a
specific reserve. Historical loss rates are applied to other commercial loans
not subject to specific reserve allocations.
46
Homogenous loans, such as consumer installment and residential mortgage
loans, are not individually reviewed by management. Reserves are established for
each pool of loans based on the expected net charge-offs. Loss rates are based
on the average 4-year net charge-off history by loan category.
Historical loss rates for commercial and consumer loans may be adjusted
for significant factors that, in management's judgment, reflect the impact of
any current conditions on loss recognition. Factors which management considers
in the analysis include the effects of the local economy, trends in the nature
and volume of loans (delinquencies, charge-offs, nonaccrual and problem loans),
changes in the internal lending policies and credit standards, collection
practices, and examination results from bank regulatory agencies and Old
Florida's internal credit review function.
Specific reserves on individual loans and historical loss rates are
reviewed throughout the year and adjusted as necessary based on changing
borrower and/or collateral conditions and actual collection and charge-off
experience.
A portion of the allowance is not allocated to any particular loan type
and is maintained in recognition of the inherent inability to precisely
determine the loss potential in any particular loan or pool of loans. Among the
factors used by management in determining the unallocated portion of the
allowance are current economic conditions, trends in Old Florida's loan
portfolio delinquency, losses and recoveries, level of underperforming and
nonperforming loans, and concentrations of loans in any one industry.
Old Florida has not substantively changed any aspect of its overall
approach in the determination of the allowance for loan losses since January 1,
2002. There have been no material changes in assumptions or estimation
techniques as compared to prior years that impacted the determination of the
current year allowance.
Real estate acquired, or deemed acquired, by Old Florida as a result of
foreclosure proceedings is classified as other real estate owned ("OREO") until
it is sold. Interest accrual, if any, ceases no later than the date of
acquisition of the real estate, and all costs incurred from such date in
maintaining the property are expensed. OREO is recorded by Old Florida at the
lower of cost or fair value less estimated costs of disposal, and any write-down
resulting there from is charged to the allowance for loan losses.
As discussed above, the allowance is maintained at a level necessary to
absorb probable losses in the portfolio. Management's determination of the
adequacy of the reserve is based on reviews of specific loans, loan loss
experience, general economic conditions and other pertinent factors. If, as a
result of charge-offs or increases in risk characteristics of the loan
portfolio, the reserve is below the level considered by management to be
adequate to absorb probable loan losses, the provision for loan losses is
increased.
NONPERFORMING ASSETS
The bank places all loans past due 90 days or more on nonaccrual
status, unless the loan is both well collateralized and in the process of
collection. Cash payments received while a loan is classified as nonaccrual are
recorded as a reduction of principal as long as doubt exists as to collection.
At December 31, 2002 and 2001, the bank had no nonaccruing loans.
47
LOAN PORTFOLIO COMPOSITION
The bank has commercial real estate loans which comprise the largest group of
loans in the bank's loan portfolio. Commercial real estate loans amounted to $79
million or 89% of the total loan portfolio as of December 31, 2002.
The following table sets forth the composition of the bank's loan
portfolio (dollars in thousands):
At December 31,
---------------------------------------------------
2002 2001
---------------------------------------------------
% of % of
Amount Total Amount Total
------- ------- ------- -------
Commercial real estate ........................ $78,928 89% $62,094 84%
Commercial .................................... $ 3,778 4% $ 4,123 6%
Residential real estate ....................... $ 4,370 5% $ 5,686 8%
Equity lines of credit and second mortgage .... $ 807 1% $ 1,017 1%
Consumer ...................................... $ 650 1% $ 1,114 1%
======= ======= ======= =======
Subtotal ............................. $88,533 100% $74,034 100%
Subtract:
Net deferred loan fees......................... (296) (300)
Allowance for loan losses ..................... (965) (825)
------- -------
Loans, net..................................... $87,272 $72,909
======= =======
The following table shows the contractual maturities of Old Florida Bank's loan
portfolio at December 31, 2002. Loans that have adjustable rates are shown as
amortizing to final maturity rather than when the interest rates are next
subject to change. The table does not include prepayments or scheduled principal
repayments.
Mortgage Loans Total
-------------- Consumer Commercial Loans
Residential Other Loans Loans Receivable
----------- ----- ----- ----- ----------
(In thousands)
Amount due:
Within 1 year $ 82 $ 200 $ 39 $20,371 $20,692
1 to 3 years 29 0 413 10,483 10,925
3 to 5 years 1,305 607 81 12,443 14,436
5 to 10 years 0 0 117 35,238 35,355
10 to 20 years 2,954 0 0 4,171 7,125
Over 20 years 0 0 0 0 0
------- ------- ------- ------- -------
Total due after 1 year 4,288 607 611 62,335 67,841
------- ------- ------- ------- -------
Total amounts due $ 4,370 $ 807 $ 650 $82,706 $88,533
======= ======= ======= ======= =======
LOANS DUE AFTER DECEMBER 31, 2003. The following table sets forth at December
31, 2002, the dollar amount of all loans due after December 31, 2003, classified
according to whether such loans have fixed or adjustable interest rates.
48
Due after December 31, 2003
Fixed Adjustable Total
----- ---------- -----
(In thousands)
Mortgage loans:
Residential $ 0 $ 4,288 $ 4,288
Other 495 112 607
Consumer loans 611 0 611
Commercial loans 18,981 43,354 62,335
------- ------- -------
Total $20,087 $47,754 $67,841
======= ======= =======
INVESTMENT PORTFOLIO
SECURITIES
According to Financial Accounting Standards No. 115, a securities
portfolio is categorized as "held to maturity," "available for sale" or
"trading." Securities held to maturity represent those securities which the bank
has the positive intent and ability to hold to maturity and are carried at
amortized cost. Securities available for sale represent those securities which
may be sold for various reasons including changes in interest rates and
liquidity considerations. These securities are reported at fair market value
with unrealized gains and losses being reported as a separate component of
stockholders equity. Trading securities are held primarily for resale and are
recorded at their fair values. Unrealized gains or losses on trading securities
are included immediately in earnings. The bank does not maintain a trading
securities portfolio.
The amortized cost and estimated fair value of investment securities
available for sale at December 31, 2002 and 2001, by contractual maturity, are
shown below (in thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
without call or prepayment penalties. Mortgage backed securities amortize in
accordance with the terms of the underlying mortgages, including prepayments as
a result of refinancings and other early payouts. The bank had no securities at
either date classified as "held to maturity".
December 31, 2002 December 31. 2001
----------------- -----------------
Amortized Estimated Yield to Amortized Estimated Yield to
Cost Fair Value Maturity Cost Fair Value Maturity
---- ---------- -------- ---- ---------- ---------
U.S. Government Agencies:
Less Than 1 year $ 0 $ 0 0 $ 500 $ 506 5.75%
1 to 5 years 974 995 5.42% 1,985 1,976 4.68%
5 to 10 years 997 1,013 5.05% 499 509 5.75%
After 10 years 0 0 0 0 0 0
Collateralized Mortgage
Obligations 1,328 1,341 4.16% 4,264 4,304 5.51%
Mortgage Backed Securities 5,465 5,585 5.15% 1,146 1,163 6.23%
------ ------ ------ ------
Total $8,764 $8,934 5.02% $8,394 $8,458 5.43%
====== ====== ====== ======
49
SECURITIES PORTFOLIO.
The following table sets forth the carrying value of the bank's
securities portfolio (dollars in thousands):
AT DECEMBER 31,
---------------
2002 2001
---- ----
Securities Available for Sale:
U.S. Government mortgage-backed securities............................... $5,585 $1,163
U.S. Government agency securities........................................ $2,008 $2,991
Collateralized Mortgage Obligations...................................... $1,341 $4,304
------ ------
Total........................................................... $8,934 $8,458
====== ======
As of December 31, 2002 and 2001, we had short-term investments
consisting of federal funds sold and interest bearing deposits in other banks of
$3.8 million and $5.8 million, respectively. Generally, the federal funds are
sold on an overnight basis to other banks.
DEPOSITS
Core deposits, which exclude time deposits of $100,000 or more and
brokered deposits, provide a relatively stable funding source for our loan
portfolio and other earning assets. Our core deposits were $70.0 million as of
December 31, 2002 and $60.9 million as of December 31, 2001.
The average balance of our deposits and the average rates paid on such
deposits for the years ended December 31, 2002 and 2001 are as follows (in
thousands):
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Amount Rate Amount Rate
------ ---- ------ ----
Non-Interest Bearing Demand $ 8,675 - $ 6,767 -
Interest Bearing Demand and
Savings 36,819 1.30% 30,629 3.14%
Time Deposits 43,270 4.37% 40,715 6.66%
The maturity distribution of our time deposits of $100,000 or more as
of December 31, 2002 and 2001 is as follows (in thousands):
December 31, 2002 December 31, 2001
----------------- -----------------
Three months or less $ 4,021 $ 2,813
Over three through twelve months 6,571 8,608
Over twelve months 11,287 7,888
------- -------
Total $21,879 $19,309
======= =======
The banking industry uses two key ratios to measure relative
profitability of net interest income: net interest rate spread and net interest
margin. The net interest rate spread measures the difference between the average
yield on earning assets and the average rate paid on interest-bearing
liabilities. The interest rate spread ignores the impact of noninterest bearing
deposits and gives a direct perspective on the effect of market interest rate
movements. The net interest margin is defined as net interest income as a
percent of average total earning assets and takes into account the positive
impact of investing noninterest-bearing deposits and our capital, to the extent
not invested in non-earning assets.
50
Our net interest spread was 3.57% for 2002 and 2.73% in 2001, while our
net interest margin was 4.08% for 2002 and 3.57% in 2001. Our net interest
margin increased in 2002 because of our ability to reprice deposits lower, while
many loan rates reached their contractual floors, and remained relatively
stable.
The following table shows the relationship between interest income and
expense and the average balances of interest earning assets and interest bearing
liabilities (in thousands).
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
ASSETS
Interest earning assets:
Federal funds sold and interest
bearing deposits $ 7,315 $ 75 1.03% $ 6,812 $ 229 3.36%
Investment securities 10,333 576 5.57% 8,191 502 6.13%
Loans 77,430 6,064 7.83% 69,834 6,151 8.81%
-------- ------ ------- -------
Total interest earning assets 95,078 $6,715 7.06% 84,837 $ 6,882 8.11%
------ -------
All other assets 7,297 6,573
-- ----- -------
Total assets $102,375 $91,410
======== =======
LIABILITIES AND SHAREHOLDERS EQUITY
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
Interest-bearing deposits $ 80,089 $ 2,815 3.51% $71,344 $ 3,846 5.39%
Other borrowings 1,157 20 1.73% 254 6 2.36%
-------- ------- ------- -------
Total interest-bearing liabilities 81,246 2,835 3.49% 71,598 3,852 5.38%
-------- ------- -------
Other non-interest bearing
liabilities 9,416 8,898
Stockholders' equity 11,713 10,914
-------- -------
Total liabilities and stockholders'
equity $102,375 $91,410
======== =======
Net interest spread 3.57% 2.73%
Net interest income $ 3,880 $ 3,030
======= =======
Net interest margin on average
earning assets 4.08% 3.57%
Changes in interest income and interest expense can result from
variances in both volume and rates. The following table describes the impact on
the bank's net interest income resulting from changes in average balances and
average rates for the periods indicated. The changes in interest due to both
volume and rate have been allocated to volume and rate changes in proportion to
the relationship of the absolute dollar amounts of the changes in each.
51
YEAR ENDED DECEMBER 31,
2002 VS 2001
INCREASE (DECREASE) DUE TO
----------------------------------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
Interest earning assets:
Federal funds sold and
Interest bearing deposits (158) 17 (13) (154)
Investment securities (46) 131 (11) 74
Loans (684) 669 (72) (87)
------ ------ ------ ------
Total (888) 817 (96) (167)
Interest bearing liabilities
Deposits (1,341) 471 (161) (1,031)
Other (2) 21 (5) 14
------ ------ ------ ------
Total (1,343) 492 (166) (1,017)
------ ------ ------ ------
Net change in net
Interest income 455 325 70 850
====== ====== ====== ======
52
REGULATORY CAPITAL REQUIREMENTS
As of December 31, 2002, the most recent notification from the
regulatory authorities categorized the bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage percents as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
Bank's category. The bank's actual capital amounts and percentages are also
presented in the table (dollars in thousands).
FOR CAPITAL FOR WELL
ADEQUACY CAPITALIZED
ACTUAL PURPOSES PURPOSES
------ -------- --------
AMOUNT PERCENT PERCENT PERCENT
------ ------- ------- -------
AS OF DECEMBER 31, 2002:
Total capital (to Risk-
Weighted Assets) $ 12,287 13.35% 8.00% 10.00%
Tier I Capital (to Risk-
Weighted Assets 11,322 12.30 4.00 6.00
Tier I Capital
(to Average Assets) 11,322 10.96 4.00 5.00
AS OF DECEMBER 31, 2001:
Total capital (to Risk-
Weighted Assets) 11,779 15.20 8.00 10.00
Tier I Capital (to Risk-
Weighted Assets) 10,954 14.14 4.00 6.00
Tier I Capital
(to Average Assets) 10,954 11.65 4.00 5.00
MARKET RISK
Market risk is the risk of loss from adverse changes in market prices
and rates. The bank does not engage in trading or hedging activities and does
not invest in interest-rate derivatives or enter into interest rate swaps. The
bank's market risk arises primarily from interest-rate risk inherent in its
lending and deposit taking activities. To that end, management actively monitors
and manages its interest-rate risk exposure. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in the Notes to the Consolidated Financial Statements.
The bank's primary objective in managing interest-rate risk is to
minimize the adverse impact of changes in interest rates on the bank's net
interest income and capital, while adjusting the bank's asset-liability
structure to obtain the maximum yield-cost spread on that structure. The bank
relies primarily on its asset-liability structure to control interest rate risk.
However, a sudden and substantial change in interest rates may adversely impact
the bank's earnings, to the extent that the interest rates borne by assets and
liabilities do not change at the same speed, to the same extent, or on the same
basis.
The bank uses modeling techniques to simulate changes in net interest
income under various rate scenarios. Important elements of these techniques
include the mix of floating versus fixed rate assets and liabilities, and the
scheduled, as well as expected, repricing and maturing volumes and rates of the
existing balance sheet.
53
ASSET AND LIABILITY STRUCTURE
As part of its asset and liability management, the bank has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the bank's
earnings. Management believes that these processes and procedures provide the
bank with better capital planning, asset mix and volume controls, loan-pricing
guidelines, and deposit interest-rate guidelines which should result in tighter
controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A
gap is considered positive when the amount of interest-rate sensitive assets
exceeds interest-rate sensitive liabilities. A gap is considered negative when
the amount of interest-rate sensitive liabilities exceeds interest-rate
sensitive assets. During a period of rising interest rates, a negative gap would
adversely affect net interest income, while a positive gap would result in an
increase in net interest income. During a period of falling interest rates, a
negative gap would result in an increase in net interest income, while a
positive gap would adversely affect net interest income.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on the results of operations, the bank's
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of its interest-earning assets
and interest-bearing liabilities. Such policies have consisted primarily of
- emphasizing the origination of adjustable-rate loans, which carry
a floor rate of interest;
- maintaining a stable core deposit base; and
- maintaining a significant portion of liquid assets (cash and
short-term securities).
The bank's cumulative positive gap at the one year measurement period
was $25.1 million at December 31, 2002.
GAP analysis is not a precise indicator of our interest rate
sensitivity position. The analysis presents only a static view of the timing of
maturities and repricing opportunities. Since all instruments do not react the
same way or at the same time to changes in market rates. For this reason a
greater emphasis is placed on the simulation model data.
The following table sets forth certain information relating to the
bank's interest-earning assets and interest bearing liabilities at December 31,
2002, that are estimated to mature or are scheduled to reprice within the period
shown (dollars in thousands):
54
MORE MORE THAN MORE THAN MORE
THAN THREE SIX MONTHS ONE YEAR THAN FIVE OVER
THREE MONTHS TO TO ONE TO FIVE YEARS TO TEN
MONTHS SIX MONTHS YEAR YEARS TEN YEARS YEARS TOTAL
------ ---------- ---- ----- --------- ----- -----
Loans .................................. $ 38,607 $ 27,639 $ 11,781 $ 9,181 $ 1,325 $ 0 $ 88,533
Securities available for sale .......... 701 662 1,227 5,191 1,153 0 8,934
Fed Funds Sold & Interest Bearing
Deposits ............................... 3,809 0 0 0 0 0 3,809
Federal Home Loan Bank Stock ........... 0 0 0 0 0 169 169
Total-rate-sensitive assets ... $ 43,117 $ 28,301 $ 13,008 $ 14,372 $ 2,478 $ 169 $101,445
======== ======== ======== ======== ======== ======== ========
Deposit accounts
Savings NOW and money-
market deposits ............ $ 34,746 $ 0 $ 0 $ 0 $ 4,093 $ 0 $ 38,839
Time Deposits ................. 7,146 7,146 7,211 24,379 0 0 45,882
Federal Home Loan Bank
advances ................... 0 3,000 0 0 360 0 3,360
Other borrowings .............. 0 0 0 0 0 $ 0 0
-------- -------- -------- -------- -------- -------- --------
Total rate-sensitive
liabilities .......... $ 41,892 $ 10,146 7,211 $ 24,379 $ 4,453 0 $ 88,081
-------- -------- -------- -------- -------- -------- --------
GAP repricing differences .............. $ 1,225 $ 18,155 $ 5,797 $(10,007) $ (1,975) $ 169 $ 13,364
======== ======== ======== ======== ======== ======== ========
Cumulative GAP........................ $ 1,225 $ 19,380 25,177 $ 15,170 $ 13,195 $ 13,364
======== ======== ======== ======== ======== ========
Cumulative GAP/total assets........... 1.13% 17.91% 23.28% 14.02% 12.20% 12.35%
======== ======== ======== ======== ======== ========
Significant assumptions used in preparing the table above:
(1) Adjustable-rate loans are included in the period in which their interest
rates are next scheduled to adjust rather than in the period in which the loans
mature. Fixed-rate loans are scheduled, including repayments, according to their
contractual maturities. (2) Securities are scheduled according to the earlier of
their contractual maturity or the date in which the interest rate is scheduled
to increase. The effects of possible prepayments that may result from the
issuer's right to call a security before its contractual maturity date are not
considered. (3) Interest checking and money market deposits are regarded as
ready accessible withdrawable accounts. Savings are scheduled through expected
retention date; and certificates of deposit are scheduled through their maturity
dates.
COMPARISON OF YEARS ENDED DECEMBER 31, 2002 AND 2001
GENERAL
Net earnings for the year ended December 31, 2002, were $389 thousand
compared to net earnings of $208 thousand for the year ended December 31, 2001.
The increase in net earnings is primarily due to an increase in net interest
income. The following table shows some financial ratios for Old Florida for its
last two fiscal years.
At December 31,
------------------------------------
2002 2001
------------------------------------
Return on average assets 0.38% 0.23%
Return on average equity 3.32% 1.91%
Average equity to average assets 11.44% 11.94%
CHANGE IN FINANCIAL CONDITION 2002 VS 2001
Total assets increased $12.2 million or 13%, from $96.0 million at
December 31, 2001 to $108.2 million at December 31, 2002 primarily as a result
of a $14.3 million increase in loans. Loans were funded from an increase in
deposits of $11.8 million from $80.1 million at December 31, 2001 to $91.9
million at December 31, 2002. The $460,000 net increase in stockholders' equity
during the year ended December 31, 2002, resulted from net earnings of $389,000
and a $71,000 net of tax benefit increase in accumulated other comprehensive
income.
55
INTEREST INCOME AND EXPENSE
Interest income decreased $167 thousand from $6.9 million for the year
ended December 31, 2001 to $6.7 million for the year ended December 31, 2002.
The decrease was primarily due to the drop in interest rates during the year,
and the repricing of existing variable rate loans.
Interest expense decreased $1 million in 2002 compared to 2001. The
decrease was due to interest rates falling throughout the year, and the ability
to reprice maturities at lower rates.
PROVISION FOR LOAN LOSSES
The provision for loan losses is charged to operations to bring the
total allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by the Bank,
industry standards, the amounts of nonperforming loans, general economic
conditions, particularly as they relate to the Bank's market areas, and other
factors related to the collectibility of the loan portfolio. There was a $149
thousand provision recorded for the year ended December 31, 2002, compared to
$80 thousand in 2001. At December 31, 2002, the allowance for loan losses was
$965 thousand. While management believes that its allowance for loan losses is
adequate as of December 31, 2002, future adjustments to the bank's allowance for
loan losses may be necessary if economic conditions differ substantially from
the assumptions used in making the initial determination.
NONINTEREST INCOME
Noninterest income increased from $195 thousand in 2001 to $268
thousand in 2002 primarily due to increased service charges on deposit accounts
in 2002 compared to 2001 due to our continued emphasis on obtaining customer
transaction accounts and related fee income.
NONINTEREST EXPENSE
Total noninterest expense increased $585 thousand for the year ended
December 31, 2002, compared to 2001. Employee compensation and benefits
increased $379 thousand, and our data processing fees increased $78 thousand due
to increases in fees at contract renewal.
INCOME TAXES
The income tax provision increased from $146,000 for the year ended
December 31, 2001 (an effective tax rate of 41.2%) to $234,000 (an effective tax
rate of 37.6%) for the year ended December 31, 2002. The decrease in the
effective rate is due to a decrease in nondeductible expenses in relation to
earnings before income taxes.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, substantially all of the assets and
liabilities of the bank are monetary in nature. As a result, interest rates have
a more significant impact on the bank's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services.
RECENT PRONOUNCEMENTS
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others" ("FIN45"), which expands
previously issued accounting guidance and disclosure requirements for certain
guarantees. FIN 45 requires Old Florida to recognize an initial liability for
the fair value of an obligation assumed by issuing a
56
guarantee. The provision for initial recognition and measurement of the
liability will be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. The adoption of FIN 45 is not expected to
materially affect the consolidated financial statements.
In May, 2002, the FASB issued SFAS No. 145, "Recission of FASB
Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002." This statement rescinds SFAS No. 4 and 64,
"Reporting Gains and Losses from Extinguishment of Debt" and "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements," respectively, and restricts the
classification of early extinguishment of debt as an extraordinary item to the
provisions of APB Opinion No. 30. This statement also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers," which is no longer
necessary because the transition to the provisions of the Motor Carrier Act of
1980 is complete. The Statement also amends SFAS No. 13, "Accounting for
Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. Finally, the Statement makes various technical corrections to
existing pronouncements, which are not considered substantive. This statement is
effective for financial statements issued on or after May 15, 2002. The adoption
of this statement had no effect on the consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 provides guidance on
the recognition and measurement of liabilities for costs associated with exit or
disposal activities. SFAS No. 146 is effective for exit and disposal activities
that are initiated after December 31, 2002. The adoption of this Statement is
not expected to have any effect on the Company's consolidated financial
statements.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure" was issued in December, 2002. SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide three alternative methods
of transition to SFAS 123's fair-value method of accounting for stock-based
Compensation. This Statement is effective for fiscal years ending after December
15, 2002. The Company has elected to continue to use the Intrinsic Value Method.
Therefore, the only effect to the Company was additional disclosure requirements
in the footnotes to the consolidated financial statements.
MARINE FINANCIAL INFORMATION
Marine's audited balance sheets as of December 31, 2002 and 2001 and
its audited statements of income, cash flows and changes in shareholders' equity
for the years then ended are set forth beginning at page F-1 included as part of
this proxy statement/prospectus.
MARINE MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of Marine's financial condition
and results of operation for its fiscal years ended December 31, 2002 and 2001
is set forth below. This discussion and analysis is intended to assist you in
understanding Marine's financial condition and results of operations. You should
read this commentary in conjunction with the financial statements and the
related notes and the other statistical information included elsewhere in this
document, as well as with an understanding of Marine's short operating history.
OVERVIEW
BACKGROUND
Marine was incorporated in January 1997 to serve as a holding company
for Marine National Bank. For approximately the first 33 months of operation,
Marine's main activities centered on applying for a national bank charter,
applying to become a bank holding company, preparing the banking facilities,
hiring and training bank personnel, and raising capital in an initial public
offering to fund the start-up of Marine National Bank. On October 12, 1999,
Marine National Bank commenced operations.
57
During the development stage, from January 23, 1997 to October 12,
1999, Marine's net loss amounted to approximately $1,023,000.
From inception the Bank has experienced operating losses due in part to
operating and financial weaknesses. On September 11, 2001, the Bank entered into
a written agreement with the OCC to address these weaknesses. The agreement
requires, among other items, corrective actions to be taken by the Bank
involving management of its liquidity, interest rate risk, and loan portfolio
administration, and review of its bank information systems and effectiveness of
its internal audit program. On January 15, 2003, the Bank received notification
from the OCC that the Bank was considered to be in full compliance with the
written agreement. Until the agreement has been formally terminated by the OCC,
however, failure to maintain compliance with the various provisions could
subject the Bank to more restrictive and onerous regulatory actions.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are fundamental to understanding management's
discussion and analysis of results of operations and financial condition. The
accounting principles we follow and our methods of applying these principles
conform with accounting principles generally accepted in the United States and
with general practices within the banking industry. In connection with the
application of accounting principles, management has made significant judgments
and estimates that, in the case of the determination of our allowance for loan
losses, have been critical to the determination of our financial position,
results of operations and cash flows.
The collectibility of loans is reflected through our estimate of the
allowance for loan losses. We perform periodic and systematic detailed reviews
of our lending portfolio to assess overall collectibility. These reviews take
into consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect a borrower's ability to
pay, overall portfolio quality and reviews of specific problem loans. Actual
results could differ from those estimates.
A description of our other significant accounting policies can be found
in Note 1 of the Notes to Financial Statements.
NET INTEREST INCOME
Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
We reported a net loss for the year ended December 31, 2002 of
$440,000, compared to a net loss of $342,000 for the year ended December 31,
2001. Net interest income was $1.6 million in 2002 compared to $1.3 million in
2001. Other income was $201,000 for the year ended December 31, 2002 as compared
to $195,000 in 2001. Other expenses for the year ended 2002 totaled $2.0
million, compared to $1.8 million in 2001.
In 2002, average interest earning assets increased to $57.0 million, or
91.0% of total assets. This increase was primarily due to the increase in
investment securities. Average loans outstanding for 2002 were $31.8 million.
Average interest-bearing liabilities for 2002 increased to $52.5 million.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
We reported a net loss for the year ended December 31, 2001 of
$342,000, compared to a net loss of $1,709,000 for the year ended December 31,
2000. Net interest income was $1,288,000 in 2001 compared to $827,000 in 2000.
Other income was $195,000 for the year ended December 31, 2001 as compared to
$(33,000) in 2000. Other expenses for 2001 totaled $1,785,000, compared to
$2,323,000 in 2000.
In 2001, average interest earning assets increased to $50.7 million, or
89.6% of total assets. This increase was primarily due to the increase in loans
outstanding. Average loans outstanding for 2001 were $33.1 million. Average
interest-bearing liabilities for 2001 increased to $46.8 million.
Net interest income is the single largest contributor to earnings. Net
interest income is the interest we earn on loans and investments, reduced by the
interest we pay on deposit accounts. Net interest income was negatively impacted
during 2001 by the decline in interest rates, particularly during the second
half of the year. While we
58
initially benefited from the declining rate environment in terms of acquiring
new loan business, as rates continued to decline it became increasingly
difficult to grow net interest income at a pace consistent with our asset
growth. Our loan portfolio, which experienced a decline in rates, is largely
funded by fixed rate certificates of deposit, which did not experience immediate
rate declines. Each decline in rates therefore resulted in a relative decline in
net interest income due to this mismatch in what we had to pay versus what we
received. Toward the end of 2001, however, we did experience some benefit of the
lower rate environment, as CD's issued when we first opened began repricing at
lower rates. Significant management time and attention is focused on monitoring,
measuring and managing earnings in various rate environments.
The banking industry uses two key ratios to measure relative
profitability of net interest income: net interest rate spread and net interest
margin. The net interest rate spread measures the difference between the average
yield on earning assets and the average rate paid on interest-bearing
liabilities. The interest rate spread ignores the impact of noninterest bearing
deposits and gives a direct perspective on the effect of market interest rate
movements. The net interest margin is defined as net interest income as a
percent of average total earning assets and takes into account the positive
impact of investing noninterest-bearing deposits and our capital, to the extent
not invested in non-earning assets.
Our net interest spread was 2.56% for 2002 and 2.04% in 2001, while our
net interest margin was 2.86% for 2002 and 2.54% in 2001. Our net interest
margin increased in 2002 because of our ability to better match our rates paid
on interest bearing liabilities in relation to our interest earning assets.
The following tables show the relationship between interest income and
expense and the average balances of interest earning assets and interest bearing
liabilities (in thousands).
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------------------------- -------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
ASSETS
Interest earning assets:
Federal funds sold and interest
bearing deposits $ 3,268 $ 96 2.94% $ 7,342 $ 379 5.17%
Investment securities 21,960 1,231 5.60% 10,264 671 6.54%
Loans 31,812 2,307 7.25% 33,090 2,844 8.60%
------- ------ ------- ------
Total interest earning assets 57,040 $3,634 6.37% 50,696 3,894 7.68%
------ ------
All other assets 5,660 5,853
------- -------
Total assets $62,700 $56,549
======= =======
59
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------------------------- -------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings
deposits 16,929 404 2.39% 10,899 371 3.41%
Time deposits 29,714 1,380 4.63% 30,467 1,928 6.33%
Other borrowings 5,836 217 3.72% 4,833 308 6.37%
------- ------ ------- ------
Total interest-bearing liabilities 52,479 2,001 3.81% 46,199 2,607 5.64%
------- ------ ------
Other non-interest bearing liabilities 3,047 3,062
Stockholders' equity 7,174 7,288
------- -------
Total liabilities and stockholders'
equity 62,700 56,549
======= =======
Net interest spread 2.56% 2.04%
Net interest income 1,633 1,287
====== ======
Net interest margin on average earning
assets 2.86% 2.54%
Return on average assets (0.70)% (0.60)%
Return on average equity (6.13)% (4.69)%
Dividend payout ratio - -
Average equity to average assets 11.44% 12.89%
====== ======
Changes in interest income and interest expense can result from
variances in both volume and rates. The following table describes the impact on
Marine's net interest income resulting from changes in average balances and
average rates for the periods indicated. The changes in interest due to both
volume and rate have been allocated to volume and rate changes in proportion to
the relationship of the absolute dollar amounts of the changes in each.
VOLUME/RATE ANALYSIS
(in thousands)
INCREASE (DECREASE) DUE TO CHANGES IN:
2002 OVER 2001 2001 OVER 2000
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ----- ------ ---- -----
Interest income on:
Loans (including loan fees) $(106) (431) (537) $1,538 (227) 1,311
Investment securities 669 (109) 560 (955) (55) (1,010)
=====
Federal funds sold (159) (124) (283) (64) (63) (127)
----- ----- ----- ------ ----- ------
Total interest earning assets 404 (664) (260) (519) (345) 174
----- ----- ----- ------ ----- ------
Interest expense on:
Interest-bearing deposits 258 (773) (515) 160 (453) (293)
Other borrowed funds 55 (146) (91) 12 (5) 7
----- ----- ----- ------ ----- ------
Total interest-bearing liabilities 313 (919) (606) 172 (458) (286)
----- ----- ----- ------ ----- ------
Increase (decrease) in net interest
income $ 91 255 346 $ 347 113 460
===== ===== ===== ====== ===== ======
60
OTHER INCOME AND OTHER EXPENSES
Noninterest Income. Noninterest income consists predominately of
service charges on deposit accounts, secondary market mortgage origination fees,
gains and losses from the sale of investment securities and other miscellaneous
revenues and fees. Because fees from the origination of mortgage loans often
reflect market conditions, our noninterest income may tend to have more
fluctuations on a quarter to quarter basis than does net interest income.
Noninterest expense. Noninterest expense consists of salaries and
employee benefits, equipment and occupancy expenses, and other operating
expenses. Our primary component of noninterest expense is salaries and employee
benefits.
Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
Noninterest income and Noninterest expense
Other operating income for the twelve months ended December 31, 2002
totaled $201,000, representing service charges on deposit accounts of $48,000,
mortgage origination fees of $118,000, gains on sales of investment securities
of $23,000, and other miscellaneous income of $12,000. This is an increase from
$195,000 in 2001. Operating expenses in 2002 were $2.0 million, a $181,000
increase compared with 2001 levels, primarily due to additional personnel and
occupancy expense.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Noninterest income and Noninterest expense
Other operating income for the twelve months ended December 31, 2001
totaled $195,000, representing service charges on deposit accounts of $43,000,
mortgage origination fees of $91,000, gains on sales of investment securities of
$52,000 and other miscellaneous income of $9,000. This is an increase from
$(33,000) in 2000, when we experienced an 83,000 loss on the sale of securities.
Operating expenses in 2001 were $1,785,000, a $538,000 decrease compared with
2000 levels, primarily due to certain personnel costs being recognized in 2000
relating to employment terminations.
CHANGES IN FINANCIAL CONDITION
Total assets at December 31, 2002 were $62.9 million, representing a
$3.9 million, or 7%, increase from December 31, 2001. Deposits increased $3.1
million, or 7%, from December 31, 2001. Net loans decreased $1.8 million, or 5%,
from December 31, 2001. The allowance for loan losses at December 31, 2002
totaled $566,000, representing 1.7% of total loans compared to the December 31,
2001 total of $261,000, which represented .75% of total loans. Cash and cash
equivalents increased $4.9 million from December 31, 2001 due to the overall
growth of our balance sheet and our need to maintain a necessary level of
liquidity related to this growth.
LOAN PORTFOLIO
Because loans typically provide higher interest yields than do other
types of earning assets, our intent is to channel a substantial percentage of
earning assets into loans. Total net loans outstanding at December 31, 2002 and
2001 were $32.8 million and $34.6 million, respectively.
61
Major classifications of loans (in thousands) as of December 31, 2002
and 2001 are summarized as follows:
December 31, 2002 December 31, 2001
----------------- -----------------
Amount % of total Amount % of total
------ ---------- ------ ----------
Commercial and commercial real estate $19,766 59.22% $ 22,009 62.97%
Real estate -- mortgage 9,593 28.75% 10,554 30.20%
Lines of credit 498 1.49% 621 1.78%
Consumer 3,518 10.54% 1,768 5.05%
------- ------ -------- ------
Total loans 33,375 100.00% 34,952 100.00%
====== ======
Less: Unearned income and deferred loan fees 56 67
Allowance for loan losses 566 261
------- -------
Total net loans $32,753 $34,624
======= =======
The largest component of our loan portfolio was commercial and
commercial real estate loans, which represented 59.22% and 62.97% of the loan
portfolio as of December 31, 2002 and 2001, respectively. Of the $19.8 million
in commercial loans, $14.3 million are commercial loans secured by commercial
properties. Due to the short time frame the portfolio has existed, the current
loan mix may not be indicative of the ongoing make-up of the portfolio. In order
to reduce risk, our goal is to maintain a reasonably diversified portfolio.
Maturities of all loans as of December 31, 2002 are summarized as follows:
1 Year or 1 to 5 Over
Less Years 5 Years Total
Commercial and commercial real estate $ 5,121,890 $ 8,524,706 $ 6,119,656 $19,766,252
Real Estate -- mortgage 3,681,693 3,069,965 2,840,660 9,592,318
Lines of credit 141,992 176,816 179,476 498,284
Consumer 1,051,262 1,461,508 1,005,403 3,518,173
----------- ----------- ----------- -----------
Total Loans $ 9,996,837 $13,232,995 $10,145,195 $33,375,027
----------- ----------- ----------- -----------
At December 31, 2002, we had $10.4 million in loan participations
purchased and $2.9 million in loan participations sold. Investments in loan
participations typically have a greater yield than investments in securities and
federal funds and as a result, generally improve our interest rate spread. We
use the same credit policies and standards in purchasing loan participations as
we do for loans we originate and as of December 31, 2002, have not experienced
any losses related to participations purchased.
We classify loans as non-accrual generally when they are past due in
principal or interest payments for more than 90 days or it is otherwise not
reasonable to expect collection of principal and interest under the original
terms. Exceptions are allowed for 90-day past-due loans when such loans are well
secured and in process of collection. Generally, payments received on
non-accrual loans are applied directly to principal. We have adopted the
principles of Financial Accounting Standards Board ("FASB") SFAS No. 114 and No.
118 relating to accounting for impaired loans. A loan is considered impaired
when, based on current information and events, it is probable that all amounts
due according to the contractual terms of the loan will not be collected.
Impaired loans are measured based on the present value of collateral if the loan
is collateral dependent. As of December 31, 2002 and 2001, we had no non-accrual
loans or loans past due greater than 90 days.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Management's judgment in determining the adequacy of the allowance for
loan losses is based on evaluations of the collectibility of loans in the
portfolio. These evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, current economic conditions that
may affect a borrower's ability to pay, overall portfolio quality, and reviews
of specific problem loans. In determining the adequacy of the allowance for loan
losses, management uses a loan grading system that rates loans in different
grading categories.
62
Grades five, six and seven, which represent criticized or classified loans
(loans with greater risk of loss potential), are assigned allocations of loss
based on published regulatory guidelines. These loans are inadequately protected
by the current net worth or paying capacity of the borrower or the collateral
pledged. Loans classified in this manner have well-defined weaknesses that
jeopardize liquidation of the debt. Loans graded one through four are stratified
by type and allocated loss ranges based on management's perception of the
inherent loss for the strata. The combination of these results are compared
monthly by management to the recorded allowance for loan losses and material
differences are adjusted by increasing or decreasing the provision for loan
losses.
We use an external loan review function to place loans into various
loan grading categories, which assists in developing lists of potential problem
loans. These loans are continuously monitored by the loan review function to
ensure early identification of any deterioration. The reserves are reviewed by
the Board on a quarterly basis in compliance with regulatory requirements.
Because of our limited operating history, our current reserving process is
somewhat speculative and may be influenced by factors not directly relevant to
projectable loan losses in our loan portfolio. As the loan portfolio matures, a
more comprehensive methodology, which considers risk by loan types, as well as
our loss history, will be employed. Management attempts to maintain an allowance
that is deemed adequate based on the evaluation of specific credits along with
the overall condition of the portfolio.
As of December 31, 2002, the allowance for loan losses was $566,000, or
1.70% of outstanding loans, as compared to $261,000, or .75% of outstanding
loans at December 31, 2001.
We provided $308,000, and $40,000 for the years ended December 31, 2002
and 2001, respectively, to the allowance for loan losses for potential problem
loans. The loan loss provision in 2002 reflected the results of an in-depth
study by management of the loan portfolio.
The following presents an analysis of the allowance for loan losses,
including charge-off activity.
December 31, 2002 December 31, 2001
----------------- -----------------
Balance at Beginning of Period $ 261,116 $ 230,000
--------- ---------
Charge-offs:
Commercial and commercial real estate 0 0
Real estate -- mortgage 0 0
Lines of credit 0 0
Consumer 3,430 8,884
--------- ---------
3,430 8,884
--------- ---------
Recoveries:
Commercial and commercial real estate 0 0
Real estate -- mortgage 0 0
Lines of credit 0 0
Consumer 147 0
--------- -
147 0
--------- -
Net charge-offs (3,283) (8,884)
--------- ---------
Provision charged to operations 308,086 40,000
--------- ---------
Balance at end of period $ 565,919 $ 261,116
========= =========
Ratio of net charge-offs during the period to (0.01)% 0.0%
average loans outstanding during the period
INVESTMENT PORTFOLIO
The investment securities portfolio as of December 31, 2002 and 2001
was $19.0 million and $17.9 million, respectively. The increase in the
investment portfolio was due to the overall growth of our balance sheet
63
and related liquidity needs. We believe the investment portfolio provides a
balance to interest rate and credit risk in other categories of the balance
sheet while providing a vehicle for the investment of available funds.
The amortized cost and estimated fair value of investment securities
available for sale at December 31, 2002 and 2001, by contractual maturity, are
shown below (in thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
without call or prepayment penalties. Mortgage backed securities amortize in
accordance with the terms of the underlying mortgages, including prepayments as
a result of refinancings and other early payouts.
December 31, 2002 DECEMBER 31, 2001
----------------- -----------------
Amortized Estimated Yield to Amortized Estimated Yield to
Cost Fair Value Maturity Cost Fair Value Maturity
---- ---------- -------- ---- ---------- --------
U.S. Government Agencies:
Less than 1 year $ 504 $ 508 2.77% $ - $ - -
1 to 5 years 1,500 1,507 2.81% - - -
5 to 10 years 1,000 1,000 5.20% 1,000 1,000 6.40%
After 10 years 4,000 4,114 6.35% 11,997 11,796 6.36%
Collateralized Mortgage
Obligations 3,408 3,420 3.67% 4,172 4,215 6.79%
Mortgage Backed Securities 8,401 8,504 4.38% 844 864 6.42%
------- ------- ------- -------
Total $18,813 $19,053 4.55% $18,013 $17,875 6.47%
======= ======= ======= =======
As of December 31, 2002 and 2001, we had short-term investments
consisting of federal funds sold, securities purchased under agreements to
resell and interest bearing deposits in other banks of $4.6 million and $0,
respectively. Generally, the federal funds and securities purchased under
agreements to resell are sold on an overnight basis to other banks.
DEPOSITS
Core deposits, which exclude time deposits of $100,000 or more and
brokered deposits, provide a relatively stable funding source for our loan
portfolio and other earning assets. Our core deposits were $37.3 million as of
December 31, 2002 and $32.8 million as of December 31, 2001.
The average balance of our deposits and the average rates paid on such
deposits as of December 31, 2002 and 2001 are as follows (in thousands):
December 31, 2002 December 31, 2001
------------------ ------------------
Amount Rate Amount Rate
------ ---- ------ ----
Non-Interest Bearing Demand $ 2,212 - $ 1,928 -
Interest Bearing Demand and
Savings $ 16,929 2.39% $10,899 3.41%
Time Deposits $ 29,714 4.63% $30,467 6.33%
The maturity distribution of our time deposits of $100,000 or more as
of December 31, 2002 and 2001 is as follows (in thousands):
December 31, 2002 December 31, 2001
----------------- -----------------
Three months or less $ 1,134 $ 3,793
Over three through twelve months 4,763 7,490
Over twelve months 6,929 2,972
------ ------
Total $ 12,826 $ 14,255
====== ======
64
LIQUIDITY
We must maintain, on a daily basis, sufficient funds to cover the
withdrawals from depositors' accounts and to supply new borrowers with funds. To
meet these obligations, we keep cash on hand, maintain account balances with
correspondent banks, and purchase and sell federal funds and other short-term
investments. Asset and liability maturities are monitored in an attempt to match
these maturities to meet liquidity needs. It is our policy to monitor our
liquidity to meet regulatory requirements and local funding requirements. We
believe our current level of liquidity is adequate to meet our needs.
Our primary source of liquidity is a stable base of deposits. We raise
deposits by providing deposit services in our market and through deposit
brokers. Scheduled repayments on loans, and interest and maturities of our
investments also provide liquidity. All of our securities have been classified
as available-for-sale. If necessary, we have the ability to sell a portion of
our investment securities to manage our interest sensitivity gap or liquidity.
We may also utilize cash and due from banks and federal funds sold to meet
liquidity needs.
At December 31, 2002, we had unused lines of credit totaling $14
million. Those lines of credit included $4 million available for the purchase of
overnight federal funds from two correspondent financial institutions and $10
million available under a line of credit agreement secured by marketable
securities. As of December 31, 2002, we had no outstanding balances under these
arrangements.
Our cash flows are composed of three classifications: cash flows from
operating activities, cash flows from investing activities, and cash flows from
financing activities. Cash and cash equivalents increased by $4.9 million to
$5.6 million during the year ended December 31, 2002, and decreased by $7.8
million to $688,000 during the year ended December 31, 2001. The increase in
2002 was primarily attributable to the overall growth of our balance sheet and
our need to maintain a necessary level of liquidity related to this growth. The
decrease for 2001 was attributable to management's efforts to grow interest
earning assets. Cash provided (used) by operations totaled $102,000 and
($68,000), respectively, for the years ended December 31, 2002 and 2001. Net
cash provided by financing activities for the years ended December 31, 2002 and
2001 totaled $4.2 million and $5.0 million, respectively, which was primarily
made up of $3.1 million and $8.3 million, respectively, of increased deposits.
Cash provided (used) by investing activities for the years ended December 31,
2002 and 2001 totaled $629,000 and ($12.8) million, respectively. Net loans
decreased in 2002 by $1.6 million and increased in 2001 by $4.2 million.
Proceeds from the sale of investment securities available-for-sale were $7.0
million and $1.8 million in 2002 and 2001, respectively, and proceeds from
maturities, paydowns and calls of investment securities were $15.5 million and
$10.7 million, respectively.
INTEREST RATE SENSITIVITY
Asset/liability management is the process by which we monitor and
control the mix and maturities of our assets and liabilities. The essential
purposes of asset/liability management are to ensure adequate liquidity and to
maintain an appropriate balance between interest sensitive assets and interest
sensitive liabilities to minimize potentially adverse impacts on earnings from
changes in market interest rates. Interest rate sensitivity can be managed by
repricing assets or liabilities, selling securities available-for-sale,
replacing an asset or liability at maturity, or adjusting the interest rate
during the life of an asset or liability. Managing the amount of assets and
liabilities repricing in the same time interval helps to minimize interest rate
risk and manage net interest income in changing interest rate environments.
We use income simulation modeling as our primary tool to measure
interest rate risk and to manage our interest rate sensitivity. Simulation
modeling considers not only the impact of changing market rates of interest on
future net interest income, due to its affect on our interest-earning assets and
interest-bearing liabilities, but also other potential causes of variability
such as changes in earning asset levels, mix, yield, and general market
conditions by simulating various increasing and decreasing interest rates. In
managing our interest rate sensitivity, our simulation modeling allows us to
focus on the maturity of assets and liabilities and their repricing
characteristics during periods of changing interest rates. This process allows
us to manage both our assets and liabilities to respond quickly to changes in
interest rates, thereby minimizing the effects of interest rate movements on our
net interest income.
65
Another monitoring technique that we employ is the measurement of our
interest sensitivity "gap", which is the positive or negative dollar difference
between assets and liabilities that are subject to interest rate repricing
within a given period of time. Our net interest income generally would benefit
from rising interest rates when we have an asset-sensitive gap position.
Conversely, our net interest income generally would benefit from decreasing
interest rates of interest when we have a liability-sensitive gap position.
To measure our interest sensitivity gap, we continually evaluate the
asset mix of our balance sheet in terms of several variables: yield, credit
quality, appropriate funding sources and liquidity. To effectively manage the
liability mix of the balance sheet, we focus on expanding the various funding
sources. The interest rate sensitivity position as of December 31, 2002 is
presented in the following table (in thousands). The difference between rate
sensitive assets and rate sensitive liabilities, or the interest rate
sensitivity gap, is shown at the bottom of the table. Since all interest rates
and yields do not adjust at the same velocity, the gap is only a general
indicator of rate sensitivity. The table may not be indicative of our rate
sensitivity position at other points in time.
One year After one but After five Total
or less within five years years -----
------- ----------------- -----
Rate sensitive assets:
Investment portfolio $ 248 $ 6,281 $12,524 $19,053
Short term investments 4,831 - - 4,831
Loans 16,355 14,398 2,566 33,319
-------- -------- ------- -------
Total rate sensitive assets 21,434 20,679 15,090 57,203
-------- -------- ------- -------
Rate sensitive liabilities:
Interest bearing deposits 23,964 24,234 - 48,198
FHLB advances 4,800 - - 4,800
-------- -------- ------- -------
Total rate sensitive liabilities 28,764 24,234 - 52,998
Interest sensitive gap (7,330) (3,555) 15,090
Cumulative interest sensitivity gap $ (7,330) $(10,885) $4,205
Ratio of cumulative interest sensitivity
gap to total earning assets (12.81%) .19% 7.35%
======= ==== =====
As indicated in the table above, during the first year approximately
54% of the interest bearing liabilities will reprice within one year while 38%
of the interest earning assets will reprice within the same period. The table
also highlights that Marine is liability sensitive in the first 12 months and
within the next five years (as indicated by a negative gap) and cumulatively
asset sensitive after five years (as indicated by a positive gap).
Our gap analysis is not a precise indicator of our interest sensitivity
position. The analysis presents only a static view of the timing of maturities
and repricing opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally. Varying
interest rate environments can create unexpected changes in the prepayment of
assets and liabilities that are not reflected in the interest rate sensitivity
analysis. For this reason, we place greater emphasis on the simulation modeling
analysis discussed above.
66
CAPITAL ADEQUACY
We are subject to various regulatory capital requirements administered
by the federal banking agencies. As of December 31, 2002, we maintained capital
ratios in the "well capitalized" classification.
The following tables present our regulatory capital position at
December 31, 2002:
Risk-Based Capital Ratios
Tier 1 Tangible Capital, actual 15.60%
Tier 1 Tangible Capital minimum requirement 4.00%
-----
Excess 11.60%
=====
Total Capital, actual 16.85%
Total Capital minimum requirement 8.00%
-----
Excess 8.85%
=====
Leverage Ratio
Tier 1 Tangible Capital to Adjusted Total
Assets, actual 10.31%
Minimum leverage requirement 4.00%
-----
Excess 6.31%
=====
IMPACT OF INFLATION AND CHANGING PRICES
The effect of relative purchasing power over time due to inflation has
not been taken into effect in our financial statements. Rather, the statements
have been prepared on an historical cost basis in accordance with generally
accepted accounting principles in the United States of America.
Because most of the assets and liabilities of a financial institution
are monetary in nature, the effect of changes in interest rates will have a more
significant impact on our performance than will the effect of changing prices
and inflation in general. Interest rates may generally increase as the rate of
inflation increases, although not necessarily in the same magnitude.
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show you the pro forma impact
of the merger on the historical financial position and results of operations of
Old Florida. The unaudited pro forma condensed combined statement of income
reflects the consolidation of the results of operations of Old Florida and
Marine for the 12 months ended December 31, 2002.
In accordance with the merger agreement, each common share of Marine
will be converted in the merger into the right to receive .62 of an Old Florida
common share plus cash in lieu of any fractional share.
The unaudited pro forma condensed combined financial information
reflects the merger based on preliminary purchase accounting adjustments.
Estimates relating to the fair value of certain assets, liabilities and other
items have been made as more fully described in the notes to the unaudited pro
forma condensed combined financial information. Actual adjustments, which may
include adjustments to additional assets, liabilities and other items, will be
made on the basis of appraisals and evaluations as of the effective date of the
merger and, therefore, may differ from those reflected in the unaudited pro
forma condensed combined financial information.
The combined company expects to achieve substantial merger benefits
through operating cost savings. The unaudited condensed combined statement of
income, which does not reflect any direct costs or potential savings which are
expected to result from the consolidation of operations of Old Florida and
Marine, is not necessarily indicative of the results of future operations. No
assurances can be given with respect to the ultimate level of cost savings or
other merger synergies to be realized.
67
The following information should be read in conjunction with and is
qualified in its entirety by the historical financial information that Old
Florida and Marine have presented in the proxy statement/prospectus. See the
sections in this document titled "Old Florida Financial Information" and "Marine
Financial Information" beginning at pages 41 and 52, and Appendices F and G.
The unaudited pro forma condensed combined financial information is
intended for information purposes and is not necessarily indicative of the
future financial position or future results of the combined company or of the
financial position or the results of operations of the combined company that
would have actually occurred had the merger been in effect as of the date or for
the periods presented.
PRO FORMA PER SHARE DATA
The following table summarizes the historical consolidated and pro
forma net earnings and net worth of Old Florida and Marine after giving effect
to the proposed acquisition at and for the year ended December 31, 2002. The pro
forma data is based on the aggregate purchase price of $8,913,000, represented
by 713,000 Old Florida common shares, for all of the outstanding shares of
Marine at January 1, 2002 and for the year ended December 31, 2002. Marine
shares may be exchanged for Old Florida common shares, using an exchange ratio
of .62 of a share of Old Florida for each Marine share tendered. The information
presented below is provided for informational purposes only and is not
necessarily indicative of the combined financial position or results of
operation which actually would have occurred if the transaction had been
consummated at the date and for the period indicated or which may be obtained in
the future. This information should be read in conjunction with the separate
consolidated financial statements and notes thereto of both Old Florida and
Marine, the respective Management's Discussion and Analysis of Financial
Condition and Results of Operations of both Old Florida and Marine and the other
unaudited pro forma financial information, all included elsewhere in this Proxy
Statement/Prospectus.
AT OR FOR THE
YEAR ENDED
DECEMBER 31, 2002
----------------------
(DOLLARS IN THOUSANDS)
Shares outstanding at end of period:
Assumed number of shares of Old Florida common stock issued......... 713,000
Shares of common stock of Old Florida before acquisition............ 1,216,595
---------------
Pro forma shares of Old Florida common stock outstanding
after acquisition.............................................. 1,929,595
===============
Consolidated net earnings (loss):
Old Florida - historical............................................ $ 389
Marine - historical................................................. (440)
Adjustments for the acquisition..................................... 168 (1)
---------------
Combined entity - pro forma after acquisition.................. $ 117
===============
Consolidated stockholders' equity:
Old Florida - historical............................................ $ 11,974
Marine - historical................................................. 7,010
Net issuance of Old Florida common stock............................ 8,913 (2)
Adjustments for the acquisition..................................... (7,010)(3)
---------------
Combined entity - pro forma after acquisition.................. $ 20,887
===============
Consolidated basic net earnings (loss) per share:
Old Florida - historical (4)........................................ $ .32
===============
Marine - historical (5)............................................. $ (.38)
===============
Old Florida - proforma after acquisition............................ $ .06
===============
Marine - proforma after acquisition (8)............................. $ .04
===============
68
AT OR FOR THE
YEAR ENDED
DECEMBER 31, 2002
-----------------
(DOLLARS IN THOUSANDS)
Consolidated diluted net earnings (loss) per share:
Old Florida - historical (4)..................................... $ .32
========
Marine - historical (5).......................................... $ (.38)
========
Old Florida - proforma after acquisition......................... $ .06
========
Marine - proforma after acquisition (8).......................... $ .04
========
Dividends per share:
Old Florida - historical......................................... $ -
========
Marine - historical.............................................. $ -
========
Marine - proforma after acquisition.............................. $ -
========
Consolidated book value per share:
Old Florida - historical (6)..................................... $ 9.84
========
Marine - historical (7).......................................... $ 6.10
========
Old Florida - proforma after acquisition......................... $ 10.82
========
Marine - proforma after acquisition (8).......................... $ 6.71
========
- -------------------------------
(1) Reflects pro forma adjustments as detailed on the pro forma combined
statement of operations.
(2) Reflects the issuance of 713,000 Old Florida common shares at an
assumed price of $12.50 per share as the consideration issued in the
acquisition.
(3) Represents elimination of stockholders' equity of Marine.
(4) Computed using 1,216,595 for basic and 1,230,523 for diluted for
December 31, 2002 weighted-average shares outstanding.
(5) Computed using 1,150,000 for basic and diluted for December 31, 2002
weighted-average shares outstanding.
(6) Computed using 1,216,595 at December 31, 2002 common shares
outstanding.
(7) Computed using 1,150,000 at December 31, 2002 common shares
outstanding.
(8) Computed using the related Old Florida's proforma after acquisition
amount multiplied by the exchange ratio.
69
PRO FORMA CONDENSED COMBINED CAPITALIZATION
The following table sets forth the capitalization of Old Florida at
December 31, 2002 and the pro forma capitalization of Old Florida, after giving
effect to the proposed acquisition assuming 713,000 shares of Old Florida shares
are issued in the acquisition. The information presented below should be read in
conjunction with the separate consolidated financial statements and notes
thereto of Old Florida and Marine, the respective Management's Discussion and
Analysis of Financial Condition and Results of Operations of Old Florida and
Marine, and other unaudited pro forma financial information, all included
elsewhere in this Proxy Statement/Prospectus.
AT DECEMBER 31, 2002
---------------------------------------------------------
PROFORMA
ADJUSTMENTS
FOR ACQUISITION
--------------- PRO
OLD FLORIDA MARINE DEBIT CREDIT FORMA
----------- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
Stockholders' equity:
Common stock $ 12 $ 11 $ 11(1) $ 7(2) $ 19
Additional paid-in capital............ 12,426 10,831 10,831(1) 8,906(2) 21,332
Accumulated deficit................... (577) (3,980) 3,980(1) (577)
Accumulated other comprehensive
income.......................... 113 148 148(1) - 113
------- ------- ------- ------- -------
Total stockholders' equity...... $11,974 $ 7,010 $10,990 $12,893 $20,887
====== ======= ======= ======= =======
- -----------------
(1) Reflects the elimination of the stockholders' equity of Marine.
(2) Reflects the issuance of 713,000 shares of Old Florida Common Stock
at an assumed price of $12.50 per share as the consideration issued
in the acquisition.
70
PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following Pro Forma Condensed Combined Balance Sheet reflects the
consolidated balance sheet of Old Florida as of December 31, 2002, after giving
effect to the proposed acquisition of Marine by Old Florida. The transaction
will be accounted for as a purchase and is based on assumptions explained herein
and in the Notes to Pro Forma Condensed Combined Balance Sheet and Statement of
Operations. The information presented below should be read in conjunction with
the separate consolidated financial statements and notes thereto of Old Florida
and Marine, the respective Management's Discussion and Analysis of Financial
Condition and Results of Operations of Old Florida and Marine and the other
unaudited pro forma financial information, all included elsewhere in this Proxy
Statement/Prospectus.
ADJUSTMENTS
FOR ACQUISITION
OLD ---------------
FLORIDA MARINE DEBIT CREDIT PROFORMA
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
ASSETS
Cash and cash equivalents ..................... $ 6,613 $ 5,571 - $ - $ 12,184
Securities available for sale ................. 8,934 19,053 - - 27,987
Other investments ............................. - 268 - - 268
Loans receivable, net ......................... 87,272 32,753 148(2) - 120,173
Premises and equipment, net ................... 4,131 4,504 68(4) 154(8) 8,549
Federal Home Loan Bank stock, at cost ......... 169 350 - - 519
Accrued interest receivable and other assets .. 767 353 - - 1,120
Deferred tax asset ............................ 262 (84) 1,486(6) 309(7)
58(8) 1,413
Core deposit intangible ....................... - - 1,524(5) - 1,524
----------- ----------- ----------- ----------- -----------
Total ................................. $ 108,148 $ 62,768 $ 3,284 $ 463 $ 173,737
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits ........................... $ 7,206 $ 1,941 $ - $ $ 9,147
Savings, NOW and money market deposits .... 38,839 20,124 - - 58,963
Time deposits ............................. 45,882 28,074 - 550(3) 74,506
----------- ----------- ----------- ----------- -----------
Total deposits ........................ 91,927 50,139 - 550 142,616
Federal Home Loan Bank advances ............... 3,360 4,800 - 68(3) 8,228
Other liabilities ............................. 887 819 - 300(18) 2,006
----------- ----------- ----------- ----------- -----------
Total liabilities ..................... 96,174 55,758 - 918 152,850
----------- ----------- ----------- ----------- -----------
Stockholders' equity:
Preferred stock ........................... - - - - -
Common stock .............................. 12 11 11(9) 7(1) 19
Additional paid-in capital ................ 12,426 10,831 10,831(9) 8,906(1) 21,332
Accumulated deficit ....................... (577) (3,980) - 3,980(9) (577)
Accumulated other comprehensive income .... 113 148 148(9) - 113
----------- ----------- ----------- ----------- -----------
Total stockholders' equity ............ 11,974 7,010 10,990 12,893 20,887
----------- ----------- ----------- ----------- -----------
Total ................................. $ 108,148 $ 62,768 10,990 13,811 173,737
=========== =========== =========== =========== ===========
Book value per share .......................... $ 9.84 $ 6.10 $ 10.82
=========== =========== ===========
Common shares outstanding ..................... 1,216,595 1,150,000 1,929,595
=========== =========== ===========
71
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The following Pro Forma Condensed Combined Statement of Operations
reflect the consolidated results of operations of Old Florida for the year ended
December 31, 2002, after giving effect to the proposed acquisition of all of the
outstanding stock of Marine by Old Florida in a transaction which will be
accounted for as a purchase. The statement is based on the assumptions explained
herein and in the Notes to the Pro Forma Condensed Combined Balance Sheet and
Statement of Operations. The Pro Forma Condensed Combined Statement of
Operations does not necessarily reflect the results of operations as they would
have been if Old Florida and Marine had constituted a single entity during the
year ended December 31, 2002. The information presented below should be read in
conjunction with the separate consolidated financial statements and notes
thereto of Old Florida and Marine, the respective Management's Discussion and
Analysis of Financial Condition and Results of Operations of Old Florida and
Marine, and the other unaudited pro forma financial information, all included
elsewhere in this Proxy Statement Prospectus.
72
YEAR ENDED DECEMBER 31, 2002
-----------------------------------------------------------
PROFORMA
ADJUSTMENTS
FOR ACQUISITION
OLD --------------- PROFORMA
FLORIDA MARINE DEBIT CREDIT COMBINED
--------- --------- ----- ------ ----------------
($ IN THOUSANDS)
Interest income:
Loans ........................................... $ 6,064 $ 2,307 $ 50(10) - $ 8,321
Securities ...................................... 576 1,231 - - 1,807
Other interest-earning assets ................... 75 96 - - 171
--------- --------- ---- ----- ----------
Total interest income ....................... 6,715 3,634 50 - 10,299
--------- --------- ---- ----- ----------
Interest expense:
Deposits ........................................ 2,815 1,784 339(11) 275(12) 4,663
Other borrowings ................................ 20 217 - 68(12) 169
--------- --------- ---- ----- ----------
Total interest expense ...................... 2,835 2,001 339 343 4,832
--------- --------- ---- ----- ----------
Net interest income ................................. 3,880 1,633 389 343 5,467
Provision for loan losses ................... 149 308 - - 457
--------- --------- ---- ----- ----------
Net interest income after provision for loan losses.. 3,731 1,325 389 343 5,010
--------- --------- ---- ----- ----------
Noninterest income:
Service charges on deposit accounts ............. 176 48 - - 224
Other service charges and fees .................. 62 125 - - 187
Gain on sale of securities available for sale ... 30 24 - - 54
Other income .................................... - 4 - - 4
--------- --------- ---- ----- ----------
Total noninterest income .................... 268 201 - - 469
--------- --------- ---- ----- ----------
Noninterest expense:
Salaries and employee benefits .................. 1,780 1,001 - - 2,781
Occupancy and equipment ......................... 754 260 - 50(15) 964
Other ........................................... 842 705 - - 1,547
--------- --------- ---- ----- ----------
Total noninterest expenses .................. 3,376 1,966 - 50 5,292
--------- --------- ---- ----- ----------
Earnings (loss) before income taxes ................. 623 (440) 389 393 187
Income taxes (credit) ....................... 234 - 2(14) 166(16) 70
--------- --------- ---- ----- ----------
Net earnings ........................................ $ 389 $ (440) $391 $ 559 $ 117
========== ========== ==========
Basic earnings (loss) per share ..................... $ .32 $ (.38) $ .06(13)
========== ========== ==========
Weighted-average shares outstanding - Basic ......... 1,216,595 1,150,000 $1,929,595
========== ========== ==========
Diluted earnings (loss) per share ................... $ .32 $ (.38) $ .06(13)
========== ========== ==========
Weighted-average shares outstanding - Diluted ....... 1,230,523 1,150,000 $1,943,523(17)
========== ========== ==========
73
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
AND STATEMENT OF OPERATIONS
The Pro Forma condensed Combined Balance Sheet as of December 31, 2002,
assumes the proposed acquisition of Marine by Old Florida occurred on December
31, 2002. The proposed acquisition of Marine by Old Florida will be accounted
for as a purchase transaction, and, in accordance with accounting principles
generally accepted in the United States of America, the purchase price will be
allocated to the assets and liabilities of Marine based upon their relative fair
values, as determined by appraisals and studies to be undertaken as of the
Effective Date. The adjustments will include, among others, a valuation of loans
and investments, a valuation of premises and equipment and a determination of
the value in excess of book value, if any, of customer checking, savings and
other deposit accounts. In accordance with Statement of Financial Accounting
Standards ("SFAS No. 141"), Business Combinations, the assets and liabilities
were fair valued which resulted in an excess of fair value of acquired assets
over cost which was allocated as a prorata reduction to the premises and
equipment acquired.
The Pro Forma Condensed Combined Statement of Operations for the year
ended December 31, 2002, assumes that the proposed acquisition of Marine by Old
Florida occurred on January 1, 2002.
The Pro Forma financial information included in the Pro Forma Condensed
Combined Balance Sheet and the Pro Forma Condensed Combined Statement of
Operations assumes a purchase price of $8,913,000, represented by 713,000 Old
Florida common shares valued at $12.50 per share, the price of recent trades
known to management.
The adjustments shown in these pro forma statements reflect approximate
market values as of December 31, 2002, and do not reflect subsequent changes in
interest rates. The actual adjustments as of the Effective Date can not be
determined until that time and may have an impact on the pro forma financial
position and results of operations which is different from that reflected in the
accompanying Proforma Condensed Combined Balance Sheet and Statement of
Operations.
Costs incurred by Old Florida to complete this acquisition are not
expected to be material and accordingly have not been considered in these pro
forma statements.
(1) Reflects the issuance of 713,000 shares of Old Florida stock at an
assumed price of $12.50 per share in exchange for 100% of the
outstanding shares of Marine' common stock.
(2) Reflects the write-up of Marine' loans to estimated fair value. For
variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. Fair
values for fixed-rate loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
(3) Reflects the write-up of time deposits and Federal Home Loan Bank
advances to estimated fair value. The fair values disclosed for demand,
savings, NOW and money market deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate time deposits and Federal Home Loan
Bank advances are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregate expected monthly maturities of time deposits.
(4) Reflects the write-up of premises and equipment to fair market value.
The fair value of land and buildings is based on management's knowledge
and experience as to the value of such property in the market and
preliminary discussions with appraisers. Equipment is valued at Marine's
net book value.
(5) Reflects the recording of a core deposit intangible asset. The core
deposit intangible was based on the composition of the deposit accounts,
management's knowledge of similar sales of deposit accounts in the
market and preliminary discussions with appraisers.
74
(6) Reflects the deferred tax asset recorded for deferred tax assets for
which Marine had established a valuation allowance.
(7) Reflects the deferred tax liability on the fair market adjustments.
(8) Reflects the excess of the estimated fair value of the net assets
acquired over the purchase price and the related tax impact at
statutory rates. Such excess has been allocated as a proforma reduction
to premises and equipment acquired in the acquisition.
(9) Reflects the elimination of stockholders' equity of Marine.
(10) Reflects the amortization or accretion of the premium or discount from
the write-up of the loan portfolio using the straight line method over
the remaining estimated lives of the related loans.
(11) Reflects the amortization of the core deposit intangible using an
accelerated method over 8 years, the remaining estimated life of the
related deposits.
(12) Reflects the amortization of the premiums from the write-up of the
deposits and Federal Home Loan Bank advances using the level yield
method over the remaining estimated life of the related deposits and
borrowings.
(13) Computed using the weighted average number of shares of Old Florida at
the date indicated plus 713,000 shares of Old Florida issued as a
result of the acquisition.
(14) Reflects the tax effect (37.63% effective tax rate) of the amortization
of the write-up of Marine' loans receivable, premises and equipment,
deposits and other borrowings.
(15) Reflects the adjustment for depreciation for write-down of building,
equipment and furniture and fixtures.
(16) Reflects the deferred tax credit (37.63% effective tax rate) recorded
for the loss incurred by Marine.
(17) Includes 1,230,523 weighted average shares outstanding for Old Florida
and 713,000 shares issued in the acquisition of Marine.
(18) Reflects estimated termination benefits for certain employees of
Marine.
75
The following table sets forth the pro forma effect on future periods
results of operations, of the accretion and amortization of the valuation
adjustments to be recorded in connection with the proposed acquisition of Marine
by Old Florida. The actual effect of the accretion and amortization of these
valuation adjustments may vary if the assumptions used are not realized.
INCREASE (DECREASE) IN NET EARNINGS
------------------------------------------------------------------------------------------------
(IN THOUSANDS)
AMORTIZATION
ACCRETION/ AMORTIZATION OF
(AMORTIZATION) OF CORE PREMIUM AMORTIZATION INCOME NET EFFECT
FOR THE YEAR OF PREMIUM DEPOSIT FOR FMV OF PREMIUM TAX ON RESULTS
ENDING DECEMBER 31, ON LOANS INTANGIBLE ON DEPOSITS FHLB ADVANCES DEPRECIATION EFFECT OF OPERATIONS
- ------------------- -------- ---------- ----------- ------------- ------------ ------ -------------
2002 ........ $ (50) $ (339) $275 $68 $ 50 $ (2) $ 2
2003 ........ (49) (296) 183 - 50 42 (70)
2004 ........ (49) (254) 92 - 3 78 (130)
2005 ........ - (212) - - 3 79 (130)
2006 ........ - (169) - - 3 63 (103)
2007 ........ - (127) - - 3 47 (77)
2008 ........ - (85) - - 3 31 (51)
2009 ........ - (42) - - 3 15 (24)
2010-2040 ... - - - - 78(2) (30) 48
----- ------- ---- --- ---- --- -----
Total.............. $(148) $(1,524) $550 $68 $196(1) $323 $(535)
===== ======= ==== === ==== === =====
(1) Of the total adjustments to premises and equipment, $110,000 was
allocated to land and $(196,000) was allocated to depreciable fixed
assets.
(2) Will be approximately $3,000 per year through the year ended 2040.
BUSINESS OF OLD FLORIDA
GENERAL
Old Florida is a financial holding company which is incorporated under
Florida law. Through its banking subsidiary, Old Florida Bank, Old Florida is
engaged in a general commercial banking business in the Fort Myers, Florida
metropolitan area.
Old Florida Bank provides the following principal services:
- the acceptance of deposits for demand, savings and time accounts
and the servicing of those accounts;
- commercial, industrial, consumer and real estate lending,
including installment loans and personal lines of credit;
- safe deposit operations;
- cash management;
- electronic funds transfers; and
- a variety of additional banking-related services tailored to the
needs of individual customers.
Old Florida was organized in 2001 pursuant to an Agreement and Plan of
Share Exchange approved by the requisite vote of shareholders of Old Florida
Bank, under which shareholders of Old Florida Bank exchanged their
76
shares of Old Florida Bank for common shares of Old Florida. Old Florida Bank
became the wholly-owned subsidiary of Old Florida through that reorganization.
Old Florida Bank, the predecessor to Old Florida, was organized and commenced
business as a Florida state-chartered bank in 1998.
Old Florida, through its subsidiary, Old Florida Bank, competes for
deposits and loans with other banks, savings associations, credit unions and
other types of financial institutions and operates two full-service offices. Old
Florida operates in a highly competitive industry. Old Florida Bank's main
competition comes from other commercial banks, national or state savings and
loan institutions, securities brokers, mortgage bankers, finance companies and
insurance companies. Banks generally compete with other financial institutions
through the banking products and services offered, the pricing of services, the
level of service provided, the convenience and availability of services, and the
degree of expertise and personal manner in which these services are offered. Old
Florida Bank encounters strong competition from most of the financial
institutions in its market area.
Old Florida's primary market area is the Fort Myers metropolitan area,
Lee County, Florida. According to the most recent market data, there are
approximately 32 other deposit taking/lending institutions competing in Old
Florida's market. According to the most recent market data for deposits, Old
Florida ranks 16th in market share with approximately 1.3% of the market.
Old Florida employs 44 total employees, 41 of which are employed on a
full-time basis. Old Florida is not dependent on one or a few major customers.
Old Florida has one other subsidiary, Old Florida Capital, Inc. Old
Florida Capital, Inc. serves as a finder, introducing borrowers to suitable
lenders, and receives fees for providing this service.
Old Florida as a financial holding company, and Old Florida Capital,
Inc., as a nonbank subsidiary of Old Florida, are subject to regulation by the
Federal Reserve Board. As a Florida state-chartered bank, Old Florida Bank is
supervised and regulated by the Florida Department of Financial Services. In
addition, as insurer of its deposits and as its primary federal regulatory
agency, the Federal Deposit Insurance Corporation has regulatory authority over
Old Florida Bank.
PROPERTIES
Old Florida Bank's main banking office is located at 6321 Daniels
Parkway, Fort Myers, Florida. Old Florida Bank also operates a full service
branch banking office at 24201 Walden Center Drive, Bonita Springs, Florida. Old
Florida Bank owns the premises for its main office. The bank leases the premises
for its branch office under a lease that terminates January 31, 2004. The bank
has four options to renew this lease for an additional five years each. Old
Florida believes those properties are suitable for its use. Old Florida believes
that these properties are in excellent condition and are adequately covered by
insurance.
LEGAL PROCEEDINGS
Old Florida and its subsidiaries are not currently a party to any
litigation nor is Old Florida aware of any threatened litigation against it or
its subsidiaries other than routine litigation incidental to the conduct of our
business.
MANAGEMENT OF OLD FLORIDA
BOARD OF DIRECTORS
The following table gives information, as of April 25, 2003, concerning
the individuals who are and after the merger, will be the members of the board
of directors of Old Florida, the surviving corporation in the merger.
77
Director of Old
Florida
Position(s) Held with Old Florida Continuously Term
Name Age and Old Florida Bank Since Expires In
- ---- --- ----------------------------------- ------------------ ------------
Charles C. Bundschu III 52 Director 1988 2006
Joseph E. D'Jamoos 70 Director 1988 2006
Frank H. Galeana 73 Director and Chairman 1988 2004
Elmo J. Hurst 72 Director 1988 2004
Karl L. Johnson 50 Director 1988 2005
Larry W. Johnson 48 Director, President & CEO 1988 2005
Nicholas J. Panicaro 50 Director, Executive V. P. & CFO 2001 2005
In addition, Old Florida and Marine have agreed that, following the merger,
Pierce T. Neese and William L. McDaniel, Jr. will become directors of Old
Florida. Mr. Neese is 63 years old and has served as a director of Marine since
1999. Mr. Neese also serves as the Chairman of the Board of Marine and as the
Chairman of the Board of Marine National Bank. Mr. McDaniel is 41 years old and
has served as a director of Marine since 1999.
EXECUTIVE OFFICERS
The following table lists the names and ages of the executive officers
of Old Florida as of April 25, 2003, and the positions presently held by those
individuals. These individuals will be the executive officers of the surviving
corporation in the merger. The board of directors may remove any of the
executive officers at any time.
Positions Held with Old Florida and
Name Age Old Florida Bank
- ---- --- ----------------
Larry W. Johnson 48 President & Chief Executive Officer
Nicholas J. Panicaro 50 Executive Vice President & CFO
Perry Barbee 48 Executive Vice President
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
PERRY BARBEE became an Executive Vice President of Old Florida Bank on
March 3, 2003. Old Florida hired Mr. Barbee to act as its Naples Area President
to manage its business in the Naples, Florida market area. Mr. Barbee has 26
years of experience in commercial banking. From 1998 to 2003 Mr. Barbee was
Senior Vice-President/Site Manager for the Commercial Loan Service Center of the
Southeast Region of the United States for Bank of America. From 1991 to 1998 Mr.
Barbee served as the Senior Vice President/Senior Credit Policy Officer for
Barnett Bank, NA, for the Naples and Fort Myers areas.
CHARLES C. BUNDSCHU III has been President and Chief Executive Officer
of Bundschu Kraft, Inc., a privately-held general contractor and real estate
development company doing business in Southwest Florida, since _________. Mr.
Bundschu holds Florida licenses as a professional engineer and real estate
broker. Mr. Bundschu is a Florida Class A General Contractor. Mr. Bundschu was a
director of South Florida Bank from 1988 to 1997.
JOSEPH E. D'JAMOOS has been engaged in commercial real estate
development in Southwest Florida since 1998, primarily through his companies,
JED of Southwest Florida, Inc. and D'Jamoos/Jerulle Construction Co., LLC for
78
the past twenty-five years. Mr. D'Jamoos has also been an investor in and
developer of a number of industrial and commercial parks and retail facilities
in New England and Southwest Florida.
FRANK H. GALEANA has been the owner and President of Galeana Automotive
Group, which owns and operates various automobile dealerships and a rental car
agency, since 1971. These include VanDyke Dodge, Inc., Saturn of Warren and
Saturn of Lakeside, all in the Detroit, Michigan area, Galeana
Chrysler-Plymouth-Jeep in Columbia, South Carolina, Galeana
Chrysler-Plymouth-Jeep and Galeana Pontiac-Isuzu in Fort Myers, Florida, and
Thrifty Rent-A-Car for Southwest Florida.
ELMO J. HURST has been Chairman and Chief Executive Officer of
Almego-Truflex, Inc. since 1995. Almega-Truflex manufactures electrical
harnesses and power cords and is located in Breman, Indiana. Mr. Hurst has been
Chairman and Chief Executive Officer of Fredrickson Fire Equipment Service
Company since 1997. Fredrickson sells and services fire equipment and is located
in Bensonville, Illinois. Mr. Hurst has been Chairman and Chief Executive
Officer of Mountain State Home Health Service, Inc. since 1998. Mountain State
Home Health Service provides home health care services and is located in Beckly,
West Virginia. Mr. Hurst has been the sole shareholder of Elex, Inc., an
equipment leasing company in Beckly, West Virginia, since 1974. Mr. Hurst has
been a director of various banks since 1972. From 1994 to 1997, Mr. Hurst was a
director of Bank One, West Virginia.
KARL L. JOHNSON is an attorney practicing law in Florida. Mr. Johnson
has been the managing partner of Nuckolls, Johnson & Belcher, PA, a Fort Myers,
Florida based law firm, since 1987.
LARRY W. JOHNSON has over 25 years commercial banking experience. Since
1998 Mr. Johnson has been President and Chief Executive Officer of Old Florida
Bank and, since its organization as a financial holding company to own Old
Florida Bank in 2001, President and Chief Executive Officer of Old Florida. From
1996 until joining Old Florida Bank, Mr. Johnson was Executive Vice President
and Senior Loan Officer at Mercantile Bank of Southwest Florida, where he
managed all lending activities at that bank.
NICHOLAS J. PANICARO has over 30 years experience in either operations
or finance positions with commercial banks. Since 1998 Mr. Panicaro has been
Executive Vice President and Chief Financial Officer of Old Florida Bank and,
since its organization as a financial holding company to own Old Florida Bank in
2001, Executive Vice President and Chief Financial Officer of Old Florida. From
1988 to November 1997 Mr. Panicaro was Executive Vice President, Chief Operating
Officer and a director of First National Bank of Southwest Florida, where he
managed all operations and finance matters for that bank.
PIERCE T. NEESE will become a director of Old Florida following the
merger. Mr. Neese has over 30 years experience in commercial banking. Mr. Neese
is currently Chairman of Marine and Marine National Bank. Mr. Neese is President
of United Security Bancshares, Inc., the bank holding company for United
Security Bank, with offices in Spartan and Woodstock, Georgia, where he has been
Chairman since 1974. Mr. Neese was President of Etowan Bank in Canton, Georgia,
until its acquisition by BB&T in 1999. Mr. Neese has also been President of PTN
Consulting Co., which provides bank consulting services, since 1998.
WILLIAM L. MCDANIEL, JR. will become a director of Old Florida
following the merger. Mr. McDaniel has been a director of Marine since its
organization in 1999. Mr. McDaniel has been President of Big Island Excavating,
Inc., based in Naples, Florida since 1999. Big Island Excavating is a mining and
excavating company primarily engaged in selling aggregate and other materials in
Southwest Florida. Mr. McDaniel is also a Florida licensed real estate broker
and has been President and owner of The Realty Company since 1987. The Realty
Company is primarily engaged in commercial real estate acquisition, development
and sale.
79
OLD FLORIDA EXECUTIVE COMPENSATION
AND OTHER INFORMATION
GENERAL
The following information relates to compensation of management for the
years ended December 31, 2002, 2001 and 2000, unless otherwise noted below.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for Old Florida's Chief Executive Officer and the only other executive officer
with salary and bonus exceeding $100,000 for 2002, as well as the total
compensation paid to each individual during the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------
----------------------------------
SECURITIES ALL OTHER
YEAR SALARY ($) BONUS ($) UNDERLYING COMPENSATION
---- ---------- --------- OPTIONS (#) ($) (1)
----------- -------
NAME AND PRINCIPAL POSITION
---------------------------
Larry W. Johnson
President and Chief Executive Officer 2002 145,200.00 14,520.00 2,500 4,792
2001 132,000.00 13,200.00 1,396 4,356
2000 120,000.00 0.00 1,000 3,600
Nicholas J. Panicaro
Executive Vice President and
Chief Financial Officer 2002 108,900.00 10,890.00 2,500 1,797
2001 99,000.00 9,900.00 0 1,634
2000 90,000.00 0.00 0 1,350
(1) The amounts shown in this column for the most recently completed
fiscal year were derived from 401(k) matching contributions in the
amount of $4792.00 for Mr. Johnson and $1,797.00 for Mr. Panicaro.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED(#)(1) FISCAL YEAR PRICE ($/SH)(2) EXPIRATION DATE
- ---- ------------- ----------- --------------- ---------------
Larry W. Johnson 2,500 17% $12.50 12/16/2012
Nicholas J. Panicaro 2,500 17% $12.50 12/16/2012
- -----------
(1) All 2002 options shown in the above table were under the Officers' and
Employees' Stock Option Plan. Options become exercisable in increments
of 33% per year and vest fully on December 16, 2005.
(2) All options were granted with an exercise price of 100% of the fair
market value on the date of the grant.
80
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table presents information about stock options exercised
during 2002 and unexercised stock options at December 31, 2002 for the two named
executive officers.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN 2002 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2002 (#) DECEMBER 31, 2002 ($)
--------------------- -----------------------
NAME SHARES ACQUIRED ON VALUE
---- EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------ -------- ------------------------- -------------------------
Larry W. Johnson 0 0 29,751 / 6,145 $73,686 / $7,710
Nicholas J. Panicaro 0 0 15,000 / 2,500 $37,500 / 0
OLD FLORIDA BANK OFFICERS' AND EMPLOYEES' STOCK OPTION PLAN
Old Florida and its shareholders have adopted the Old Florida Bank
Officers' and Employees' Stock Option Plan. A total of 100,000 common shares
have been reserved for issuance under the plan, subject to adjustment if Old
Florida's capitalization changes as a result of a stock split, stock dividend,
recapitalization, merger or similar event. A total of 33,439 common shares
remain available for the grant of options under the Plan. The plan provides for
the award of stock options to any Old Florida employee designated by a committee
of Old Florida's Board consisting of non employee directors, which administers
the plan. The committee's authority includes the power to (a) determine who will
receive stock options under the plan, (b) establish the terms and conditions of
stock options (other than the schedule on which options become exercisable), (c)
determine the amount and the award, and whether the options are incentive stock
options or nonqualified stock options, (d) interpret the plan, and (e)
administer the plan.
Stock options awarded under the plan have terms of up to 10 years and
may be incentive or nonqualified stock options, meaning stock options that do
not qualify under Section 422 of the Internal Revenue Code for the special tax
treatment available for qualified, or "incentive", stock options. All stock
option awards made to date are incentive stock options. The exercise price of
incentive stock options may not be less than the fair market value of Old
Florida's common stock on the date of grant. The plan provides that the exercise
price of the option granted under the plan will be the greater of fair market
value on the date of grant or $10.00.
The plan provides for the vesting of the right to exercise all options
awarded under the plan as follows: (i) thirty-three percent of the shares
covered by the option may be acquired one year after the grant of the option;
(ii) sixty-six percent of the shares covered by the option may be acquired two
years after the grant of the option; and (iii) the option is fully vested three
years from the date of the grant of the option. The plan provides for
acceleration of the vesting of the options in the event of a change in control
of Old Florida.
An option holder whose service terminates because of retirement, death,
or disability has 90 days after termination within which he or his estate may
exercise options, forfeiting any options not exercised by the end of 90 days
from termination. An option holder whose service is terminated for any other
reason, with or without cause, forfeits all unexercised stock options.
EMPLOYMENT AGREEMENTS WITH EXECUTIVES
Old Florida Bank has employment agreements with Messrs. Johnson and
Panicaro. These agreements were entered into in January 2000, are three years in
duration and are renewable each year thereafter unless terminated by either the
executive or Old Florida Bank. The Agreements have been renewed. The Agreements
provide for base compensation, determined in the discretion of the board of
directors or, in the case of Mr. Panicaro, by the President
81
and Chief Executive Officer, benefits and insurance, vacation, reimbursement of
business expenses and a car allowance, to be paid or provided to the executive
for the performance of their duties. If the executive's employment is terminated
by Old Florida Bank other than for cause, or by the executive due to a breach of
the agreement by the Bank or a significant reduction in the executive's job at
the Bank, the agreements obligate the Bank to make continuing salary and bonus
payments to the Bank and to continue medical and life insurance for the greater
of the duration of the agreement or one year. The agreements also provide for
the payment to the executives of cash lump sum payments of two times their
annual salary (including bonuses) if the executive's employment is terminated
after a change in control of the Bank, or if the executive voluntarily
terminates his employment within one year following a change in control of the
Bank.
DIRECTOR COMPENSATION
Directors of Old Florida receive a monthly retainer of $250.00 to
compensate them for their services as a director.
OLD FLORIDA BANK DIRECTORS' STOCK OPTION PLAN
Nonemployee directors have received grants of stock options under the
Old Florida Bank Directors' Stock Option Plan.
A total of 100,000 common shares were reserved for issuance under the
plan, subject to adjustment if Old Florida's capitalization changes as a result
of a stock split, stock dividend, recapitalization, merger or similar event.
Outstanding options have been awarded covering all common shares reserved for
issuance under the Plan. No options were awarded under the plan during 2002. The
plan provides for the award of nonqualified stock options to Old Florida
directors designated by a committee of Old Florida's Board consisting of non
employee directors, which administers the plan. The committee's authority
includes the power to (a) determine who will receive stock options under the
plan, (b) establish the terms and conditions of stock options (other than the
schedule on which options become exercisable), (c) determine the amount and the
awards, (d) interpret the plan, and (e) administer the plan.
Stock options awarded under the plan have terms of up to 10 years and
are nonqualified stock options, meaning stock options that do not qualify under
Section 422 of the Internal Revenue Code for the special tax treatment available
for qualified, or "incentive", stock options. The plan provides that the
exercise price of all options granted under the plan will be the greater of fair
market value on the date of grant or $10.00. Provisions as to vesting of the
right to exercise options, including acceleration of vesting in the event of a
change in control of Old Florida, are the same as in the Old Florida Officers'
and Employees' Stock Option Plan.
An option holder whose service terminates because of retirement, death
or disability, has 90 days after termination within which he or his estate may
exercise options, forfeiting any options not exercised by the end of 90 days
from termination. An option holder whose service is terminated for any other
reason, with or without cause, forfeits all unexercised stock options.
CERTAIN TRANSACTIONS
Directors and executive officers of Old Florida and their associates
were customers of, or had transactions with, Old Florida Bank in the ordinary
course of business during 2002. We expect additional transactions to take place
in the future. All outstanding loans to directors and executive officers and
their associates, commitments and sales, purchases and placements of investment
securities and other financial instruments included in such transactions were
made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral where applicable, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than normal risk of collectibility or present other unfavorable features.
82
DESCRIPTION OF OLD FLORIDA SHARES
GENERAL
We are authorized to issue 5,000,000 common shares, $.01 par value per
share. As of December 31, 2002, 1,216,595 common shares were issued and
outstanding. We are also authorized to issue 1,000,000 preferred shares, $.01
par value per share, none of which are issued and outstanding.
Holders of common shares are entitled to dividends when and if declared
by our board of directors out of legally available funds. Voting rights are
vested in holders of our common shares, each share being entitled to one vote.
Holders of common shares have no cumulative voting rights in electing directors.
Holders of our common shares have no preemptive rights to subscribe to
additional shares that we may issue.
ANTITAKEOVER PROVISIONS
Several provisions of the Old Florida articles of incorporation and
bylaws may discourage unilateral tender offers or other attempts to take over
and acquire the business of the company. The following summarizes those
provisions of the articles of incorporation and bylaws which might have a
potential "anti-takeover" effect.
- Classified Board of Directors. The Old Florida board of directors
is divided into three classes of approximately equal numbers of
directors, with the term of office of one class expiring each
year. This provides a greater likelihood of continuity, knowledge
and experience on the board of directors because at any one time,
one third of the board of directors would be in its second year of
service and one third of the board of directors would be in its
third year of service. In addition, any person who may attempt to
take over Old Florida would have to deal with the current board of
directors because even if that person acquires a majority of the
outstanding Old Florida common shares, that person would be unable
to change the majority of the board of directors at any one
special meeting.
- Vacancies on the Board of Directors. Any vacancy occurring in the
board of directors, including an increase in the number of
directors, shall be filled by the affirmative vote of a majority
of the directors then in office, though less than a quorum of the
board of directors. A director elected to fill a vacancy in a
particular class will serve until the next shareholders' meeting.
This provision may make it more difficult for any person who may
attempt to take over Old Florida to elect new directors even if
that person successfully removes existing directors.
AUTHORIZED PREFERRED SHARES
Old Florida's articles of incorporation authorize the board of
directors to issue so-called "blank check" preferred shares, which permits the
board of directors to issue preferred shares in the voting powers, dividend
rights and other rights and preferences as determined by the board of directors.
The issuance of these shares could dilute the voting power of a person
attempting to acquire control of Old Florida, increase the cost of acquiring
control or otherwise hinder the efforts of the person to acquire control.
LIQUIDATION RIGHTS
In the event of liquidation, the holders of our common shares are entitled to
certain rights as to assets distributable to shareholders on a pro rata basis
after satisfaction of our debts.
DISSENTERS' RIGHTS
Our common shareholders have dissenters' rights in certain transactions
pursuant to Florida law, including mergers requiring the approval of our
shareholders and certain amendments to our articles of incorporation.
83
MARKET FOR OLD FLORIDA COMMON SHARES AND DIVIDENDS
Old Florida's common stock trades infrequently. Old Florida's common shares are
not listed on any exchange on the NASDAQ. Old Florida's common shares first
became quoted on the Over-The-Counter Electronic Bulletin Board on April 25,
2003. Old Florida's stock symbol is OFBS.OB. For 2002 and 2001, we obtained the
high and low bid quotations shown below from Robert W. Baird & Co. These
quotations are inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.
2002 Low Bid High Bid
---- ------- --------
1st Quarter $11.50 $12.00
2nd Quarter $12.00 $12.00
3rd Quarter $12.00 $12.50
4th Quarter $12.50 $12.50
2001 Low Bid High Bid
---- ------- --------
1st Quarter $11.00 $11.50
2nd Quarter $11.50 $11.50
3rd Quarter $11.50 $11.50
4th Quarter $12.00 $12.00
We do not know what prices were actually paid. We have not verified the
accuracy of those prices that have been reported. These prices may not reflect
the prices at which the stock would trade in an active market.
We have not paid any cash dividends. Our ability to pay future
dividends, should our board of directors choose to do so, is dependent on the
ability of Old Florida Bank to pay dividends to Old Florida. The Bank's ability
to pay dividends is subject to regulatory limits and oversight.
84
MARKET FOR MARINE COMMON SHARES AND DIVIDENDS
Marine's common stock trades infrequently and is not traded on any established
securities market. Marine's stock symbol is MBSK.PK. For 2002 and 2001, we
obtained the high and low bid quotations shown below from Bloomberg Information
Services. These quotations are inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.
2002 Low Bid High Bid
---- ------- --------
1st Quarter $6.10 $6.75
2nd Quarter $6.50 $7.05
3rd Quarter $5.50 $6.75
4th Quarter $4.80 $6.00
2001 Low Bid High Bid
---- ------- --------
1st Quarter $3.00 $6.25
2nd Quarter $4.80 $7.75
3rd Quarter $6.70 $8.30
4th Quarter $6.02 $7.25
We do not know what prices were actually paid. We have not verified the
accuracy of those prices that have been reported. Because of the lack of an
established market for our stock, these prices may not reflect the prices at
which the stock would trade in an active market.
We have not paid cash dividends.
BUSINESS OF MARINE
GENERAL
Marine is a bank holding company incorporated under Florida law. Marine
is headquartered in Naples, Florida. Marine was organized in 1997 under the laws
of the State of Florida. Marine has one subsidiary, Marine National Bank. Marine
National Bank is a national banking association organized under the statutes of
the United States in 1999.
Marine National Bank provides full service banking to individuals as
well as to businesses through its banking office in Naples, Florida. Marine
National Bank provides a variety of services, including personal checking
accounts and savings programs, certificates of deposit, money market accounts,
certificates of deposit and individual retirement accounts.
Marine National Bank provides commercial loans, including loans under
lines of credit and revolving credit, term loans, real estate mortgage loans and
other specialized loans.
COMPARISON OF RIGHTS OF HOLDERS OF OLD FLORIDA COMMON SHARES
AND HOLDERS OF MARINE COMMON SHARES
As a result of the merger, the holders of Marine common shares will
become holders of Old Florida common shares, subject to the exercise of
dissenters' appraisal rights. Following the merger, the Old Florida articles and
bylaws will govern the rights of those shareholders. Both Marine and Old Florida
are incorporated in Florida, so the Florida Business Corporation Act will
continue to govern the rights of Marine shareholders after the merger.
Differences exist between the rights of holders of Old Florida common shares and
the rights of holders of Marine common shares arising from the distinctions
between the articles and bylaws of Old Florida and Marine The rights, however,
of holders of Old Florida common shares and those of holders of Marine common
shares are similar in
85
many material respects. The significant differences are summarized below. This
summary is necessarily general and is not a complete discussion of, and is
qualified by, the more detailed provisions of Florida law, and the articles and
bylaws of each corporation.
AUTHORIZED CAPITAL
Old Florida. Old Florida is authorized to issue 5,000,000 common shares
and 1,000,000 preferred shares. As of December 31, 2002, 1,216,595 common shares
of Old Florida were issued and outstanding and no preferred shares of Old
Florida were issued and outstanding and no preferred shares of Old Florida were
issued.
Marine. Marine is authorized to issue 10,000,000 common shares and
2,000,000 preferred shares. As of the record date, 1,150,000 common shares of
Marine were issued and outstanding and no preferred shares of Marine were
issued.
AMENDMENT OF ARTICLES OF INCORPORATION
Old Florida. The FBCA generally requires most amendments to a Florida
corporation's articles of incorporation be adopted by the affirmative vote of a
majority of the shares entitled to vote thereon upon recommendation of the board
of directors, subject to amendments in certain minor respects which do not
require stockholder action. Unless the FBCA requires a greater vote, amendments
may be adopted by a majority of the shares entitled to vote, a quorum being
present.
Marine. The affirmative vote of at least 75% of the shares of Marine
entitled to vote is required under Marine's articles of incorporation to amend
or repeal provisions of the articles of incorporation that relate to (i) the
number, classification and election of directors, (ii) certain business
combinations and other transactions with a holder of 5% or more of Marine's
voting shares; and (iii) the discretion of Marine's board of directors in
considering acquisition proposals.
RECORD DATE
Old Florida. The board of directors may fix a record date in order to
determine who the shareholders of the corporation are for purposes of
determining such things as the receipt of dividends or voting rights. This
record date must not be more than 70 days before a meeting or action requiring a
determination of shareholders. The bylaws state the record date for shareholder
action by written consent will be the date the first written consent is
delivered to Old Florida. The bylaws state that the record date for shareholders
entitled to demand a special meeting is the date the first shareholder delivers
the demand for the special meeting to Old Florida.
Marine. The board of directors may fix a record date in order to
determine who the shareholders of the corporation are for purposes of
determining such things as the receipt of dividends or voting rights. This
record date must (i) not be more than 70 days or less than 10 days before a
shareholder meeting, (ii) less than 10 days after the date of a board of
directors resolution fixing a record date for determination of shareholders
entitled to take action by written consent without a meeting, or (iii) for any
other action, not more than 70 days before the date for the action.
NUMBER OF DIRECTORS
Old Florida. The number of directors is set by resolution of the Old
Florida board of directors.
Marine. The number of directors is set by resolution of the Marine
board of directors but must be between 5 and 25 under Marine's articles and
bylaws.
86
SHAREHOLDER PROPOSALS; ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Old Florida. Old Florida's articles of incorporation and bylaws do not
contain any specific provisions relating to the notice and procedural
requirements for shareholder nominations of candidates for director.
Consequently, Old Florida's shareholders are subject to fewer restrictions
concerning nomination of candidates for director than Marine's shareholders.
Special meetings may be held upon call of the chairman of the board of
directors, the president, the board of directors, or at the request of the
holders of not less than 10% of all the shares entitled to vote at such meeting.
A notice of a special meeting must state the purpose for which the meeting is to
be called.
Marine. Business conducted at annual meetings of shareholders is
limited to business that is properly submitted to the meeting under Marine's
bylaws. Matters are properly submitted by the board of directors, or by any
other holder of voting securities of the corporation who is entitled to vote at
the meeting and who complies with the notice requirements. All shareholder
proposals must be in writing and delivered to or mailed to the Secretary of
Marine at the principal executive offices of Marine between 30 and 60 days
before the annual meeting of shareholders, however, if Marine gives less than 38
days' prior notice or public disclosure of the date of the meeting, then notice
of the shareholders' proposal is timely if given within 8 days after notice or
public disclosure of the meeting. The notice must provide (i) a brief
description of the proposal and the reasons for it, (ii) the shareholder's name
and address, (iii) the number and class of shares owned by the shareholder
making the proposal, and (iv) any material interest of the shareholder in the
matter addressed by the proposal. To be timely, director nominations made by
shareholders must be given to Marine's Secretary in writing and within the same
timeframes as for shareholder proposals. The notice of the director nomination
must set forth for each nominee, (i) the name, age, and business and residence
address of the person, (ii) the person's principal occupation or employment,
(iii) the number and class of shares owned by the person, and (iv) any other
information required to be disclosed as to a director nominee by the SEC's proxy
solicitation rules. The notice must also identify the name and record address
and number and class of shares owned by the shareholder making the nomination.
CONTROL SHARE ACQUISITION PROVISIONS
The FBCA precludes an acquiror of the shares of a Florida corporation
who crosses one of three voting thresholds (20%, 33 1/3%, or 50%) from obtaining
voting control of the shares, under certain circumstances, unless a majority in
interest of the disinterested shareholders of the corporation votes to give
voting power to those shares.
The corporation's shareholders, other than holders of control shares,
have dissenting shareholder appraisal rights in the event control shares are
accorded voting rights and, as a consequence, the holders of the control shares
have a majority of all voting power for the election of directors. The FBCA
permits Florida corporations to opt out of these control share acquisition
provisions by stating in their articles that they do not apply.
Old Florida. Old Florida is subject to these control share acquisition
provisions since it has not opted out. The control share acquisition provisions
do not apply in the context of a merger, including the merger of Marine into Old
Florida.
Marine. Marine has opted out of the application of these control share
acquisition provisions by stating in its articles that they do not apply to
Marine.
Certain other provisions of Marine's articles of incorporation may have
the effect of discouraging attempts to acquire control of Marine. The affiliated
transactions provisions of Marine's articles of incorporation limit the ability
of an interested shareholder to enter into certain transactions involving
Marine. An "interested shareholder" is defined in Marine's articles to mean any
person who directly or indirectly beneficially owns, alone or with associates or
affiliates, more than 5% of the outstanding voting shares of Marine. These
provisions specify that supermajority shareholder or board of directors'
approval is necessary for an interested shareholder to enter into any merger or
consolidation with Marine and any of its subsidiaries, or any sale, lease,
exchange or other disposition of assets having a fair market value of more than
25% of Marine's total assets. Such transactions may not be effected or
consummated unless:
- authorized and approved by at least three-fourths of the directors
of Marine; or
87
- authorized and approved by the affirmative vote of holders of not
less than two-thirds of the outstanding voting shares.
OTHER ANTI-TAKEOVER PROVISIONS
Marine. Marine's articles contain fair price provisions that require an
interested shareholder to pay a "fair price" as specified in Marine's articles
to shareholders in a transaction involving a merger, consolidation sale of
assets with a fair market value greater than 25% of Marine's total assets,
unless the transaction is approved by a majority of the voting shares other than
those beneficially owned by the interested shareholder.
Marine's articles expressly provide broad discretion to its board of
directors to consider a number of factors and constituencies in evaluating any
offer for a merger with the corporation, or tender or exchange offer for its
shares or the acquisition of substantially all its assets.
Old Florida. Old Florida's articles and bylaws do not contain
comparable provisions.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Old Florida. Old Florida's bylaws provide that the corporation has the
power to indemnify its directors and officers if the director or officer
conducted himself or herself in good faith, the director or officer reasonably
believed the conduct was in, or not opposed to, the best interests of the
corporation and the director or officer had no reason to believe that his or her
conduct was unlawful. In accordance with Florida law, the Old Florida bylaws
provide that a director will not be indemnified in connection with a proceeding
in which the director was adjudged liable to the corporation or in connection
with a proceeding in which the director was found to have received an improper
personal benefit.
Old Florida's bylaws provide that the directors and officers of the
corporation are entitled to mandatory indemnification if the director or officer
is successful on the merits or otherwise in the defense of any proceeding.
The bylaws provide that the corporation may pay the expenses of an
officer or director in defending a civil or criminal proceeding in advance of
the final disposition of the proceeding if the director or officer provides an
undertaking to repay the amount advanced to Old Florida if he is ultimately
found not to be entitled to indemnification.
Unless pursuant to a court order, the bylaws provide that the
corporation may indemnify a director or officer only if it is authorized by a
determination that the director or officer met the standard of conduct required
for indemnification. The determination must be made by (i) a majority vote of a
quorum made up of disinterested members of the board of directors, (ii) a
majority vote of a board committee made up of a disinterested directors, (iii) a
written opinion of special legal counsel or (iv) a vote of disinterested
shareholders.
Marine. Marine's bylaws, as permitted by Florida law, provide that
Marine shall indemnify and hold harmless all of its directors and officers, and
former directors and officers, from and against all liabilities and obligations,
including attorneys' fees, incurred in connection with any actions taken or
failed to be taken by such director, officer, employee and agent in their
capacity as such to the fullest extent possible under law. In any event, it is
mandatory for a Florida corporation to indemnify a director, officer, employee
or agent against expenses actually and reasonably incurred in successfully
defending an action, provided the person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation.
88
SUPERVISION AND REGULATION OF OLD FLORIDA AND OLD FLORIDA BANK
Old Florida and Old Florida Bank are subject to extensive regulation
under federal and Florida banking laws and regulations. The following discussion
of the material elements of the regulatory framework applicable to financial
holding companies and banks is not intended to be complete and is qualified in
its entirety by the text of the relevant federal and Florida laws and
regulations. A change in the applicable banking laws or regulations may have a
material effect on Old Florida's business.
REGULATION OF OLD FLORIDA
Bank Holding Company Act. As a financial holding company, Old Florida is subject
to supervision and regulation by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956. Under the Bank Holding
Company Act, among other things:
- bank holding companies generally may not acquire ownership or
control of more than 5% of any class of voting shares or
substantially all of the assets of any company, including a
bank, without the prior approval of the Federal Reserve Board;
- bank holding companies, like Old Florida, that have elected to
become financial holding companies may engage in a full range
of financial activities but are limited to financial
activities.
The Federal Reserve Board has authority to issue cease and desist
orders to terminate or prevent unsafe or unsound banking practices or violations
of laws or regulations and to assess civil money penalties against bank holding
companies and their non-bank subsidiaries, officers, directors and other
institution-affiliated parties, and to remove officers, directors and other
institution-affiliated parties.
Riegle-Neal Interstate Banking and Branching Efficiency Act. The
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits
adequately capitalized bank holding companies to acquire banks in any state
subject to specified concentration limits and other conditions. The Interstate
Act also authorizes the interstate merger of banks. In addition, among other
things, the Interstate Act permits banks to establish new branches on an
interstate basis provided that such action is specifically authorized by the law
of the host state.
Financial Services Modernization Legislation. The Gramm-Leach-Bliley
Act, enacted in 1999, eliminates many of the restrictions placed on the
activities of certain qualified bank hold companies. The general effect of the
law is to establish a comprehensive framework to permit affiliations among
commercial banks, insurance companies, securities firms, and other financial
service providers by revising and expanding the Bank Holding Company Act
framework to permit a holding company system, such as Old Florida, to engage in
a full range of financial activities through a new entity known as a "financial
holding company". Financial activities is broadly defined to include not only
banking, insurance and securities activities, but also merchant banking and
additional activities that the Federal Reserve Board, in consultation with the
Secretary of the Treasury, determines to be financial in nature, incidental to
such financial activities, or complementary activities that do not pose a
substantial risk to the safety and soundness of depository institutions or the
financial system generally.
In order to become a financial holding company and engage in the new
activities, a bank holding company, such as Old Florida, must meet certain
tests. Specifically, all of a bank holding company's banks must be
well-capitalized and well-managed, as measured by regulatory guidelines, and all
of the bank holding company's banks must have been rated "satisfactory" or
better in the most recent evaluation of each bank under the Community
Reinvestment Act of 1977. A bank holding company that elects to be treated as a
financial holding company may face significant consequences if its banks fail to
maintain the required capital and management ratings, including entering into an
agreement with the Federal Reserve Board which imposes limitations on its
operations and may even require divestitures. These possible ramifications may
limit the ability of a bank subsidiary to significantly expand or acquire less
than well-capitalized and well-managed institutions. Old Florida has elected to
become a financial holding company.
Dividends. The Federal Reserve Board has authority to prohibit bank
holding companies from paying dividends if such payment is deemed to be an
unsafe or unsound practice. The Federal Reserve Board has indicated generally
that is may be an unsafe and an unsound practice for bank holding companies to
pay dividends unless the
89
bank holding company's net income over the preceding year is sufficient to fund
the dividends and the expected rate of earnings retention is consistent with the
organization's capital needs, asset quality, and overall financial condition.
Old Florida's ability to pay dividends is dependent upon the flow of dividend
income to it from its banking subsidiaries, which may be affected or limited by
regulatory restrictions imposed by federal or state bank regulatory agencies.
Transactions by Bank Holding Companies with their Affiliates. There are
various legal restrictions on the extent to which bank holding companies and
their non-bank subsidiaries may borrow, obtain credit from or otherwise engage
in "covered transactions" with their insured depository institution
subsidiaries. "Covered transactions" are defined by statue for these purposes to
include:
- a loan or extension of credit to an affiliate:
- a purchase of or investment in securities issued by
an affiliate;
- a purchase of assets from an affiliate unless
exempted by the Federal Reserve Board;
- the acceptance of securities issued by an affiliate
as collateral for a loan or extension of credit to
any person or company or
- the issuance of a guarantee, acceptance or letter of
credit on behalf of an affiliate, including
confirmation of a letter of credit issued by an
affiliate and a cross-affiliate netting arrangement.
These borrowings and other covered transactions by an insured
depository institution subsidiary with its non-depository institution affiliates
are generally limited to the following amounts:
- in the case of any one affiliate, the aggregate
amount of covered transactions of the insured
depository institution and its subsidiaries cannot
exceed 10% of the capital stock and surplus of the
insured depository institution; and
- in the case of all affiliates, the aggregate amount
of covered transactions of the insured depository
institution and its subsidiaries cannot exceed 20% of
the capital stock and surplus of the insured
depository institution.
Certain of these covered transactions are also subject to collateral
security requirements.
Other types of transactions between a bank and a bank holding company
must be on market terms and not otherwise unduly favorable to the bank holding
company or an affiliate of the bank holding company. In October 2002, the
Federal Reserve Board adopted a regulation which implements these restrictions
on transactions with affiliates. Among other matters, this new regulation
requires banks that engage in derivatives transactions with affiliates or that
grant intra-day credit to affiliates to establish policies and procedures that
address the credit risks associated with these types of transactions.
Anti-Tying Rules. Under federal banking law, a bank holding company and
its subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property of any kind,
or furnishing of any service.
Holding Company Support of Subsidiary Banks. Under Federal Reserve
Board policy, Old Florida is expected to act as a source of financial strength
to its subsidiary banks and to commit resources to support these subsidiaries.
This support of its subsidiary banks may be required at times when, absent such
Federal Reserve Board policy, Old Florida might not otherwise be inclined to
provide it. In addition, any capital loans by a bank holding company to any of
its subsidiary banks are subordinate in right of payment to deposits and certain
other indebtedness of its subsidiary banks. In the event of a bank holding
company's bankruptcy, any commitment by the
90
bank holding company to a federal bank regulatory agency to maintain capital of
a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Liability of Commonly Controlled Depository Institutions. Under the
Federal Deposit Insurance Act, a depository institution insured by the Federal
Deposit Insurance Corporation can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with:
- the "default" of a commonly controlled FDIC- insured
depository institution; or
- any assistance provided by the FDIC to any commonly
controlled depository institution in "danger of
default."
For these purposes, the term "default" is defined generally as the appointment
of a conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a default is likely to occur
without federal regulatory assistance.
REGULATION OF OLD FLORIDA BANK
General. Old Florida Bank is an FDIC-insured Florida chartered bank
that is not a member of the Federal Reserve System and therefore is subject to
supervision and regulation by the FDIC and the Florida Department of Financial
Services.
Examinations and Supervision. The FDIC and the Florida Department of
Financial Services regularly examine the condition and operations of Old Florida
Bank, including, among other things, its capital adequacy, reserves, loans,
investments, earnings, liquidity, compliance with laws and regulations, record
of performance under the Community Reinvestment Act and management practices. In
addition, Old Florida Bank is required to furnish quarterly and annual reports
of income and condition to the FDIC and periodic reports to the Florida
Department of Financial Services. The enforcement authority of the FDIC includes
the power to:
- impose civil money penalties;
- terminate insurance coverage;
- remove officers and directors;
- issue cease-and-desist orders to prevent unsafe or
unsound practices or violations of laws or
regulations; and
- impose additional restrictions and requirements with
respect to banks that do not satisfy applicable
regulatory capital requirements.
Dividends. As noted above, the principal source of Old Florida's
revenue is dividends from Old Florida Bank. Payments of dividends by Old Florida
Bank is subject to banking law restrictions such as:
- the FDIC's authority to prevent a bank from paying
dividends if such payment would constitute an unsafe
or unsound banking practice or reduce the bank's
capital below safe and sound levels;
- federal legislation which prohibits FDIC-insured
depository institutions from paying dividends or
making capital distributions that would cause the
institution to fail to meet minimum capital
requirements; and
- Florida banking law restrictions which require that a
bank may not, without the approval the Florida
Department of Financial Services, declare dividends
other than from current net profits and retained net
profits from the prior 2 years.
91
Affiliate Transactions. As noted above, banks are subject to
restrictions imposed by federal law on extensions of credit to, purchases of
assets from, and certain other transactions with affiliates and on investments
in stock or other securities issued by affiliates. These restrictions prevent
banks from making loans to affiliates unless the loans are secured by collateral
in specified amounts and have terms at least as favorable to the bank as the
terms of comparable transactions between the bank and non-affiliates. Further,
federal law significantly restricts extensions of credit by banks to directors,
executive officers and principal shareholders and other related parties.
Deposit Insurance. Deposits made in Old Florida Bank are insured by the
Bank Insurance Fund of the FDIC to the legal maximum of $100,000 for each
insured depositor. The Federal Deposit Insurance Act provides that the FDIC
shall set deposit insurance assessment rates on a semi-annual basis at a level
sufficient to increase the ratio of Bank Insurance Fund reserves to BIF-insured
deposits to at least 1.25% over a 15-year period commencing in 1991, and to
maintain that ratio. Although the established framework of risk-based insurance
assessments accomplished this increase in May 1995, and the FDIC has made a
substantial reduction in the assessment rate schedule, the Bank Insurance Fund
insurance assessments may be increased in the future if necessary to maintain
reserves at the required level.
Federal Reserve Board Policies. The monetary policies and regulations
of the Federal Reserve Board have had a significant effect on the operating
results of banks in the past and are expected to continue to do so in the
future. Federal Reserve Board policies affect the levels of bank earnings on
loans and investments and the levels of interest paid on bank deposits through
the Federal Reserve System's open-market operations in United States government
securities, regulation of the discount rate on bank borrowings from Federal
Reserve Banks and regulation of non-earning reserve requirements applicable to
bank deposit account balances.
Consumer Protection Regulation: Bank Secrecy Act; USA PATRIOT Act.
Other aspects of the lending and deposit businesses of Old Florida Bank the are
subject to regulation by the FDIC, include disclosure requirements with respect
to the payment of interest, payment and other terms of consumer and residential
mortgage loans and disclosure requirements with respect to the payment of
interest, payment and other terms of consumer and residential mortgage loans and
disclosure of interest and fees and other terms of, and the availability of,
funds for withdrawal from consumer deposit accounts. In addition, Old Florida
bank is subject to federal law prohibiting certain forms of discrimination in
credit transaction, and imposing certain record keeping, reporting and
disclosure requirements with respect to residential mortgage loan applications.
Old Florida bank is also subject to federal laws establishing certain record
keeping, customer identification and reporting requirements with respect to
certain large cash transactions, sales and travelers checks or other monetary
instruments, and international transportation of cash or monetary instruments.
In addition, under the USA PATRIOT Act of 2001, financial institutions, such as
Old Florida Bank, are required to implement additional policies and procedures
with respect to, or additional measures designed to address, any or all of the
following matters, among others; money laundering; suspicious activities and
currency transaction reporting; and currency crimes.
Community Reinvestment Act Regulations. The Community Reinvestment Act
of 1977 requires lenders to identify the communities served by the bank's
offices and to identify the types of credit the bank is prepared to extend
within these communities. Failure of a bank to receive at least a "satisfactory"
rating could inhibit the bank or its holding company from undertaking certain
activities including engaging in activities newly permitted as a financial
holding company under the Gramm-Leach-Bliley Act and acquisitions of other
financial institutions, which require regulatory approval based, in part, on
Community Reinvestment Act compliance considerations. The Federal Reserve Board
must take into account the record of performance of banks in meeting the credit
needs of the entire community served, including low and moderate-income
neighborhoods.
Capital Requirements. The FDIC has established guidelines with respect
to the maintenance of appropriate levels of capital by state chartered
FDIC-insured banks that are not members of the Federal Reserve System and the
Federal Reserve has established substantially identical guidelines for bank
holding companies. If a banking organization's capital levels fall below the
minimum requirements established by these guidelines, a bank or bank holding
company will be expected to develop and implement a plan acceptable to the FDIC,
or the Federal Reserve, as applicable, to achieve adequate levels of capital
within a reasonable period, and may be denied approval to acquire or establish
additional banks or non-bank businesses, merge with other institutions or open
branch facilities
92
until those capital levels are achieved. Federal legislation requires federal
bank regulators to take "prompt corrective action" with respect to insured
depository institutions that fail to satisfy minimum capital requirements and
imposed significant restrictions on those institutions.
In particular, FDIC guidelines and regulations and the Federal Deposit
Insurance Corporation Improvement Act of 1991 include, among other things;
- minimum leverage capital ratios or Tier 1 capital to total ratios
and other required ratios;
- minimum capital levels measured as a percentage of a bank's
risk-adjusted assets;
- as noted above, requirements that federal banking regulators take
"prompt corrective action" with respect to, and impose significant
restrictions on, any bank that fails to satisfy its applicable
minimum capital requirements;
- assignment of a bank by the FDIC to one of three capital
categories consisting of (1) well capitalized, (2) adequately
capitalized and (3) undercapitalized, and one of three supervisory
categories, which category assignments determine the bank's
assessment rate;
- restrictions on the ability of a bank to accept brokered deposits;
- authorization of the FDIC to appoint itself as conservator or
receiver for a state-chartered bank under certain circumstances
and expansion of the grounds for appointment of a conservator or
receiver for an insured depository institution;
- adoption of uniform real estate lending standards;
- standards for safety and soundness related to, among other things,
internal controls and audit systems loan documentation, credit
underwritings and interest rate risk exposure;
- restrictions on the activities and investments of state-chartered
banks; and
- consumer protection provisions.
LEGAL MATTERS
The federal income tax consequences of the merger, along with other legal
matters in connection with the merger and the issuance of Old Florida common
shares to former Marine shareholders, have been passed upon for Old Florida by
Werner & Blank, LLC.
EXPERTS
OLD FLORIDA
The consolidated financial statements of Old Florida as of December 31, 2002 and
2001, and for each of the two years in the period ended December 31, 2002,
included in this proxy statement/prospectus beginning at page F-2 have been
audited by Hacker, Johnson & Smith PA, independent auditors, as set forth in
their report thereon, incorporated by reference herein. Those consolidated
financial statements are included in this proxy statement/prospectus in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing.
MARINE
The consolidated financial statements of Marine as of December 31, 2002
and 2001, and for each of the two years in the period ended December 31, 2002,
included in this proxy statement/prospectus beginning at page
93
F-28, have been audited by Porter Keadle Moore, LLP, independent auditors, as
set forth in their report thereon, incorporated by reference herein. Those
consolidated financial statements are included in this proxy
statement/prospectus in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
REGISTRATION STATEMENT
Old Florida has filed with the SEC a registration statement on Form S-4
to register the Old Florida common shares to be issued to Marine shareholders in
the merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Old Florida and Marine
This proxy statement/prospectus is part of that registration statement. The
rules and regulations of the SEC allow us to omit some information included in
the registration statement from this document.
Old Florida and Marine have not authorized anyone to give any
information or make any representation about the merger or our corporations that
differs from, or adds to, the information in this proxy statement/prospectus or
in the reports that are publicly filed with the SEC. Therefore, if anyone does
give you different or additional information, you should not rely on it.
This proxy statement/prospectus is dated May 5, 2003. The information
contained in this proxy statement/prospectus speaks only as of that date, unless
the information specifically indicates that another date applies. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date, and neither the mailing of this
proxy statement/prospectus to you nor the issuance to you of Old Florida common
shares will create any implication to the contrary.
94
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Old Florida Bankshares, Inc.
Report of Independent Auditors......................................................F-3
Consolidated Balance Sheets as at December 31, 2002 and December 31, 2001...........F-4
Consolidated Statements of Earnings for the years ended December 31, 2002
and the period ended December 31, 2001..............................................F-5
Consolidated Statements of Changes in Stockholder's Equity as of December 31, 2002
and December 31, 2001...............................................................F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2002 and
December 31, 2001...................................................................F-7
Notes to Consolidated Financial Statements..........................................F-8
Marine Bancshares, Inc.
Report of Independent Auditors......................................................F-28
Consolidated Balance Sheets as at December 31, 2002 and December 31, 2001...........F-29
Consolidated Statements of Operations and Comprehensive Income for the years
ended December 31, 2002 and December 31, 2001.......................................F-30
Consolidated Statements of Changes in Stockholder's Equity as of December 31, 2002,
and December 31, 2001...............................................................F-32
Consolidated Statements of Cash Flows for the years ended December 31, 2002 and
December 31, 2001...................................................................F-33
Notes to Consolidated Financial Statements..........................................F-34
</Table>
F-1
OLD FLORIDA BANKSHARES, INC.
Ft. Myers, Florida
Audited Consolidated Financial Statements
At December 31, 2002 and 2001 and For the Years Then Ended
(Together with Independent Auditors' Report)
F-2
INDEPENDENT AUDITORS' REPORT
Board of Directors
Old Florida Bankshares, Inc.
Ft. Myers, Florida:
We have audited the accompanying consolidated balance sheets of Old
Florida Bankshares, Inc. and Subsidiaries (the "Company") at December 31, 2002
and 2001, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
January 8, 2003
F-3
OLD FLORIDA BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31,
------------------------------
2002 2001
---- ----
ASSETS
Cash and due from banks $ 2,804 3,444
Interest-bearing deposits with banks 2,472 2,595
Federal funds sold 1,337 3,216
--------- ---------
Total cash and cash equivalents 6,613 9,255
Securities available for sale 8,934 8,458
Loans, net of allowance for loan losses of
$965 in 2002 and $825 in 2001 87,272 72,909
Premises and equipment, net 4,131 4,179
Federal Home Loan Bank stock, at cost 169 169
Accrued interest receivable 372 337
Deferred income taxes 262 532
Other assets 395 128
--------- ---------
Total assets $ 108,148 95,967
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits 7,206 6,767
Savings, NOW and money-market deposits 38,839 30,005
Time deposits 45,882 43,400
--------- ---------
Total deposits 91,927 80,172
Official checks 566 625
Federal Home Loan Bank advances 3,360 3,373
Accrued interest payable and other liabilities 321 283
--------- ---------
Total liabilities 96,174 84,453
--------- ---------
Commitments (Notes 4, 7 and 16)
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $.01 par value; 5,000,000 shares authorized,
1,216,595 shares issued and outstanding
in 2002 and 2001 12 12
Additional paid-in capital 12,426 12,426
Accumulated deficit (577) (966)
Accumulated other comprehensive income 113 42
--------- ---------
Total stockholders' equity 11,974 11,514
--------- ---------
Total liabilities and stockholders' equity $ 108,148 95,967
========= =========
See Accompanying Notes to Consolidated Financial Statements.
F-4
OLD FLORIDA BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
-----------------------------------
2002 2001
---- ----
Interest income:
Loans $ 6,064 6,151
Securities 576 502
Other interest-earning assets 75 229
---------- ----------
Total interest income 6,715 6,882
---------- ----------
Interest expense:
Deposits 2,815 3,846
Other borrowings 20 6
---------- ----------
Total interest expense 2,835 3,852
---------- ----------
Net interest income 3,880 3,030
Provision for loan losses 149 80
---------- ----------
Net interest income after provision for loan losses 3,731 2,950
---------- ----------
Noninterest income:
Service charges on deposit accounts 176 99
Other service charges and fees 62 83
Gain on sale of securities available for sale 30 13
---------- ----------
Total noninterest income 268 195
---------- ----------
Noninterest expenses:
Salaries and employee benefits 1,780 1,401
Occupancy and equipment 754 717
Advertising 53 47
Insurance 29 27
Data processing 203 125
Telephone 81 74
Professional fees 74 100
Other 402 300
---------- ----------
Total noninterest expenses 3,376 2,791
---------- ----------
Earnings before income taxes 623 354
Income taxes 234 146
---------- ----------
Net earnings $ 389 208
========== ==========
Basic earnings per share $ .32 .18
========== ==========
Weighted average number of shares outstanding for basic 1,216,595 1,163,188
========== ==========
Diluted earnings per share $ .32 .18
========== ==========
Weighted average number of shares outstanding for diluted 1,230,523 1,177,116
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
F-5
OLD FLORIDA BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
($ IN THOUSANDS)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL DEFICIT INCOME (LOSS) EQUITY
-------------- -------------- --------------- --------------- --------------
Balance at December 31, 2000 $ 10 9,961 (1,174) (12) 8,785
------
Issuance of common stock
(216,595 shares) 2 2,465 -- -- 2,467
------
Comprehensive income:
Net earnings -- -- 208 -- 208
Net change in unrealized
loss on securities available
for sale, net of tax -- -- -- 54 54
------
Comprehensive income 262
------ ------ ------ ------ ------
Balance at December 31, 2001 12 12,426 (966) 42 11,514
Comprehensive income:
Net earnings -- -- 389 -- 389
Net change in unrealized
gain on securities available
for sale, net of tax -- -- -- 71 71
------
Comprehensive income 460
------ ------ ------ ------ ------
Balance at December 31, 2002 $ 12 12,426 (577) 113 11,974
====== ====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements.
F-6
OLD FLORIDA BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
--------------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net earnings $ 389 208
Adjustments to reconcile net earnings to net cash provided by
(used in) by operating activities:
Depreciation 361 363
Provision for loan losses 149 80
Provision for deferred income taxes 234 146
Amortization of loan fees, costs, premiums and discounts (286) (353)
Gain on sale of securities available for sale (30) (13)
(Increase) decrease in accrued interest receivable (35) 76
Increase in other assets (73) (17)
Decrease in official checks, accrued interest
payable and other liabilities (21) (1,223)
-------- --------
Net cash provided by (used in) operating activities 688 (733)
-------- --------
Cash flows from investing activities:
Purchase of securities available for sale (9,976) (6,444)
Principal collected on securities available for sale 2,871 1,040
Call of securities available for sale 4,485 4,000
Sale of securities available for sale 2,247 1,180
Net increase in loans (14,192) (6,191)
Purchase of Federal Home Loan Bank stock -- (69)
Purchase of premises and equipment (313) (778)
Cash received in acquisition of deposit accounts 8,052 --
-------- --------
Net cash used in investing activities (6,826) (7,262)
Cash flows from financing activities:
Net increase in deposits 3,509 1,449
Proceeds from Federal Home Loan Bank advances 3,000 3,373
Repayments of Federal Home Loan Bank advances (3,013) --
Proceeds from sale of common stock -- 2,467
-------- --------
Net cash provided by financing activities 3,496 7,289
-------- --------
Net decrease in cash and cash equivalents (2,642) (706)
Cash and cash equivalents at beginning of year 9,255 9,961
-------- --------
Cash and cash equivalents at end of year $ 6,613 9,255
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,815 3,899
======== ========
Income taxes $ -- --
======== ========
Noncash transaction-
Accumulated other comprehensive income,
change in unrealized gain (loss) on securities available for sale $ 71 54
======== ========
See Accompanying Notes to Consolidated Financial Statements.
F-7
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2002 AND 2001 AND FOR THE YEARS THEN ENDED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL. Old Florida Bankshares, Inc. (the "Holding Company") owns 100% of
the outstanding common stock of Old Florida Bank (the "Bank") and Old
Florida Capital, Inc. ("OFC") (collectively the "Company"). On April
16, 2001, the Bank's stockholders approved a plan of corporate
reorganization under which the Bank would become a wholly-owned
subsidiary of the Holding Company and the Holding Company was approved
on July 1, 2001. The Bank's stockholders exchanged their common shares
for shares of the Holding Company. As a result, all of the previously
issued $5 par value common shares of the Bank were exchanged for
1,216,595 shares of the $0.01 par value common shares of the Holding
Company. The Holding Company's acquisition of the Bank was accounted
for similar to a pooling of interests and, accordingly, the financial
data for periods presented include the results of the Bank. In 2002,
the Holding Company established OFC which will broker commercial
mortgage loans. OFC was inactive in 2002.
The Holding Company's only business activities are those of its
subsidiaries. The Bank is a state (Florida) chartered commercial bank.
The Bank offers a variety of community banking services to individual
and corporate customers through its two banking offices located in Ft.
Myers and Bonita Springs, Florida. The deposits of the Bank are insured
by the Federal Deposit Insurance Corporation.
In February 2002, the Company acquired deposits from another financial
institution in South Fort Myers, Florida. The deposits were transferred
to the Fort Myers branch. The excess of the fair value of liabilities
assumed over the fair value of tangible assets acquired in this
transaction is being amortized on the straight-line basis over ten
years. The intangible asset at December 31, 2002 was $194,276 and is
included in other assets on the consolidated balance sheet.
BASIS OF PRESENTATION. The accompanying consolidated financial statements
include the accounts of the Holding Company, the Bank and OFC. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
USE OF ESTIMATES. In preparing consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the balance sheet and reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and deferred tax assets.
CASH AND CASH EQUIVALENTS. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and due from banks,
interest-bearing deposits with banks and federal funds sold, all of
which mature within ninety days.
The Company's banking subsidiary is required by law or regulation to
maintain cash reserves with the Federal Reserve Bank. The reserve
balances at December 31, 2002 and 2001 were approximately $350,00 and
$245,000, respectively.
(continued)
F-8
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SECURITIES. Securities may be classified as either trading, held to
maturity or available for sale. Trading securities are held principally
for resale and recorded at their fair values. Unrealized gains and
losses on trading securities are included immediately in earnings.
Held-to-maturity securities are those which the Company has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are excluded from earnings and reported in comprehensive
income. Gains and losses on the sale of available-for-sale securities
are recorded on the trade date and are determined using the
specific-identification method. Premiums and discounts on securities
available for sale are recognized in interest income using the interest
method over the period to maturity.
LOANS. Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for
loan losses, and any deferred fees or costs.
Commitment fees, loan origination fees and certain direct origination
costs are capitalized and recognized as an adjustment of the yield of the
related loan.
The accrual of interest on loans is discontinued at the time the loan
is ninety days delinquent unless the loan is well-collateralized and in process
of collection. In all cases, loans are placed on nonaccrual or charged-off at an
earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The interest on
these loans is accounted for on the cash-basis or cost-recovery method, until
qualifying for return to accrual. Loans are returned to accrual status when all
the principal and interest amounts contractually due are brought current and
future payments are reasonably assured.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the collectibility
of the loans in light of historical experience, the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes
available.
(continued)
F-9
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
ALLOWANCE FOR LOAN LOSSES, CONTINUED. A loan is considered impaired when, based
on current information and events, it is probable that the Company will be
unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Factors considered
by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest
payments when due. Loans that experience insignificant payment delays and
payment shortfalls generally are not classified as impaired. Management
determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay,
the reasons for the delay, the borrower's prior payment record, and the
amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan by loan basis for commercial and commercial
real estate loans by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's obtainable
market price, or the fair value of the collateral if the loan is collateral
dependent.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately identify
individual installment, home equity or residential loans for impairment
disclosures.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and
amortization expense is computed using the straight-line method over
the estimated useful life of each type of asset or the lease term if
shorter.
TRANSFER OF FINANCIAL ASSETS. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1)
the assets have been isolated from the Company, (2) the transferee
obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets,
and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before their
maturity.
INCOME TAXES. Deferred tax assets and liabilities are determined using the
liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects
of the temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws. The Company recognized a
deferred tax asset because management believes it will utilize the
deferred tax asset to offset income tax liabilities generated in future
periods.
(continued)
F-10
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
STOCK COMPENSATION PLANS. Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation, as amended by SFAS
No. 148, Accounting for Stock-Based Compensation Transition and
Disclosure (collectively, "SFAS 123") encourages all entities to adopt
a fair value based method of accounting for employee stock compensation
plans, whereby compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period, which
is usually the vesting period. However, it also allows an entity to
continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (Opinion No. 25), whereby compensation cost is the excess, if
any, of the quoted market price of the stock at the grant date (or
other measurement date) over the amount an employee must pay to acquire
the stock. Stock options issued under the Company's stock option plans
have no intrinsic value at the grant date, and under Opinion No. 25 no
compensation cost is recognized for them. The Company has elected to
continue with the accounting methodology in Opinion No. 25 and, as a
result, has provided proforma disclosures of net earnings and other
disclosures, as if the fair value based method of accounting had been
applied.
OFF-BALANCE-SHEET INSTRUMENTS. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit and unused lines of credit.
Such financial instruments are recorded in the financial statements
when they are funded.
FAIR VALUES OF FINANCIAL INSTRUMENTS. The fair value of a financial
instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances,
there are no quoted market prices for the Company's various financial
instruments. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of
future cash flows. Accordingly, the fair value estimates may not be
realized in an immediate settlement of the instrument. SFAS 107
excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value
amounts presented may not necessarily represent the underlying fair
value of the Company. The following methods and assumptions were used
by the Company in estimating fair values of financial instruments:
CASH AND CASH EQUIVALENTS. The carrying amounts of cash and cash
equivalents approximates their fair value.
SECURITIES. Fair values for securities available for sale are
based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments. The carrying value of Federal
Home Loan Bank stock approximates fair value.
LOANS. For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on
carrying values. Fair values for fixed-rate loans are estimated
using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers
of similar credit quality.
ACCRUED INTEREST. The carrying amount approximates fair value.
(continued)
F-11
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED.
DEPOSIT LIABILITIES. The fair values disclosed for demand,
savings, NOW and money market deposits are, by definition, equal
to the amount payable on demand at the reporting date (that is,
their carrying amounts). Fair values for fixed-rate time deposits
are estimated using a discounted cash flow calculation that
applies interest rates currently being offered on certificates to
a schedule of aggregate expected monthly maturities of time
deposits.
FHLB ADVANCES. The carrying amount approximates fair value.
OFF-BALANCE-SHEET INSTRUMENTS. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter
into similar agreements, taking into account the remaining terms
of the agreements and the counterparties' credit standing.
EARNINGS PER SHARE. Earnings per share ("EPS") of common stock has been
computed on the basis of the weighted-average number of shares of
common stock outstanding. For 2002 and 2001, outstanding stock options
are considered dilutive securities for purposes of calculating diluted
EPS which is computed using the treasury stock method. The following
tables present the calculations of EPS (dollars in thousands, except
per share amounts).
FOR THE YEAR ENDED DECEMBER 31, 2002
------------------------------------
WEIGHTED- PER
AVERAGE SHARE
EARNINGS SHARES AMOUNT
-------- --------- ------
Basic EPS:
Net earnings available to common stockholders $ 389 1,216,595 $ .32
=====
Effect of dilutive securities-
Incremental shares from assumed conversion of options - 13,928
----- -----------
Diluted EPS:
Net earnings available to common stockholders
and assumed conversions $ 389 1,230,523 $ .32
=== ========= =====
FOR THE YEAR ENDED DECEMBER 31, 2001
------------------------------------
WEIGHTED- PER
AVERAGE SHARE
EARNINGS SHARES AMOUNT
-------- --------- ------
Basic EPS:
Net earnings available to common stockholders $ 208 1,163,188 $ .18
=====
Effect of dilutive securities-
Incremental shares from assumed conversion of options - 13,928
----- -----------
Diluted EPS:
Net earnings available to common stockholders
and assumed conversions $ 208 1,177,116 $ .18
=== ========= =====
(continued)
F-12
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
COMPREHENSIVE INCOME. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net
earnings. Although certain changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, are
reported as a separate component of the equity section of the balance
sheet, such items, along with net earnings, are components of
comprehensive income. The components of other comprehensive income and
related tax effects are as follows (in thousands):
YEARS ENDED DECEMBER 31,
------------------------
2002 2001
-------- -------
Unrealized holding gains on available-for-sale securities $ 144 95
Reclassification adjustment for gains realized in earnings (30) (13)
--- ---
Net unrealized gains 114 82
Income taxes (43) (28)
--- ---
Net amount $ 71 54
=== ===
</Table>
ADVERTISING. The Company expenses all media advertising as incurred.
RECENT PRONOUNCEMENTS. In November 2002, the FASB issued FASB Interpretation
No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness to Others"
("FIN 45"), which expands previously issued accounting guidance and
disclosure requirements for certain guarantees. FIN 45 requires the
Company to recognize an initial liability for the fair value of an
obligation assumed by issuing a guarantee. The provision for initial
recognition and measurement of the liability will be applied on a
prospective basis to guarantees issued or modified after December 31,
2002. The adoption of FIN 45 is not expected to materially affect the
consolidated financial statements.
In May, 2002, the FASB issued SFAS No. 145, "Recission of FASB Statement
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002." This statement rescinds SFAS No. 4 and
64, "Reporting Gains and Losses from Extinguishment of Debt" and
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements,"
respectively, and restricts the classification of early extinguishment
of debt as an extraordinary item to the provisions of APB Opinion No.
30. This statement also rescinds SFAS No. 44, "Accounting for
Intangible Assets of Motor Carriers," which is no longer necessary
because the transition to the provisions of the Motor Carrier Act of
1980 is complete. The Statement also amends SFAS No. 13, "Accounting
for Leases," to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. Finally, the Statement makes
various technical corrections to existing pronouncements, which are not
considered substantive. This statement is effective for financial
statements issued on or after May 15, 2002. The adoption of this
statement had no effect on the consolidated financial statements.
(continued)
F-13
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RECENT PRONOUNCEMENTS, CONTINUED. In June 2002, the FASB issued SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 provides guidance on the recognition and
measurement of liabilities for costs associated with exit or disposal
activities. SFAS No. 146 is effective for exit and disposal activities
that are initiated after December 31, 2002. The adoption of this
Statement is not expected to have any effect on the Company's
consolidated financial statements.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure" was issued in December, 2002. SFAS No. 148 amends SFAS No.
123, "Accounting for Stock-Based Compensation," to provide three
alternative methods of transition to SFAS 123's fair-value method of
accounting for stock-based Compensation. This Statement is effective
for fiscal years ending after December 15, 2002. The Company has
elected to continue to use the Intrinsic Value Method, therefore the
only effect to the Company was additional disclosure requirements in
the footnotes to the consolidated financial statements.
RECLASSIFICATIONS. Certain balances in the 2001 consolidated financial
statements have been reclassified to conform to 2002 presentation.
(2) SECURITIES AVAILABLE FOR SALE
Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values are as
follows (in thousands):
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
AT DECEMBER 31, 2002:
U.S. Government Agency securities $ 1,971 37 - 2,008
Collateralized mortgage obligations 1,328 14 (1) 1,341
Mortgage-backed securities 5,465 120 - 5,585
----- --- --- ------
$ 8,764 171 (1) 8,934
===== === === ======
AT DECEMBER 31, 2001:
U.S. Government Agency securities 2,984 24 (17) 2,991
Collateralized mortgage obligations 4,264 47 (7) 4,304
Mortgage-backed securities 1,146 17 - 1,163
----- --- --- ------
$ 8,394 88 (24) 8,458
===== === === ======
Sales of securities available for sale were as follows (in thousands):
YEARS ENDED DECEMBER 31,
2002 2001
------ ------
Gross proceeds $2,247 1,180
====== ======
Gross gains 30 15
Gross losses -- (2)
------ ------
Net gains $ 30 13
====== ======
(continued)
F-14
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) SECURITIES AVAILABLE FOR SALE, CONTINUED
The scheduled maturities of securities available for sale at December 31,
2002 are as follows (in thousands):
AMORTIZED FAIR
COST VALUE
------ ------
Due from one to five years $ 974 995
Due from five to ten years 997 1,013
Collateralized mortgage obligations 1,328 1,341
Mortgage-backed securities 5,465 5,585
------ ------
$8,764 8,934
====== ======
(3) LOANS
The components of loans are as follows (in thousands):
AT DECEMBER 31,
2002 2001
---- ----
Commercial $ 3,778 4,123
Commercial real estate 78,928 62,094
Residential real estate 4,370 5,686
Installment 650 1,114
Home equity 807 1,017
-------- --------
88,533 74,034
Deduct:
Net deferred loan and commitment fees (296) (300)
Allowance for loan losses (965) (825)
-------- --------
Loans, net $ 87,272 72,909
======== ========
An analysis of the change in the allowance for loan losses follows (in
thousands):
YEARS ENDED DECEMBER 31,
------------------------
2002 2001
---- ----
Beginning balance $ 825 745
Provision for loan losses 149 80
(Charge-offs), net of recoveries (9) --
----- -----
Ending balance $ 965 825
===== =====
The Company had no impaired loans in 2002 or 2001.
THE COMPANY HAD NO NONACCRUAL LOANS OR LOANS WHICH WERE OVER NINETY
DAYS PAST DUE BUT STILL ACCRUING INTEREST.
(continued)
F-15
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) PREMISES AND EQUIPMENT
A summary of premises and equipment follows (in thousands):
AT DECEMBER 31,
---------------
2002 2001
---- ----
Land $ 1,109 1,109
Building 2,415 2,400
Leasehold improvements 230 230
Furniture and fixtures 709 633
Computer equipment and software 996 735
Construction in progress - 59
------- -------
Total, at cost 5,459 5,166
Less accumulated depreciation and amortization (1,328) (987)
------- -------
Premises and equipment, net $ 4,131 4,179
======= =======
The Company has an operating lease for a branch facility. The term of the
lease is for five years and contains four five year renewal options.
Also, the Company leases certain equipment and automobiles under
operating leases with lease terms ranging from two to three years. Rent
expense under operating leases during the years ended December 31, 2002
and 2001 was $101,368 and $101,954, respectively. Approximate future
minimum annual rental payments under noncancellable leases are as
follows (in thousands):
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
2003 $ 139
2004 128
2005 99
2006 98
2007 101
Thereafter 110
-----
$ 675
(continued)
F-16
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) DEPOSITS
The aggregate amount of certificates of deposit with a minimum denomination
of $100,000, was approximately $21.9 million and $19.3 million at
December 31, 2002 and 2001, respectively.
A schedule of maturities of time deposits at December 31, 2002 follows
(in thousands):
YEAR ENDING
DECEMBER 31, AT DECEMBER 31
------------ --------------
2003 $ 21,503
2004 13,408
2005 7,133
2006 1,346
2007 2,492
--------
$ 45,882
========
(6) FEDERAL HOME LOAN BANK ADVANCES
MATURITIES AND INTEREST RATES ON FEDERAL HOME LOAN BANK ("FHLB")
ADVANCES WERE AS FOLLOWS (DOLLARS IN THOUSANDS):
AT DECEMBER 31,
YEAR ENDING INTEREST ----------------------
DECEMBER 31, RATE 2002 2001
------------- -------- ---- ----
2002 2.0% $ - 3,000
2003 1.6% 3,000 -
2011 1.5% 360 373
------ -----
$3,360 3,373
====== =====
At December 31, 2002, FHLB advances were collateralized by all of the
Company's FHLB stock, a blanket lien on commercial real estate and
residential real estate loans and pledged securities of approximately
$1.2 million.
(7) FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments are unused lines of credit and
commitments to extend credit and may involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount
recognized in the consolidated balance sheet. The contract amounts of
these instruments reflect the extent of involvement the Company has in
these financial instruments.
(continued)
F-17
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) FINANCIAL INSTRUMENTS, CONTINUED
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for unused lines of credit and
commitments to extend credit is represented by the contractual amount
of those instruments. The Company uses the same credit policies in
making commitments as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit
evaluation of the counterparty.
The estimated fair values of the Company's financial instruments at
December 31, 2002 were as follows (in thousands):
CARRYING FAIR
AMOUNT VALUE
-------- -------
Financial assets:
Cash and cash equivalents $ 6,613 6,613
======= ========
Securities available for sale $ 8,934 8,934
======= ========
Loans, net $ 87,272 87,571
======= =======
Accrued interest receivable $ 372 372
======== =======
Federal Home Loan Bank stock $ 169 169
======== =======
Financial liabilities:
Deposits $ 91,927 94,829
======= =======
FHLB advances $ 3,360 3,360
======= =======
(continued)
F-18
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) FINANCIAL INSTRUMENTS, CONTINUED
Unused lines of credit and commitments to extend credit typically result in
loans with a market interest rate when funded. A summary of the amounts
of the Company's financial instruments, with off-balance-sheet risk
follows at December 31, 2002 (in thousands):
ESTIMATED
NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE
-------- -------- ---------
Unused lines of credit $ 18,130 - -
======== ====== ======
Commitments to extend credit $ 2,063 - -
======== ====== ======
(8) CREDIT RISK
The Company grants the majority of its loans to borrowers throughout the
Ft. Myers, Bonita Springs and Naples, Florida areas. Although the
Company has a diversified loan portfolio, a significant portion of its
borrowers' ability to honor their contracts is dependent upon the
economy of Ft. Myers, Bonita Springs and Naples, Florida.
(9) INCOME TAXES
The income tax provision consisted of the following (in thousands):
YEARS ENDED DECEMBER 31,
------------------------
2002 2001
---- ----
Deferred:
Federal $ 200 125
State 34 21
---- ---
Total deferred $ 234 146
=== ===
(continued)
F-19
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) INCOME TAXES, CONTINUED
THE REASONS FOR THE DIFFERENCES BETWEEN THE STATUTORY FEDERAL INCOME
TAX RATE AND THE EFFECTIVE TAX RATE ARE SUMMARIZED AS FOLLOWS ($ IN THOUSANDS):
YEARS ENDED DECEMBER 31,
----------------------------------
2002 2001
-------- --------
% OF % OF
PRETAX PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS
------ -------- ------ --------
Income taxes at Federal statutory rate $ 212 34.0% $ 120 34.0%
Increase resulting from:
State taxes, net of Federal tax benefit 22 3.6 14 3.9
Other - - 12 3.3
----- ---- ----- ----
$ 234 37.6% $ 146 41.2%
===== ==== ===== ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below (in thousands).
AT DECEMBER 31,
----------------------
2002 2001
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 145 425
Allowance for loan losses 184 128
Organizational and preopening costs 19 25
Accumulated depreciation 63 54
Intangible assets 2 -
Other - 7
----- ---
Deferred tax assets 413 639
----- ---
Deferred tax liabilities:
Accrual to cash adjustment 94 86
Unrealized gain on securities available for sale 57 21
----- ---
Deferred tax liabilities 151 107
----- ---
Net deferred tax asset $ 262 532
===== ===
At December 31, 2002, the Company has approximately the following net
operating loss carryforwards available to offset future taxable income
(in thousands):
EXPIRATION AMOUNT
---------- ------
2019 $ 216
2020 170
-----
$ 386
(continued)
F-20
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) RELATED PARTY TRANSACTIONS
At December 31, 2002 and 2001, officers and directors of the Company and
entities in which they hold a financial interest had loan balances
outstanding to the Company of approximately $1.6 million and $144,000,
respectively. At December 31, 2002 and 2001, such parties owned
approximately 36.3% of the common stock of the Company.
(11) STOCK OPTION PLANS
THE COMPANY HAS AN INCENTIVE STOCK OPTION PLAN FOR OFFICERS AND
EMPLOYEES OF THE COMPANY AND HAS RESERVED 100,000 SHARES OF COMMON STOCK FOR THE
PLAN. THE EXERCISE PRICE OF THE STOCK OPTIONS IS THE GREATER OF $10 OR THE FAIR
MARKET VALUE OF THE COMMON STOCK ON THE DATE OF GRANT. THE OPTIONS VEST 33%
DURING THE SECOND AND THIRD YEAR, RESPECTIVELY, AFTER GRANT AND ARE FULLY
EXERCISABLE DURING THE FOURTH YEAR AFTER THE GRANT DATE. THE OPTIONS MUST BE
EXERCISED WITHIN 10 YEARS FROM THE DATE OF GRANT. AT DECEMBER 31, 2002, 33,439
SHARES REMAIN AVAILABLE FOR GRANT.
The Company also has a nonqualified stock option plan for directors of the
Company and has reserved 100,000 shares of common stock for the plan.
The exercise price of the stock options is the greater of $10 or the
fair market value of the common stock on the date of grant. The options
vest 33% during the second and third year, respectively, after grant
and are fully exercisable during the fourth year after the grant date.
The options must be exercised within 10 years from the date of grant.
As of December 31, 2002 all available options had been granted.
A summary of stock option transactions follows (dollars in thousands,
except per share amounts):
RANGE
OF PER WEIGHTED-
SHARE AVERAGE AGGREGATE
NUMBER OF OPTION PER SHARE OPTION
SHARES PRICE PRICE PRICE
--------- ------------- --------- ---------
Outstanding at December 31, 2000 153,000 $ 10.00 10.00 1,530
Options granted 9,896 11.50 11.50 114
Options forfeited (10,670) 10.00 10.00 (107)
Options exercised (665) 10.00 10.00 (7)
------- -----
Outstanding at December 31, 2001 151,561 10.00-11.50 10.10 1,530
Options granted 15,000 12.50 12.50 187
------- -----
Outstanding at December 31, 2002 166,561 $ 10.00-12.50 10.35 1,717
======= ============= ===== =====
The weighted-average remaining contractual life of the outstanding stock
options at December 31, 2002 and 2001 was 7.0 years and 7.7 years,
respectively.
(continued)
F-21
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(11) STOCK OPTION PLANS, CONTINUED
These options are exercisable as follows:
NUMBER WEIGHTED-AVERAGE
YEAR ENDING OF SHARES EXERCISE PRICE
----------- --------- ----------------
Currently 138,660 $ 10.00
2003 13,944 10.00
2004 8,958 11.50
2005 4,999 12.50
-------
166,561 $ 10.35
======= =======
The Company accounts their stock option plans under the recognition and
measurement principles of APB No. 25. No stock-based employee
compensation cost is reflected in net earnings, as all options granted
under those plans had an exercise price equal to the market value of
the underlying common stock on the date of grant. The following table
illustrates the effect on net earnings and earnings per share if the
Company had applied the fair value recognition provisions of SFAS No.
123 to stock-based employee compensation.
YEARS ENDED DECEMBER 31,
--------------------------
2002 2001
---- ----
Net earnings, as reported $ 389 208
Deduct: Total stock-based employee compensation
determined under the fair value based method for all
awards, net of related tax effect (44) (79)
----- ---
Proforma net earnings $ 345 129
===== ===
Earnings per share, basic and diluted $ .32 .18
===== ===
Proforma earnings per share, basic and diluted $ .28 .11
===== ===
The Statement requires proforma fair value disclosures if the intrinsic
value method is being utilized. In order to calculate the fair value of
the options granted using the Black-Scholes model, it was assumed that
the risk-free interest rate for 2002 and 2001 was 4.3% and 6.0%,
respectively, there would be no dividends paid by the Company over the
exercise period, the expected life of the options would be ten years
and stock volatility would be zero due to the lack of an active market
for the stock. For purposes of pro forma disclosures, the estimated
fair value is included in expense during the vesting period (in
thousands, except per share amounts).
YEARS ENDED DECEMBER 31,
-------------------------
2002 2001
----- ----
Grant-date fair value of options issued during the period $ 63 40
===== ====
(continued)
F-22
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) PROFIT SHARING PLAN
The Company sponsors a profit sharing plan in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The profit
sharing plan is available to all employees electing to participate
after meeting certain length-of-service requirements. The Company
contributed $34,031 and $26,694 to the plan during the years ended
December 31, 2002 and 2001, respectively.
(13) STOCKHOLDERS' EQUITY
Federal and state banking regulations place certain restrictions on
dividends paid and loans or advances made by the Bank to the Holding
Company.
(14) REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by regulatory banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's and Company's consolidated
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgements
by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and percents (set forth in
the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 2002, that the Bank meets all capital
adequacy requirements to which it is subject.
(continued)
F-23
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) REGULATORY MATTERS, CONTINUED
AS OF DECEMBER 31, 2002, THE MOST RECENT NOTIFICATION FROM THE
REGULATORY AUTHORITIES CATEGORIZED THE BANK AS WELL CAPITALIZED UNDER THE
REGULATORY FRAMEWORK FOR PROMPT CORRECTIVE ACTION. TO BE CATEGORIZED AS WELL
CAPITALIZED THE BANK MUST MAINTAIN MINIMUM TOTAL RISK-BASED, TIER I RISK-BASED,
AND TIER I LEVERAGE PERCENTS AS SET FORTH IN THE TABLE. THERE ARE NO CONDITIONS
OR EVENTS SINCE THAT NOTIFICATION THAT MANAGEMENT BELIEVES HAVE CHANGED THE
BANK'S CATEGORY. THE BANK'S ACTUAL CAPITAL AMOUNTS AND PERCENTAGES ARE ALSO
PRESENTED IN THE TABLE (DOLLARS IN THOUSANDS).
FOR WELL
FOR CAPITAL CAPITALIZED
ACTUAL ADEQUACY PURPOSES PURPOSES
------------------------------------- -----------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
AS OF DECEMBER 31, 2002:
Total capital (to Risk-
Weighted Assets) $ 12,287 13.35% $ 7,362 8.00% $ 9,202 10.00%
Tier I Capital (to Risk-
Weighted Assets) 11,322 12.30 3,681 4.00 5,521 6.00
Tier I Capital
(to Average Assets) 11,322 10.96 4,133 4.00 5,166 5.00
AS OF DECEMBER 31, 2001:
Total capital (to Risk-
Weighted Assets) 11,779 15.20 6,200 8.00 7,750 10.00
Tier I Capital (to Risk-
Weighted Assets) 10,954 14.14 3,100 4.00 4,650 6.00
Tier I Capital
(to Average Assets) 10,954 11.65 3,760 4.00 4,700 5.00
(continued)
F-24
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) HOLDING COMPANY FINANCIAL INFORMATION
The Holding Company's financial information as of December 31, 2002 and
2001 and for the years then ended follows (in thousands):
CONDENSED BALANCE SHEETS
AT DECEMBER 31,
------------------------
2002 2001
---- ----
ASSETS
Cash $ 27 -
Investment in subsidiaries 11,949 11,549
-------- ------
Total assets $ 11,976 11,549
======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities 2 35
Stockholders' equity 11,974 11,514
-------- ------
Total liabilities and stockholders' equity $ 11,976 11,549
======== ======
CONDENSED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
2002 2001
---- ----
Expenses $ - (35)
Income of subsidiaries 389 243
-------- ------
Net earnings $ 389 208
======== ======
(continued)
F-25
OLD FLORIDA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) HOLDING COMPANY FINANCIAL INFORMATION, CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
2002 2001
---- ----
Cash flows from operating activities:
Net earnings $ 389 208
Adjustments to reconcile net earnings to net cash used in
operating activities:
(Decrease) increase in other liabilities (33) 35
Equity in undistributed earnings of subsidiaries (389) (243)
----- ----
Net cash used in operating activities (33) -
----- ----
Cash flows from investing activity-
Cash dividends received from subsidiary 60 -
----- ----
Net increase in cash - -
Cash at beginning of the year - -
----- ----
Cash at end of year $ 27 -
===== ====
Noncash transaction:
Change in investment in subsidiary due to change in
accumulated other comprehensive income, change in
unrealized gain on securities available
for sale, net of income tax $ 71 54
===== ====
(16) OTHER EVENTS
On December 31, 2002, the Holding Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Marine BancShares, Inc.
("Marine") pursuant to which Marine agreed to merge with and into the
Holding Company under the terms of the Merger Agreement, each share of
Marine common stock will be exchanged for .62 shares of the common
stock of the Holding Company. Marine is the parent company of Marine
National Bank, which operates from one office in Collier County,
Florida. The merger is expected to be consummated in the second quarter
of 2003. Marine has total assets of approximately $60 million and
stockholders' equity of approximately $6 million. The Holding Company
will account for this transaction using the purchase method of
accounting.
F-26
MARINE BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(WITH INDEPENDENT ACCOUNTANTS' REPORTS THEREON)
F-27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Marine Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of Marine
Bancshares, Inc. and subsidiary as of December 31, 2002 and 2001 and the related
consolidated statements of operations, comprehensive income, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Marine Bancshares,
Inc. and subsidiary as of December 31, 2002 and 2001, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Porter Keadle Moore LLP
Atlanta, Georgia
January 24, 2003
F-28
MARINE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
Assets
Cash and due from banks $ 1,001,385 688,427
Interest-bearing deposits with banks 2,194,000 -
Federal funds sold and securities purchased under agreements to resell 2,375,872 -
------------ ------------
Cash and cash equivalents 5,571,257 688,427
Investment securities available for sale 19,053,262 17,874,779
Other investments 617,575 694,425
Loans, net 32,753,312 34,624,074
Premises and equipment 4,504,287 4,591,618
Accrued interest receivable and other assets 352,503 513,915
------------ ------------
$ 62,852,196 58,987,238
============ ============
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing demand $ 1,940,859 2,052,114
Money market, interest bearing demand and savings 20,123,640 14,934,076
Time deposits 28,074,075 30,050,233
------------ ------------
Total deposits 50,138,574 47,036,423
Federal funds purchased - 1,750,000
Federal Home Loan Bank advances 4,800,000 2,000,000
Accrued interest payable and other liabilities 903,497 1,012,089
------------ ------------
Total liabilities 55,842,071 51,798,512
------------ ------------
Commitments
Shareholders' equity:
Preferred stock, par value $.01 per share, 2,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, par value $.01 per share, 10,000,000 shares authorized;
1,150,000 shares issued and outstanding 11,500 11,500
Additional paid-in capital 10,831,123 10,831,123
Accumulated deficit (3,980,004) (3,539,649)
Accumulated other comprehensive income (loss) 147,506 (114,248)
------------ ------------
Total shareholders' equity 7,010,125 7,188,726
------------ ------------
$ 62,852,196 58,987,238
============ ============
See accompanying notes to consolidated financial statements.
F-29
MARINE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
Interest income:
Loans, including fees $ 2,307,327 2,844,427
Investment securities 1,230,593 670,812
Federal funds sold 47,224 320,712
Other 48,978 58,773
----------- -----------
Total interest income 3,634,122 3,894,724
----------- -----------
Interest expense:
Deposits 1,784,022 2,299,386
Other borrowings 217,092 307,809
----------- -----------
Total interest expense 2,001,114 2,607,195
----------- -----------
Net interest income 1,633,008 1,287,529
Provision for loan losses 308,086 40,000
----------- -----------
Net interest income after provision for loan losses 1,324,922 1,247,529
----------- -----------
Non-interest income:
Service charges on deposit accounts 48,347 43,105
Other service charges and fees 125,076 93,824
Other income 3,653 6,049
Gain on sale of securities 23,438 52,480
----------- -----------
Total other income 200,514 195,458
----------- -----------
Non-interest expenses:
Salaries and employee benefits 1,000,785 786,621
Occupancy expense 259,521 315,115
Other operating 705,485 683,527
----------- -----------
Total other expenses 1,965,791 1,785,263
----------- -----------
Net loss $ (440,355) (342,276)
=========== ===========
Loss per share $ (.38) (.30)
=========== ===========
Weighted average shares outstanding 1,150,000 1,150,000
=========== ===========
See accompanying notes to consolidated financial statements.
F-30
MARINE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
--------- ---------
Net loss $(440,355) (342,276)
--------- ---------
Other comprehensive income:
Unrealized gains (losses) on investment
securities available for sale 417,680 (168,451)
Reclassification adjustment for gains on
sales of investment securities available for sale (23,438) (52,480)
--------- ---------
Total other comprehensive income (loss),
before income taxes 394,242 (220,931)
--------- ---------
Income tax (expense) benefit related to other comprehensive income:
Unrealized holding gains (losses) on investment
securities available for sale (132,488) 78,827
--------- ---------
Total other comprehensive income (loss),
net of tax 261,754 (142,104)
--------- ---------
Total comprehensive loss $(178,601) (484,380)
========= =========
See accompanying notes to consolidated financial statements.
F-31
MARINE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
Accumulated
Additional Other
Common Paid-In Accumulated Comprehensive
Stock Capital Deficit Income Total
----- ------- ------- ------ -----
Balance, December 31, 2000 $ 11,500 10,831,123 (3,197,373) 27,856 7,673,106
Net loss - - (342,276) - (342,276)
Change in accumulated other
comprehensive income (loss),
net of tax - - - (142,104) (142,104)
---------- ---------- ---------- -------- ----------
Balance, December 31, 2001 11,500 10,831,123 (3,539,649) (114,248) 7,188,726
Net loss - - (440,355) - (440,355)
Change in accumulated other
comprehensive income (loss),
net of tax - - - 261,754 261,754
---------- ---------- ---------- -------- ----------
Balance, December 31, 2002 $ 11,500 10,831,123 (3,980,004) 147,506 7,010,125
========== ========== ========== ======== ==========
See accompanying notes to consolidated financial statements.
F-32
MARINE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---- ----
Cash flows from operating activities:
Net loss $ (440,355) (342,276)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation, amortization and accretion 321,725 181,637
Provision for loan losses 308,086 40,000
Gain on sale of securities (23,438) (52,480)
Change in:
Interest receivable and other assets 128,760 (58,622)
Interest payable and other liabilities (192,728) 163,749
------------ ------------
Net cash provided (used) by operating activities 102,050 (67,992)
------------ ------------
Cash flows from investing activities:
Purchases of securities available for sale (23,339,823) (20,796,875)
Purchases of other investments - (50,000)
Proceeds from sales of other investments 76,850 -
Proceeds from sales of securities available for sale 7,023,438 1,818,000
Proceeds from calls, pay-downs and maturities of securities
available for sale 15,475,578 10,738,888
Net change in loans 1,562,676 (4,237,343)
Purchase of premises and equipment (170,090) (268,828)
------------ ------------
Net cash provided (used) by investing activities 628,629 (12,796,158)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 3,102,151 8,335,831
Net change in federal funds purchased (1,750,000) 690,509
Proceeds from Federal Home Loan Bank advances 2,800,000 -
Repayments of Federal Home Loan Bank advances - (4,000,000)
------------ ------------
Net cash provided by financing activities 4,152,151 5,026,340
------------ ------------
Net change in cash and cash equivalents 4,882,830 (7,837,810)
Cash and cash equivalents at beginning of year 688,427 8,526,237
------------ ------------
Cash and cash equivalents at end of year $ 5,571,257 688,427
============ ============
Supplemental disclosures of cash flow information and noncash transactions:
Cash paid during the year for interest $ 2,155,018 2,230,799
Change in unrealized gain (loss) on investment
securities available for sale, net of tax $ 261,754 (142,104)
See accompanying notes to consolidated financial statements.
F-33
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Marine Bancshares, Inc. (the "Company") was incorporated under the laws
of the state of Florida on January 23, 1997. The consolidated financial
statements of the Company include the accounts of the Company and its
wholly owned subsidiary, Marine National Bank (the "Bank"). All
significant intercompany balances and transactions have been eliminated.
The Company is primarily regulated by the Federal Reserve Bank, and
serves as the one bank holding company for the Bank. The Bank operates
under a national bank charter and provides a full range of banking
services primarily within the Naples, Florida area. As a national bank,
the bank is subject to regulation of the Office of the Comptroller of
the Currency and the Federal Deposit Insurance Corporation.
Basis of Presentation
The accounting principles followed by the Company, and the methods of
applying these principles, conform with accounting principles generally
accepted in the United States of America ("GAAP"), and with general
practices in the banking industry.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could differ from
those estimates. Material estimates common to the banking industry that
are particularly susceptible to significant change in the near term
include, but are not limited to, the determination of the allowance for
loan losses and valuation allowances associated with the realization of
deferred tax assets, the recognition of which are based on future
taxable income.
Cash and Cash Equivalents
Cash and due from banks, interest-bearing deposits with banks,
securities purchased under agreements to resell and federal funds sold
are considered cash and cash equivalents for cash flow reporting
purposes. Generally, securities purchased under agreements to resell and
federal funds are sold for one-day periods.
Investment Securities
The Company classifies its securities in one of three categories:
trading, available for sale, or held to maturity. Trading securities are
bought and held principally for sale in the near term. Held to maturity
securities are those securities for which the Company has the ability
and intent to hold the security until maturity. All other securities not
included in trading or held to maturity are classified as available for
sale. At December 31, 2002 and 2001, the Company had classified all of
its investment securities as available for sale.
Available for sale securities are recorded at fair value. Unrealized
holding gains and losses, net of the related tax effect, on securities
available for sale are excluded from earnings and are reported as a
separate component of shareholders' equity until realized.
A decline in the market value of any available for sale investment below
cost that is deemed other than temporary is charged to earnings and
establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and
losses for securities classified as available for sale are included in
earnings and are derived using the specific identification method for
determining the cost of securities sold.
F-34
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Other Investments
Other investments include equity securities with no readily determinable
fair value. These investments are carried at cost.
Loans and Allowance for Loan Losses
Loans are stated at principal amount outstanding, net of deferred loan
fees and the allowance for loan losses. Interest on loans is calculated
by using the simple interest method on daily balances of the principal
amount outstanding. Loan origination fees, net of certain origination
costs, are deferred and recognized as income over the life of the
related loan.
Impaired loans are measured based on the present value of expected
future cash flows, discounted at the loan's effective interest rate, or
at the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when,
based on current information and events, it is probable that all amounts
due according to the contractual terms of the loan will not be
collected.
Accrual of interest is discontinued on a loan when management believes,
after considering economic conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is
doubtful. Interest previously accrued but not collected is reversed
against current period earnings and the recognition of interest is
placed on a cash basis when such loans are placed on nonaccrual status.
The allowance for loan losses is established through a provision for
loan losses charged to earnings. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance represents an amount, which, in
management's judgment, will be adequate to absorb probable losses on
existing loans that may become uncollectible.
Management's judgment in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations
take into consideration such factors as changes in the nature and volume
of the loan portfolio, current economic conditions that may affect the
borrower's ability to pay, overall portfolio quality, and review of
specific problem loans. In determining the adequacy of the allowance for
loan losses, management uses a loan grading system that rates loans in
different grading categories. Grades five, six and seven, which
represent criticized or classified loans (loans with greater risk of
loss potential), are assigned allocations of loss based on published
regulatory guidelines. These loans are inadequately protected by the
current net worth or paying capacity of the borrower or the collateral
pledged. Loans classified in this manner have well-defined weaknesses
that jeopardize liquidation of the debt. Loans graded one through four
are stratified by type and allocated loss ranges based on management's
perception of the inherent loss for the strata. The combination of these
results are compared monthly to the recorded allowance for loan losses
and material differences are adjusted by increasing or decreasing the
provision for loan losses. Management uses an independent external loan
reviewer to challenge and corroborate the internal loan ratings and
provide additional analysis in determining the adequacy of the allowance
for loan losses.
Management believes the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on judgments different than
those of management.
F-35
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed primarily using the straight-line method over the
estimated useful lives of the assets. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed
from the accounts, and any gain or loss is reflected in earnings for the
period. The cost of maintenance and repairs which do not improve or extend
the useful life of the respective asset is charged to income as incurred,
whereas significant renewals and improvements are capitalized. The range
of estimated useful lives for premises and equipment are generally as
follows:
Buildings and improvements 10 - 40 years
Furniture, fixtures and equipment 3 - 20 years
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Additionally, the recognition of future tax benefits, such as
net operating loss carryforwards, is required to the extent that
realization of such benefits is more likely than not. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which the assets and liabilities are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income tax expense
in the period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by such
asset is required. A valuation allowance is provided for the portion of
the deferred tax asset when it is more likely than not that some portion
or all of the deferred tax asset will not be realized. In assessing the
realizability of the deferred tax assets, management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies.
Derivative Financial Instruments
In the normal course of business, the Company enters into derivative
contracts, such as interest rate floors and caps, to manage interest rate
risk by modifying the characteristics of the related balance sheet
instruments in order to reduce the adverse effect of changes in interest
rates. Interest rate floors and caps are agreements whereby the Company
obtains the right to receive interest payments when an interest rate moves
above or below a specified floor or cap rate. All derivative financial
instruments are recorded at fair value in the financial statements.
On the date a derivative contract is entered into, the Company designates
the derivative as a fair value hedge, a cash flow hedge, or a trading
instrument. Changes in the fair value of instruments used as fair value
hedges are accounted for in the earnings of the period simultaneous with
accounting for the fair value change of the item being hedged. Changes in
the fair value of the effective portion of cash flow hedges are accounted
for in other comprehensive income rather then earnings. Changes in fair
value of instruments that are not intended as a hedge are accounted for in
the earnings of the period of the change. At December 31, 2002 and 2001,
the Company's derivative contracts were accounted for as cash flow hedges.
Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per
share. The average market price during the year is used to compute
equivalent shares. As the Company was in a net loss position at December
31, 2002 and 2001, the inclusion of any potential common shares related to
F-36
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Net Loss Per Share (continued)
stock options or warrants would have had an antidilutive effect on the
Company's earnings per share. Antidilutive options and warrants totaled
243,125 and 233,125 as of December 31, 2002 and 2001, respectively.
Stock-Based Compensation
The Company has an incentive stock option plan for certain of its key
officers and employees in order that they may purchase Company stock at a
certain price. A total of 200,000 shares were reserved for possible
issuance under this plan. Of the options granted in 2001, 50,000 vested
immediately and 80,000 vest over a four-year period. The options granted
in 2002 vest over a three-year period. All options expire after ten years.
All options granted prior to 2001 have been forfeited and are no longer
outstanding.
2002 2001
--------------------- -------------------
Weighted Weighted
Average Average
Option Option
Price Price
Shares Per Share Shares Per Share
------ --------- ------ ---------
Outstanding, beginning of year 130,000 $ 5.29 65,000 $10.00
Forfeited during the year (20,000) $ 6.00 (65,000) $10.00
Granted during the year 30,000 $ 6.00 130,000 $ 5.62
-------- ------ ------- ------
Outstanding, end of year 140,000 $ 5.64 130,000 $ 5.62
======= ==== ======= =======
Number of shares exercisable 90,000 $ 5.44 70,000 $ 5.29
======= =======
The weighted average grant-date fair value of options granted in 2002 and
2001 was $1.62 and $2.41, respectively. Options outstanding at December
31, 2002 are exercisable at option prices ranging from $5.00 to $6.00 and
have a weighted average remaining contractual life of approximately 8
years.
The Plan is accounted for under Accounting Principles Board Opinion No. 25
and related interpretations. No compensation expense has been recognized
related to the grant of the incentive stock options. Had compensation cost
been determined based upon the fair value of the options at the grant
dates, the Company's net earnings and net earnings per share would have
been reduced to the proforma amounts indicated below. For disclosure
purposes, the Company immediately recognized the expense associated with
the option grants assuming that all awards will vest.
2002 2001
---- ----
Net loss As reported $(440,355) (342,276)
Compensation cost (48,660) (313,300)
Forfeitures 48,200 13,601
--------- ---------
Proforma $(440,815) (641,975)
========= =========
Net loss per share As reported $ (.38) (.30)
Proforma $ (.38) (.56)
F-37
The fair value of each option granted in 2002 and 2001 is estimated on the
date of grant using the Minimum Value pricing model with the following
weighted average assumptions: dividend yield of 0%; risk free interest
rate of 4% and 5% respectively, and an expected life of 8 years.
F-38
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENT SECURITIES
Investment securities available for sale at December 31, 2002 and 2001
are as follows:
December 31, 2002
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Mortgage-backed securities $11,808,502 117,901 2,111 11,924,292
U.S. Treasuries and U.S.
Government agencies 7,004,368 124,602 - 7,128,970
----------- ----------- ----------- -----------
$18,812,870 242,503 2,111 19,053,262
=========== =========== =========== ===========
December 31, 2001
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Mortgage-backed securities $ 5,016,054 62,863 469 5,078,448
U.S. Treasuries and U.S.
Government agencies 12,996,875 - 200,544 12,796,331
----------- ----------- ----------- -----------
$18,012,929 62,863 201,013 17,874,779
=========== =========== =========== ===========
The amortized cost and estimated fair value of investment securities at
December 31, 2002, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Estimated
Cost Fair Value
---- ----------
Due within one year $ 504,368 507,965
Due from one to five years 1,500,000 1,506,725
Due from five to ten years 1,000,000 1,000,000
Due after ten years 4,000,000 4,114,280
Mortgage-backed securities 11,808,502 11,924,292
------------ ----------
$ 18,812,870 19,053,262
============ ==========
Proceeds from sales of investment securities available for sale during
2002 and 2001 were $7,023,438 and $1,818,000, respectively. Gross gains
of $23,438 and $52,480 were realized on 2002 and 2001 sales,
respectively.
Securities with a carrying value of approximately $10,224,000 and
$5,078,000 at December 31, 2002 and 2001, respectively, were pledged to
secure public deposits as required by law and for other purposes.
F-39
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS
Major classifications of loans at December 31, 2002 and 2001 are
summarized as follows:
2002 2001
---- ----
Commercial and commercial real estate $19,766,252 22,009,225
Real estate -- mortgage 9,592,318 10,554,067
Lines of credit 498,284 621,063
Consumer 3,518,173 1,768,179
----------- ----------
33,375,027 34,952,534
Less: Net deferred loan fees 55,796 67,344
Allowance for loan losses 565,919 261,116
----------- ----------
$32,753,312 34,624,074
=========== ==========
The Bank grants loans and extensions of credit to individuals and a
variety of businesses and corporations located in its general trade area
of the city of Naples, Collier County, Florida and adjoining counties.
Commercial loans are primarily extended to small and mid-sized corporate
borrowers in service and manufacturing related industries. Although the
Bank has a diversified loan portfolio, a substantial portion of the loan
portfolio is collateralized by improved and unimproved real estate.
Therefore the Bank could be susceptible to economic downturns and
natural disasters that affect real estate values or development.
In the normal course of business, the Bank buys and sells loan
participations to other financial institutions. Loan participations are
typically entered into to comply with legal lending limits to one
borrower imposed by regulatory authorities. The participations are sold
without recourse to the Bank and the Bank imposes no transfer or
ownership restrictions on the purchaser. The Bank uses the same credit
policies and standards in purchasing loan participations as it does for
loans it originates. At December 31, 2002, the Bank had $10,405,344 in
loan participations purchased and $2,879,460 in loan participations
sold.
Changes in the allowance for loan losses were as follows:
2002 2001
---- ----
Balance at beginning of year $261,116 230,000
Provisions for loan losses 308,086 40,000
Loans charged off (3,430) (8,884)
Recoveries 147 -
------- -------
Balance at end of year $565,919 261,116
======== =======
F-40
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as
follows:
2002 2001
---- ----
Land $1,050,000 1,050,000
Buildings 3,327,371 3,307,442
Furniture, fixtures and equipment 845,546 704,085
--------- ---------
5,222,917 5,061,527
Less accumulated depreciation 718,630 469,909
--------- ---------
$4,504,287 4,591,618
========= =========
Depreciation expense amounted to $257,910 and $222,414 in 2002 and 2001,
respectively.
(5) DEPOSITS
The aggregate amount of time deposits, each with a minimum denomination
of $100,000, was approximately $12,826,000 and $14,255,000 at December
31, 2002 and 2001, respectively.
Maturities of time deposits at December 31, 2002 are as follows:
2003 $ 15,891,905
2004 10,331,823
2005 872,253
2006 10,000
2007 968,094
------------
$ 28,074,075
============
(6) HEDGING TRANSACTIONS
In 2000, the Bank entered into three interest rate cap agreements with
two financial institutions at a total cost of $47,100. The interest rate
cap agreements provide for a variable cash flow if interest rates exceed
the cap rate, based on a notional principle amount and maturity date and
are accounted for as of cash flow hedges. The agreements are recorded at
fair value and related gains or losses are deferred in shareholders'
equity (as a component of comprehensive income). The premiums paid for
these agreements are amortized over the life of the agreement and are
reflected as an adjustment to interest expense. For the years ended
December 31, 2002 and 2001, the fair value of these agreements was $0
and the Bank expensed $15,700 and $7,350, respectively, related to the
amortization of the premiums paid. The table below summarizes the Bank's
interest rate cap agreements at December 31, 2002:
Notional amount $3,000,000 $3,000,000
Fair market value - -
Cap rate 7.50% 7.50%
Termination date August 25, 2003 September 22, 2003
(7) OTHER BORROWINGS
The Bank has an agreement with the Federal Home Loan Bank ("FHLB") to
provide the Bank with credit facilities. FHLB advances at December 31,
2002 and 2001 consist of the following and are collateralized by
securities held in the Bank's portfolio:
F-41
Maturity Date Interest Rate 2002 2001
------------- ------------- ---- ----
December 5, 2003 6.44% Fixed $2,000,000 2,000,000
January 11, 2012 2.39% Fixed 2,800,000 -
---------- ---------
$4,800,000 2,000,000
========== =========
As of January 11, 2003 and each payment date thereafter, the FHLB has
the option to convert the $2,800,000 advance into a three month
LIBOR-based floating rate advance. If the FHLB elects to convert the
advance, the Bank may terminate the transaction without payment of a
prepayment fee.
The Bank is required to purchase and hold certain amounts of FHLB stock
in order to obtain FHLB advances. No ready market exists for the FHLB
stock, and it has no quoted market value. The stock is redeemable at
$100 per share subject to certain limitations set by the FHLB. At
December 31, 2002 and 2001 the Bank owned FHLB stock amounting to
$350,000.
Additionally, at December 31, 2002, the Bank had unused lines of credit
totaling $14,000,000. Those lines of credit included $4,000,000
available for the purchase of overnight federal funds from two
correspondent financial institutions and $10,000,000 available under a
line of credit agreement secured by marketable securities. At December
31, 2002 the Bank had no borrowings outstanding under these lines of
credit.
(8) EMPLOYEE AND DIRECTOR BENEFIT PROGRAMS
The Company has a 401(k) profit sharing plan which is available to
substantially all employees, subject to certain age and service
requirements. The Company contributes to the plan 50% of an eligible
employee's deferral on the first 4% that the eligible employee defers,
and may make discretionary contributions in excess of that amount based
on the Company's profitability and approval of the Board of Directors.
Employee contributions are 100% vested as amounts are credited to the
employee's account. Company contributions become 25% vested when an
employee has completed one year of service, and vest at a rate of 25%
per year thereafter, fully vesting when an employee has completed four
years of service. The Company's contribution amounted to $3,824 and
$6,608 in 2002 and 2001, respectively.
In connection with the initial offering of common stock, the Company
granted to certain organizers warrants to purchase .65 shares of common
stock (at an exercise price of $10 per share) for each initial share
purchased by such organizers in the offering. The warrants will vest in
equal increments over a three year period commencing on February 10,
1999, the date of grant, and expire ten years after the date of grant.
The Company has 103,125 warrants outstanding for issuance of shares of
its common stock.
(9) INCOME TAXES
At December 31, 2002, the Company had federal and state net operating
loss carryforwards for tax purposes of approximately $3,045,000, which
will expire beginning in 2018 if not previously utilized. No income tax
expense or benefit was recorded for the years ended December 31, 2002 or
2001 due to this loss carryforward.
The following summarizes the tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and
deferred tax liabilities. The net deferred tax balance is included as a
component of other assets at December 31, 2002 and 2001.
F-42
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2002 2001
---- ----
Deferred income tax assets:
Allowance for loan losses $ 203,796 87,863
Pre-opening expenses 139,444 217,772
Net operating loss carryforwards 1,145,879 1,035,494
Net unrealized loss on securities available for sale - 48,352
----------- -----------
Total gross deferred income tax assets 1,489,119 1,389,481
----------- -----------
Deferred income tax liabilities:
Net unrealized gain on securities available for sale (84,136) -
Premises and equipment (3,024) (18,354)
----------- -----------
Total gross deferred income tax liability (87,160) (18,354)
----------- -----------
Net deferred income tax assets 1,401,959 1,371,127
Valuation allowance (1,486,095) (1,322,775)
----------- -----------
Net deferred income tax asset (liability) $ (84,136) 48,352
=========== ===========
The future tax consequences of the differences between the financial reporting
and tax basis of the Company's assets and liabilities resulted in a net deferred
tax asset. A valuation allowance was established for the deferred tax assets as
their realization is dependent on future taxable income.
F-43
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) COMMITMENTS
The Bank leases a banking facility under an operating lease arrangement.
Future minimum lease payments required for this operating lease at
December 31, 2002 are as follows:
2003 $ 36,000
2004 36,000
2005 36,000
2006 36,000
2007 27,000
---------
Total minimum obligation $ 171,000
=========
Total rent expense was approximately $16,000 and $23,000 for 2002 and
2001, respectively. The Company leases office space located in the
Bank's building and recorded rental income in 2002 and 2001 of
approximately $144,000 and $58,000, respectively.
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the consolidated balance sheet. The contractual amounts of
those instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.
The Bank's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.
In most cases, the Bank does require collateral to support financial
instruments with credit risk.
Contractual Amount
--------------------
2002 2001
---- ----
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $ 8,048,000 4,904,000
Standby letters of credit $ 55,000 55,000
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments may expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank, upon
extension of credit is based on management's credit evaluation.
Collateral held varies but may include unimproved and improved real
estate, certificates of deposit or personal property.
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as
that
F-44
involved in extending loan facilities to customers. The Bank holds
collateral supporting these commitments for which collateral is deemed
necessary. Most letters of credit were not collateralized at December
31, 2002 and 2001.
On September 11, 2001, the Bank entered into a written agreement with
the Office of the Comptroller of the Currency ("OCC") to take certain
corrective actions involving management of its liquidity, interest rate
risk, loan portfolio administration, and review of its bank information
systems and effectiveness of its internal audit program. On January 15,
2003, the Bank received notification from the OCC that the Bank was
considered to be in full compliance with the written agreement. Until
the agreement has been formally terminated by the OCC, failure to comply
with the various proposed provisions could subject the Bank to more
restrictive and onerous regulatory actions.
F-45
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) COMMITMENTS, CONTINUED
In 2002, the Bank entered into employment agreements with certain key
employees. The agreements, among other things, include salary and bonus,
incentive stock option, and change in control provisions. In the event
of a change in control, the employee may elect to terminate the
agreement and receive a lump sum cash payment in an amount specified by
each employment agreement.
(11) RELATED PARTY TRANSACTIONS
The Company conducts transactions with directors and officers, including
companies in which they have a beneficial interest, in the normal course
of business. It is the Bank's policy to comply with federal regulations
that require that loan transactions with directors and executive
officers be made on substantially the same terms as those prevailing at
the time made for comparable loans to other persons. The following
summary reflects activity for related party loans for 2002:
Beginning balance $ 540,000
New loans 705,000
Repayments (50,000)
-----------
Ending balance $ 1,195,000
===========
The Bank had deposits for related parties totaling approximately
$1,990,000 and $944,000 at December 31, 2002 and 2001, respectively.
(12) REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's financial
statements. Under certain adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of Total and Tier I Capital (as defined in the regulations)
to risk-weighted assets and of Tier I Capital (as defined) to average
assets. Management believes, as of December 31, 2002 and 2001, that the
Company and the Bank meet all capital adequacy requirements to which it
is subject.
As of December 31, 2002, the most recent notification from Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification
that management believes have changed the Bank's category.
The Company's shareholders' equity is approximately $450,000 in excess
of the Bank's capital. As such, the Company's capital amounts and ratios
are categorized as well capitalized.
F-46
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) REGULATORY MATTERS, CONTINUED
The Bank's actual capital amounts (in thousands) and ratios are
presented in the table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
AS OF DECEMBER 31, 2002:
Total Capital (to Risk Weighted Assets) $6,925 16.85% $3,288 8.00% $4,110 10.00%
Tier I Capital (to Risk Weighted Assets) $6,411 15.60% $1,644 4.00% $2,466 6.00%
Tier I Capital (to Average Assets) $6,411 10.31% $2,487 4.00% $3,109 5.00%
AS OF DECEMBER 31, 2001:
Total Capital (to Risk Weighted Assets) $7,098 17.35% $3,272 8.00% $4,090 10.00%
Tier I Capital (to Risk Weighted Assets) $6,837 16.72% $1,636 4.00% $2,454 6.00%
Tier I Capital (to Average Assets) $6,837 11.53% $2,373 4.00% $2,966 5.00%
Dividends paid by the Bank are the primary source of funds available to
the Company. Banking regulations limit the amount of dividends that may
be paid without prior approval of the regulatory authorities. These
restrictions are based on the level of regulatory capital and retained
net earnings in prior years. As of December 31, 2002, the Bank could not
distribute dividends without prior regulatory approval.
(13) MARINE BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Balance Sheets
December 31, 2002 and 2001
Assets
2002 2001
---- ----
Cash $ 343,288 356,802
Investment in Marine National Bank 6,557,962 6,723,049
Other investments 74,425 74,425
Premises and equipment 34,450 34,450
---------- ---------
$7,010,125 7,188,726
Liabilities and Shareholders' Equity
Shareholders' equity $7,010,125 7,188,726
========= =========
F-47
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Statements of Operations
For the Years Ended December 31, 2002 and 2001
2002 2001
---- ----
Interest on investment securities and other $ 6,598 30,390
Other operating expenses 20,112 39,921
---------- --------
Loss before equity in undistributed
earnings of subsidiary (13,514) (9,531)
Equity in undistributed net loss of subsidiary (426,841) (332,745)
---------- --------
Net earnings $ (440,355) (342,276)
========== ========
(13) MARINE BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION,
CONTINUED
Statements of Cash Flows
For the Years Ended December 31, 2002 and 2001
2002 2001
---- ----
Cash flows from operating activities:
Net loss $(440,355) (342,276)
Adjustments to reconcile net loss to net cash
used by operating activities:
Equity in undistributed earnings of subsidiaries 426,841 332,745
Change in other assets - 4,395
--------- ---------
Net cash used by operating activities (13,514) (5,136)
--------- ---------
Net cash flows used by investing activities, consisting of
infusion of capital in Bank - (500,000)
Net change in cash (13,514) (505,136)
--------- ---------
Cash at beginning of year 356,802 861,938
--------- ---------
Cash at end of year $ 343,288 356,802
========= =========
Supplemental schedule of noncash financing and investing activities:
Change in net unrealized gain (loss) on investment
securities available for sale $ 261,754 (142,104)
F-48
MARINE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) PROPOSED MERGER
On December 31, 2002, the Board of Directors of the Company signed a
definitive agreement to merge with Old Florida Bancshares, Inc. ("Old
Florida"), a Fort Myers, Florida bank holding company. The proposed
merger provides for the conversion of each common share and share
equivalent of the Company into .62 shares of Old Florida common stock
and contains certain provisions for the maintenance of minimum capital
levels until the date the merger is consummated. The proposed merger is
subject to the consent of various regulatory authorities and shareholder
approval.
F-49
APPENDIX A
AGREEMENT AND PLAN OF MERGER
dated as of
December 31, 2002
by and between
OLD FLORIDA BANKSHARES, INC.
and
MARINE BANCSHARES, INC.
TABLE OF CONTENTS
PAGE
RECITALS......................................................................1
ARTICLE I Certain Definitions
1.01 Certain Definitions..................................................2
ARTICLE II The Merger
2.01 The Merger...........................................................7
2.02 Effectiveness of the Merger..........................................8
2.03 Effective Date and Effective Time....................................8
ARTICLE III Consideration; Exchange Procedures
3.01 Merger Consideration.................................................8
3.02 Rights as Shareholders, Stock Transfers..............................9
3.03 Fractional Shares....................................................9
3.04 Exchange Procedures..................................................9
3.05 Anti-Dilution Provisions.............................................10
ARTICLE IV Actions Pending Acquisition
4.01 Forbearances of Marine...............................................11
4.02 Forbearances of Old Florida..........................................13
ARTICLE V Representations and Warranties
5.01 Disclosure Schedules.................................................14
5.02 Standard.............................................................15
5.03 Representations and Warranties of Marine.............................15
5.04 Representations and Warranties of Old Florida........................26
ARTICLE VI Covenants
6.01 Reasonable Best Efforts..............................................37
6.02 Carry on Business in Normal Manner...................................37
6.03 Shareholder Approval.................................................37
6.04 Registration Statement...............................................38
6.05 Press Releases.......................................................39
6.06 Access; Information..................................................39
6.07 Acquisition Proposals................................................39
A-i
6.08 Affiliate Agreements.................................................40
6.09 Takeover Laws........................................................40
6.10 Regulatory Applications..............................................41
6.11 Cooperation with Filings.............................................41
6.12 Indemnification......................................................41
6.13 Employees; Employee Benefits; Directors..............................42
6.14 Notification of Certain Matters......................................43
6.15 Marine Stock Options; Marine Warrants................................43
6.16 Tax Treatment........................................................44
6.17 No Breaches of Representations and Warranties........................44
6.18 Consents.............................................................44
6.19 Insurance Coverage...................................................44
6.20 Correction of Information............................................44
6.21 Supplemental Assurances..............................................44
6.22 Merger of Marine National Bank and Old Florida Bank..................45
6.23 Marine and Old Florida Balance Sheets................................45
ARTICLE VII Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger...........45
7.02 Conditions to Obligation of Marine...................................46
7.03 Conditions to Obligation of Old Florida..............................47
ARTICLE VIII Termination
8.01 Termination..........................................................48
8.02 Effect of Termination and Abandonment; Enforcement of Agreement......49
ARTICLE IX Miscellaneous
9.01 Survival.............................................................49
9.02 Waiver; Amendment....................................................49
9.03 Counterparts.........................................................49
9.04 Governing Law........................................................50
9.05 Expenses.............................................................50
9.06 Notices..............................................................50
9.07 Entire Understanding; No Third Party Beneficiaries...................51
9.08 Interpretation; Effect...............................................51
9.09 Waiver of Jury Trial.................................................51
9.10 Successors and Assigns...............................................51
A-ii
EXHIBIT A Form of Marine Affiliate Agreement
EXHIBIT B Agreement of Merger of Old Florida Bank and Marine National Bank
A-iii
AGREEMENT AND PLAN OF MERGER, dated as of December 31, 2002 (this
"Agreement"), is by and between Old Florida Bankshares, Inc. ("Old Florida") and
Marine Bancshares, Inc. ("Marine").
RECITALS
A. Marine. Marine is a Florida corporation, having its principal place
of business in Naples, Florida.
B. Old Florida. Old Florida is a Florida corporation, having its
principal place of business in Fort Myers, Florida.
C. Intentions of the Parties. It is the intention of the parties to
this Agreement that the business combination contemplated hereby be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
D. Board Action. The respective Boards of Directors of each of Old
Florida and Marine have determined that it is in the best interests of their
respective companies and their shareholders to consummate the strategic business
combinations provided for herein.
E. Marine Stock Option. As a condition and inducement to Old Florida's
willingness to enter into this Agreement, Marine is concurrently entering into a
Stock Option Agreement with Old Florida pursuant to which Marine is granting to
Old Florida the option to purchase Marine Common Stock (as defined herein) under
certain circumstances (the "Stock Option Agreement").
F. Shareholder Agreement. As a condition and inducement to Old
Florida's willingness to enter into this Agreement, certain shareholders of
Marine and Marine are concurrently entering into an agreement with Old Florida
that provides that such shareholders will vote their shares of Marine Common
Stock to approve the Merger (as defined herein).
G. Noncompetition Agreement. As a condition and inducement to Old
Florida's willingness to enter into this Agreement, certain shareholders of
Marine are concurrently entering into an agreement with Old Florida that
provides (effective at the Effective Time) certain covenants prohibiting those
shareholders from competing with Marine and related restrictions.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
A-1
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this
Agreement with the meanings set forth below:
"Affiliate" means with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the first Person, including
without limitation all directors and executive officers of the first Person.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Bank" means Marine National Bank, a wholly-owned subsidiary of Marine.
"Bank Merger" has the meaning set forth in Section 6.22.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means a day on which the Federal Reserve Bank of Atlanta
is open for business and which is not a Saturday or Sunday.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.12(a).
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means any shares of Marine Common Stock held by a
holder who properly demands and perfects appraisal rights with respect to
such shares in accordance with applicable provisions of the FBCA.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided
for in Section 2.03.
"Employees" has the meaning set forth in Section 5.03(m).
A-2
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"FBCA" means the Florida Business Corporation Act.
"FFIEC" means Federal Financial Institutions Examination Committee.
"Florida Department" means the Florida Department of State.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Hazardous Material" has the meaning set forth in Section 5.03(p).
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"IRS" has the meaning set forth in Section 5.03(m).
The term "knowledge" means, with respect to a party hereto, actual
knowledge of any officer of that party or its Subsidiary with the title of not
less than a senior vice president, and actual knowledge of the compliance
officer or internal auditor of that party or its Subsidiary.
"Latest Statement Date" has the meaning set forth in Section 5.03(g).
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Marine" has the meaning set forth in the preamble to this Agreement.
"Marine Acquisition Proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Marine or any of its Subsidiaries or any proposal or offer to acquire in any
manner 10% or more of the outstanding shares of any class of voting securities
of, or 10% or more of the assets or
A-3
deposits of, Marine or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Marine Affiliate" has the meaning set forth in Section 6.08(a).
"Marine Articles" means the Articles of Incorporation of Marine, as
amended.
"Marine Board" means the Board of Directors of Marine.
"Marine Bylaws" means the bylaws of Marine, as amended.
"Marine Common Stock" means the common stock, $.01 par value per share,
of Marine.
"Marine Compensation and Benefit Plans" has the meaning set forth in
Section 5.03(m).
"Marine ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"Marine ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m).
"Marine Financial Statements" has the meaning set forth in Section
5.03(g).
"Marine Meeting" has the meaning set forth in Section 6.03.
"Marine Pension Plan" has the meaning set forth in Section 5.03(m).
"Marine Preferred Stock" means the preferred stock, $.01 par value per
share, of Marine.
"Marine Shareholders' Equity" means the shareholders' equity of Marine
Stock, calculated in accordance with GAAP, provided that, solely for purposes of
such calculation, (i) losses reflected in shareholders' equity pursuant to GAAP
in Marine's available for sale investment portfolio, if any, existing as of
November 30, 2002, or which result after November 30, 2002, in Marine's
available for sale investment portfolio shall be disregarded, and (ii) the
effect of recording any deferred tax asset on shareholders' equity shall be
disregarded.
"Marine Stock" means Marine Common Stock.
"Marine Stock Option" and collectively "Marine Stock Options" have the
meanings set forth in Section 6.15.
"Marine Stock Option Plans" has the meaning set forth in Section 6.15.
"Marine Warrant" and collectively "Marine Warrants" have the meanings
set forth in Section 6.15.
A-4
"Marine Warrant Agreements" have the meanings set forth in Section
6.16.
"Material Adverse Effect" means, with respect to Old Florida or Marine,
any effect that (i) is material and adverse to the financial position,
results of operations or business of Old Florida and its Subsidiaries taken
as a whole, or Marine and its Subsidiaries taken as a whole, respectively,
or (ii) would materially impair the ability of either Old Florida or Marine
to perform its obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement; provided, however, that
Material Adverse Effect shall not be deemed to include the impact of (a)
changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities or other
changes affecting depository institutions generally, including changes in
prevailing interest and deposit rates, (b) any modifications or changes to
valuation policies and practices in connection with the Merger directed by
Old Florida or restructuring charges taken in connection with the Merger
directed by Old Florida, in each case in accordance with GAAP, (c) changes
resulting from expenses (such as legal, accounting and investment bankers'
fees) incurred and Previously Disclosed in connection with this Agreement
or the transactions contemplated herein, and (d) actions or omissions of a
party which have been waived in accordance with Section 9.02 hereof.
"Merger" has the meaning set forth in Section 2.01.
"Merger Consideration" has the meaning set forth in Section 2.01.
"New Certificate" has the meaning set forth in Section 3.04.
"OCC" means The Office of the Comptroller of the Currency.
"Old Certificate" has the meaning set forth in Section 3.04.
"Old Florida" has the meaning set forth in the preamble to this
Agreement.
"Old Florida Acquisition Proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination
involving Old Florida or any of its Subsidiaries or any proposal or offer
to acquire in any manner 10% or more of the outstanding shares of any class
of voting securities of, or 10% or more of the assets or deposits of, Old
Florida or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Old Florida Articles" means the Articles of Incorporation of Old
Florida, as amended.
"Old Florida Board" means the Board of Directors of Old Florida.
"Old Florida Bylaws" means the Bylaws of Old Florida, as amended.
"Old Florida Common Stock" means the common stock, $.01 par value per
share, of Old Florida.
A-5
"Old Florida Compensation and Benefit Plans" has the meaning set forth
in Section 5.04(m).
"Old Florida ERISA Affiliate" has the meaning set forth in Section
5.04(m).
"Old Florida ERISA Affiliate Plan" has the meaning set forth in Section
5.04(m).
"Old Florida Pension Plan" has the meaning set forth in Section
5.04(m).
"Old Florida Preferred Stock" means the preferred stock, $.01 par value
per share, of Old Florida.
"Old Florida Stock" means the Old Florida Common Stock.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule.
"Proxy/Prospectus" has the meaning set forth in Section 6.04.
"Proxy Statement" has the meaning set forth in Section 6.04.
"Registration Statement" has the meaning set forth in Section 6.04.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, warrants, calls or
commitments relating to, or any stock appreciation right or other
instrument the value of which is determined in whole or in part by
reference to the market price or value of, shares of capital stock of such
person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Statute" has the meaning set forth in Section 3.04(g).
A-6
"Stock Option Agreement" has the meaning set forth in the preamble to
this Agreement.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of Marine Stock held by Marine or
any of its Subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted in good faith.
ARTICLE II
THE MERGER
2.01 THE MERGER. At the Effective Time, Marine shall merge with and
into Old Florida (the "Merger"), the separate corporate existence of Marine
shall cease and Old Florida shall survive and continue to exist as a Florida
corporation (Old Florida, as the surviving corporation in the Merger, sometimes
being referred to herein as the "Surviving Corporation"). Old Florida may at any
time prior to the Effective Time change the method (as specified in this
Agreement) of effecting the Merger if and to the extent it deems such change to
be necessary, appropriate or desirable; provided, however, that no such change
shall (i) alter or change the amount or kind of consideration to be issued to
holders of Marine Stock as provided for in this Agreement (the "Merger
Consideration"), (ii) adversely affect the tax treatment of Marine's
shareholders as a result of receiving the Merger Consideration, (iii) materially
impede or delay consummation of the transactions contemplated by this Agreement,
or (iv) otherwise be a change prohibited by Section 607.1103(8) of the FBCA.
A-7
2.02 EFFECTIVENESS OF MERGER. Subject to the satisfaction or waiver of
the conditions set forth in Article VII, the Merger shall become effective upon
the occurrence of the filing in the office of the Florida Department of the
articles of merger in accordance with Section 607.1105 of the FBCA or such later
date and time as may be set forth in such filings. The Merger shall have the
effects prescribed in the FBCA.
2.03 EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on (i) the third
Business Day to occur after the last of the conditions set forth in Article VII
shall have been satisfied or waived in accordance with the terms of this
Agreement (or, at the election of Old Florida, on the last Business Day of the
month in which such third Business Day occurs); provided, no such election shall
cause the Effective Date to fall after the date specified in Section 8.01(c)
hereof or after the date or dates on which any Regulatory Authority approval or
any extension thereof expires, or (ii) such other date to which the parties may
agree in writing. The time on the Effective Date when the Merger shall become
effective is referred to as the "Effective Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) Outstanding Marine Common Stock. Each share, excluding Treasury
Stock, of Marine Common Stock issued and outstanding immediately prior to the
Effective Time shall be cancelled and extinguished and in substitution and
exchange therefor, the holders shall be entitled to receive .62 of a share of
Old Florida Common Stock (the "Exchange Ratio"). The Exchange Ratio shall be
subject to adjustment as set forth in Section 3.05.
(b) Treasury Stock. Each share of Marine Common Stock held as Treasury
Stock immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
(c) Outstanding Old Florida Stock. Each share of Old Florida Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and unaffected by the Merger.
3.02 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of Marine Common Stock shall cease to be, and shall have no rights as,
shareholders of Marine, other than to receive any dividend or other distribution
with respect to such Marine Common Stock with a record date occurring prior to
the Effective Time and the consideration provided under this Article III, or
appraisal rights in the case of Dissenting Shares. After the third Business Day
prior to the Effective Date, there shall be no transfers on the stock transfer
books of Marine or the Surviving Corporation of any shares of Marine Stock.
A-8
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Old Florida Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger.
Such fractional share interests shall not entitle the owner thereof to vote or
to any rights of a shareholder of the Surviving Corporation. Old Florida shall
pay to each holder of Marine Common Stock who would otherwise be entitled to a
fractional share of Old Florida Common Stock (after taking into account all Old
Certificates delivered by such holder) an amount in cash (without interest)
determined by multiplying such fractional share of Old Florida Common Stock to
which the holder would be entitled by $12.50.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, Old
Florida shall deposit, or shall cause to be deposited, with Old Florida Bank (in
such capacity, the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of Marine Common Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the shares of Old Florida Common Stock ("New Certificates") and an
estimated amount of cash (such cash and New Certificates, together with any
dividends or distributions with a record date occurring on or after the
Effective Date with respect thereto (without any interest on any such cash,
dividends or distributions), being hereinafter referred to as the "Exchange
Fund") to be paid pursuant to this Article III in exchange for outstanding
shares of Marine Common Stock.
(b) As promptly as practicable after the Effective Date, Old Florida
shall send or cause to be sent to each former holder of record of shares of
Marine Common Stock immediately prior to the Effective Time transmittal
materials for use in exchanging such shareholder's Old Certificates for the
consideration set forth in this Article III. Old Florida shall cause the New
Certificates into which shares of a shareholder's Marine Common Stock are
converted on the Effective Date and/or any check in respect of any fractional
share interests or dividends or distributions which such person shall be
entitled to receive to be delivered to such shareholder upon delivery to the
Exchange Agent of Old Certificates representing such shares of Marine Common
Stock (or security or an indemnity affidavit reasonably satisfactory to Old
Florida and the Exchange Agent, if any Old Florida Certificates are lost, stolen
or destroyed) owned by such shareholder. No interest will be paid on any such
cash to be paid in lieu of fractional share interests or in respect of dividends
or distributions which any such person shall be entitled to receive pursuant to
this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent, if any,
nor any party hereto shall be liable to any former holder of Marine Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(d) No dividends or other distributions with respect to Old Florida
Common Stock with a record date occurring on or after the Effective Date shall
be paid to the holder of any unsurrendered Old Certificate representing shares
of Marine Common Stock converted in the Merger into the right to receive shares
of such Old Florida Common Stock until the holder thereof shall be entitled to
receive New Certificates in exchange therefor in accordance with the procedures
set forth in this Section 3.04. After becoming so entitled in accordance with
this Section 3.04, the record holder thereof also shall be entitled to receive
any such dividends or other distributions, without any interest thereon, which
theretofore had become payable with
A-9
respect to shares of Old Florida Common Stock such holder had the right to
receive upon surrender of the Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Marine for six months after the Effective Time shall be paid to
Old Florida. Any shareholders of Marine who have not theretofore complied with
this Article III shall thereafter look only to Old Florida for payment of the
shares of Old Florida Common Stock, cash in lieu of any fractional shares and
unpaid dividends and distributions on Old Florida Common Stock deliverable in
respect of each share of Marine Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
(f) Old Florida may from time to time, in the case of one or more
Persons, waive one or more of the rights provided to it in this Article III of
this Agreement to withhold certain payments, deliveries and distributions; and
no such waiver shall constitute a waiver of its rights thereafter to withhold
any such payment, delivery or distribution in the case of any other Person.
(g) Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, if any person shall perfect dissenters' rights in respect of
one or more Dissenting Shares in accordance with Section 607.1320 of the FBCA
(sometimes hereafter called the "Statute"), then:
(i) Each such Dissenting Share shall nevertheless be deemed
to be extinguished at the Effective Time as provided elsewhere in this
Agreement; and
(ii) Each person perfecting such dissenter's rights shall
thereafter have only such rights (and shall have such obligations) as are
provided in the Statute, and unless such rights and such obligations of such
person are terminated in accordance with Section 607.1320(4) of the FBCA, Old
Florida shall not be required to deliver any Old Florida Common Stock or cash
payments to such person in substitution for each such Dissenting Share in
accordance with this Agreement.
No person entitled to relief as a dissenting shareholder shall be entitled to
submit a letter of transmittal, and any letter of transmittal submitted by a
dissenting shareholder shall be invalid.
3.05 ANTI-DILUTION PROVISIONS. In the event Old Florida changes (or
establishes a record date for changing) the number of shares of Old Florida
Common Stock issued and
A-10
outstanding between the date hereof and the Effective Date as a result of a
stock split, stock dividend, recapitalization, reclassification, split up,
combination, exchange of shares, readjustment or similar transaction with
respect to the outstanding Old Florida Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 FORBEARANCES OF MARINE. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement and/or disclosed on the
Marine Disclosure Schedule, without the prior written consent of Old Florida,
Marine will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Except as otherwise provided in this Section 4.01,
conduct the business of Marine and its Subsidiaries other than in the ordinary
and usual course or fail to use reasonable efforts to preserve intact their
business organizations and assets and maintain their rights, franchises and
existing relations with customers, suppliers, employees and business associates,
or voluntarily take any action which, at the time taken, is reasonably likely to
have an adverse effect upon Marine's ability to perform any of its obligations
under this Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
Marine Stock, Marine Preferred Stock or any Rights, (ii) enter into any
agreement with respect to the foregoing, or (iii) permit any additional shares
of Marine Stock to become subject to new Marine Stock Options or Marine
Warrants, other Rights or similar stock-based director or employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend, other than dividends from wholly-owned Subsidiaries to Marine, or (ii)
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Marine or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit, (including incentive or bonus payments) except (i) for normal
individual increases in compensation to employees whose annual base salary does
not exceed $40,000, made in the ordinary course of business consistent with past
practice, (ii) for other changes that are required by applicable law, or (iii)
to satisfy Previously Disclosed contractual obligations existing as of the date
hereof.
A-11
(e) Benefit Plans. Enter into, establish, adopt or amend any pension,
retirement, stock option, stock warrant, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of any
director, officer or employee of Marine or its Subsidiaries, or take any action
to accelerate the vesting or exercisability of stock options, stock warrants,
restricted stock or other compensation or benefits payable thereunder; provided
that Marine may (i) take such actions in order to satisfy either applicable law
or Previously Disclosed contractual obligations existing as of the date hereof
or regular annual renewal of insurance contracts; and (ii) terminate its defined
contribution 401(k) plan at any time before the Effective Time, with benefit
distributions deferred until the Internal Revenue Service issues a favorable
determination with respect to the terminating plan's tax-qualified status upon
termination and with Marine and Old Florida to cooperate in good faith to apply
for such approval and to agree upon associated plan termination amendments that
shall, among other things, provide for the application of all assets of a
terminating plan for its participants, and allow plan participants not only to
receive lump-sum distributions of their benefits, but also to transfer those
benefits to the tax-qualified 401(k) plan that Old Florida maintains for its
employees.
(f) Dispositions. Sell, transfer, mortgage, and encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or properties
except in the ordinary course of business.
(g) Acquisitions; Reorganizations. Acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the assets, business, deposits or properties of any other entity; or
merge or consolidate with any other Person or otherwise reorganize.
(h) Governing Documents. Amend the Marine Articles, Marine Bylaws or
the articles of incorporation, articles of association or bylaws (or similar
governing documents) of any of Marine's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP.
(j) Contracts. Enter into or terminate any contract requiring the
payment or receipt of $5,000 or more in any 12 month period or amend or modify
in any material respect any of its existing material contracts, other than loans
and contracts of deposit made by the Bank. Old Florida will not unreasonably
withhold its consent to a request by Marine for Marine to enter into, terminate,
amend or modify such a contract.
(k) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material claims,
actions or proceedings and which involve solely
A-12
money damages in an amount, individually or in the aggregate for all such
settlements, that is not material to Marine and its Subsidiaries, taken as a
whole.
(l) Adverse Actions. (a) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; or (b) take any action that is
intended or is reasonably likely to result in (i) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Article VII not being satisfied or (iii) a
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(m) Risk Management. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii) fail to follow
its existing policies or practices with respect to managing its exposure to
interest rate and other risk; or (iii) fail to use commercially reasonable means
to avoid any material increase in its aggregate exposure to interest rate risk.
(n) Indebtedness. Incur any indebtedness for borrowed money or incur
any material obligation or liability other than in the ordinary course of
business.
(o) Capital Expenditures. Make any capital expenditures in excess of
$15,000 in the aggregate or for any item in excess of $5,000.
(p) Maintenance of Insurance. Fail to maintain insurance described in
Section 5.03(t).
(q) Maintenance of Property. Fail to maintain its property and
facilities in their present condition and working order, ordinary wear and tear
excepted.
(r) Commitments. Agree or commit to do any of the foregoing.
4.02 FORBEARANCES OF OLD FLORIDA. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of Marine, Old Florida will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Except as otherwise provided in this Section 4.02,
conduct the business of Old Florida and its Subsidiaries other than in the
ordinary and usual course, provided that so long as no approval is required from
any Regulatory Authority Old Florida and its Subsidiaries may enter into new
lines of business, or fail to use reasonable efforts to preserve intact their
business organizations and assets and maintain their rights, franchises and
existing relations with customers, suppliers, employees and business associates,
or voluntarily take any action which, at the time taken, is reasonably likely to
have an adverse effect upon Old Florida's ability to perform any of its
obligations under this Agreement.
(b) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend, other than dividends from wholly-owned Subsidiaries to Old Florida, or
(ii) directly or indirectly
A-13
adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock.
(c) Dispositions. Sell, transfer, mortgage, and encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or properties
except in the ordinary course of business.
(d) Acquisitions; Reorganizations. Acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the assets, business, deposits or properties of any other entity; or
merge or consolidate with any other Person or otherwise reorganize.
(e) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
GAAP.
(f) Adverse Actions. (a) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; or (b) take any action that is
intended or is reasonably likely to result in (i) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Article VII not being satisfied, or (iii)
a material violation of any provision of this Agreement except, in each case, as
may be required by applicable law or regulation.
(g) Risk Management. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii) fail to follow
its existing policies or practices with respect to managing its exposure to
interest rate and other risk; or (iii) fail to use commercially reasonable means
to avoid any material increase in its aggregate exposure to interest rate risk.
(h) Maintenance of Insurance. Fail to maintain insurance described in
Section 5.04(t).
(i) Maintenance of Property. Fail to maintain its property and
facilities in their present condition and working order, ordinary wear and tear
excepted.
(j) Commitments. Agree or commit to do any of the foregoing.
A-14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, Marine and
Old Florida have each delivered to the other a schedule (its "Disclosure
Schedule") setting forth, among other things, items, the disclosure of which are
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more
representations or warranties contained in Section 5.03 as to Marine and Section
5.04 as to Old Florida, or to one or more of its covenants contained in Article
IV and Article VI; provided, that (a) no such item is required to be set forth
in a Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to have or result in a
Material Adverse Effect on the party making the representation. Marine's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue, incorrect or to have been breached as a result of
effects on Marine arising solely from actions taken in compliance with a written
request of Old Florida.
5.02 STANDARD. No representation or warranty of Marine or Old Florida
contained in Section 5.03 or 5.04 (other than those paragraphs for which this
standard shall not apply) shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
breach of representation or warranty contained in Section 5.03 or 5.04 has had,
or is reasonably likely to have, a Material Adverse Effect. The standard set
forth in this Section 5.02 shall not apply to paragraphs (a), (b), (c), (d) or
(g)(i), (g)(ii), or (g)(iii)(B) of Section 5.03 or paragraphs (a), (b), (c),
(d), or (g)(i), (g)(ii), or (g)(iii)(B) of Section 5.04.
5.03 REPRESENTATIONS AND WARRANTIES OF MARINE. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Marine hereby represents
and warrants to Old Florida:
(a) Organization, Standing and Authority. Marine is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and any foreign jurisdictions where its ownership or leasing of property
or assets or the conduct of its business requires it to be so qualified. Marine
is registered as a bank holding company under the BHCA. Bank is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States of America. As a national bank, Bank is qualified
to do business where it does business. Marine has delivered to Old Florida
accurate and complete copies of the Marine Articles and Marine Bylaws and the
Bank's articles of association and bylaws.
(b) Capital Structure of Marine. The authorized capital stock of Marine
consists solely of 10,000,000 shares of Marine Common Stock, of which 1,150,000
shares are
A-15
outstanding, and 2,000,000 shares of Marine Preferred Stock, none of which are
outstanding. The outstanding shares of Marine Common Stock have been duly
authorized, are validly issued and outstanding, fully paid and nonassessable,
and were not issued in violation of any preemptive rights. Except as Previously
Disclosed in its Disclosure Schedule, (i) there are no shares of Marine Common
Stock or Marine Preferred Stock authorized and reserved for issuance, (ii)
Marine has no Rights issued or outstanding with respect to Marine Common Stock
or Marine Preferred Stock, and (iii) Marine has no commitment to authorize,
issue or sell any Marine Common Stock, Marine Preferred Stock or Rights, except
pursuant to this Agreement. All Marine Common Stock has been issued in full
compliance with all applicable federal and state securities laws.
(c) Subsidiaries. (i)(A) Marine has Previously Disclosed a list of all
of its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as Previously Disclosed, Marine owns, of record and
beneficially, all the issued and outstanding equity securities of each of its
Subsidiaries, (C) except as Previously Disclosed, no equity securities of any of
its Subsidiaries are or may become required to be issued (other than to it or
its wholly-owned Subsidiaries) by reason of any Right or otherwise, (D) except
as Previously Disclosed, there are no contracts, commitments, understandings or
arrangements by which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any equity securities of any such Subsidiaries (other than to
Marine or its wholly-owned Subsidiaries), (E) except as Previously Disclosed,
there are no contracts, commitments, understandings, or arrangements relating to
Marine's rights to vote or to dispose of such securities and (F) except as
Previously Disclosed, all the equity securities of each Subsidiary held by
Marine or its Subsidiaries are fully paid and nonassessable (except pursuant to
12 U.S.C. Section 55) and are owned by Marine or its Subsidiaries free and clear
of any Liens.
(ii) Marine does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of Marine's Subsidiaries has been duly organized
and is validly existing in good standing under the laws of the jurisdiction of
its organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified.
(d) Corporate Power; Authorized and Effective Agreement. Each of Marine
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets;
and Marine has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the Stock Option Agreement.
(e) Corporate Authority. The Stock Option Agreement and, subject to
receipt of the requisite adoption of this Agreement by the holders of a majority
of the shares of Marine Common Stock entitled to vote thereon (which is the only
shareholder vote required thereon), this Agreement, and the transactions
contemplated thereby have been authorized by all necessary corporate action of
Marine and the Marine Board prior to the date hereof. This Agreement and the
Stock Option Agreement are the valid and legally binding obligations of Marine,
enforceable in accordance with their terms (except as enforceability may be
limited by applicable
A-16
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles).
(f) Regulatory Filings; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by Marine or any of its Subsidiaries
in connection with the execution, delivery or performance by Marine of this
Agreement or to consummate the Merger except for (A) filings of applications and
notices, as applicable, with and the approval of certain federal and state
banking authorities, (B) filings with the SEC and state securities authorities,
and (C) the filing of the articles of merger with the Florida Department
pursuant to the FBCA. As of the date hereof, Marine is not aware of (A) any
reason why the approvals set forth in Section 7.01(b) will not be received
without the imposition of a condition, restriction or requirement of the type
described in Section 7.01(b), or (B) any reason why Regulatory Authority
approval will not be provided for the Bank Merger.
(ii) Subject to receipt of the regulatory and shareholder
approvals referred to above and expiration of related regulatory waiting
periods, and required filings under federal and state securities laws, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby do not and will not (A)
constitute a breach or violation of, or a default under, or give rise to any
Lien, any acceleration of remedies or any right of termination under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Marine or of any of its
Subsidiaries or to which Marine or any of its Subsidiaries or properties is
subject or bound, (B) constitute a breach or violation of, or a default under,
the Marine Articles or the Marine Bylaws, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license, agreement, indenture or instrument.
(g) Financial Statements and Reports; Material Adverse Effect. (i) The
consolidated balance sheets of Marine as of December 31, 2001 and 2000 and the
related consolidated statements of income, consolidated statements of cash flows
and consolidated statements of shareholders equity for the three (3) years in
the period ended December 31, 2001 (the "Latest Statement Date"), certified by
Porter Keadle Moore LLP for the one (1) year in the period ended December 31,
2001, and by Hill, Barth & King, Inc., for the two (2) years in the period ended
December 31, 2000, copies of which have been furnished by Marine to Old Florida,
the unaudited balance sheets of Marine (parent-only) and the Bank as of
September 30, 2002, and the related statements of income and shareholders equity
of Marine and the statement of income of the Bank for the nine (9) months then
ended, accurate and complete copies of which have been furnished by Marine to
Old Florida, in the form prepared for Marine's internal use, the Consolidated
Report of Condition and Income of the Bank as of and for the nine (9) months
ended September 30, 2002, and the FR Y-9SP Report for the six (6) months ended
June 30, 2002, and the year ended December 31, 2001, as filed with the Federal
Reserve Bank, accurate and complete copies of which have been furnished by
Marine to Old Florida (collectively the "Marine Financial Statements"), have
been prepared in accordance with GAAP in effect at the time as utilized in the
Marine Financial Statements applied on a consistent basis except for the effect
of the requirements of any Regulatory Authority in reporting such information,
and present fairly in all material respects the consolidated financial condition
of Marine or the Bank at the dates, and the consolidated results of operations
and cash flows for the periods, stated therein. In the case of interim fiscal
periods, all adjustments, consisting only of normal recurring items,
A-17
which management of Marine believes necessary for a fair presentation of such
financial information, have been made.
(ii) Since September 30, 2002, Marine and its Subsidiaries
have not incurred any material liability not disclosed in Marine's Financial
Statements, other than in the ordinary course of business consistent with past
practice.
(iii) Since September 30, 2002, except as disclosed in the
Marine Financial Statements, (A) Marine and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course consistent with
past practice (excluding matters related to this Agreement and the transactions
contemplated hereby) and (B) no event has occurred or circumstance arisen that,
individually or taken together with all other facts, circumstances and events
(described in any paragraph of Section 5.03 or otherwise), is reasonably likely
to have a Material Adverse Effect with respect to Marine.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Marine or any of its
Subsidiaries and, to Marine's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters.
(i) Neither Marine nor any of its Subsidiaries or properties
is a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or regulation of
financial institutions (or their holding companies) or issuers of securities or
engaged in the insurance of deposits (including, without limitation, the OCC,
the Federal Reserve System, the FDIC and the Florida Department of Banking and
Finance) or the supervision or regulation of it or any of its Subsidiaries
(collectively, the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised
by any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) Compliance with Laws. Each of Marine and its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses
A-18
as presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to Marine's knowledge, no
suspension or cancellation of any of them is threatened; and
(iii) has received no notification or communication from any
Governmental Authority (A) asserting that Marine or any of its Subsidiaries is
not in compliance with any of the statutes, regulations, or ordinances which
such Governmental Authority enforces or (B) threatening to revoke any license,
franchise, permit, or governmental authorization (nor, to Marine's knowledge, do
any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults. Except for this Agreement and as
Previously Disclosed, neither Marine nor any of its Subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract" within
the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that
restricts or limits in any way the conduct of business by it or any of its
Subsidiaries (including without limitation a non-compete or similar provision)
or (iii) constitutes a power of attorney. Neither Marine nor any of its
Subsidiaries, nor any other party to such contracts, is in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected in any way, or under which it or its
respective assets, business, or operations receive benefits, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a default.
(l) No Brokers. No action has been taken by Marine that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of Marine's
Disclosure Schedule contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including, without limitation, Marine
Pension Plans), retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare (including, without limitation, "welfare plans" within the
meaning of Section 3(1) of ERISA), fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements maintained or
contributed to (currently or within the last six years) by (a) Marine or any of
its Subsidiaries and in which any employee or former employee (the "Employees"),
consultant or former consultant (the "Consultants") officer or former officer
(the "Officers"), or director or former director (the "Directors") of Marine or
any of its Subsidiaries participates or to which any such Employees,
Consultants, Officers or Directors either participate or are a party or (b) any
Marine ERISA Affiliate (collectively, the "Marine Compensation and Benefit
Plans"). Neither Marine nor any of its Subsidiaries has any commitment to create
any additional Marine Compensation and Benefit Plan or to modify or change any
existing Marine Compensation and Benefit Plan, except as otherwise contemplated
by Section 4.01(e) of this Agreement.
(ii) Each Marine Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act, or
any regulations or rules promulgated thereunder, and all
A-19
filings, disclosures and notices required by ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. Each Marine Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Marine Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
(including a determination that the related trust under such Compensation and
Benefit Plan is exempt from tax under Section 501(a) of the Code) from the
Internal Revenue Service ("IRS"), and Marine is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. There
is no material pending or, to the knowledge of Marine, threatened legal action,
suit or claim relating to the Marine Compensation and Benefit Plans other than
routine claims for benefits thereunder. Neither Marine nor any of its
Subsidiaries has engaged in a transaction, or omitted to take any action, with
respect to any Marine Compensation and Benefit Plan that would reasonably be
expected to subject Marine or any of its Subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code or Section 502 of ERISA, assuming for
purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV of ERISA
has been or is expected to be incurred by Marine or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or any single-employer plan of any entity (a "Marine ERISA Affiliate")
which is considered one employer with Marine under Section 4001(a)(14) of ERISA
or Section 414(b) or (c) of the Code (a "Marine ERISA Affiliate Plan"). None of
Marine, any of its Subsidiaries or any Marine ERISA Affiliate has contributed,
or has been obligated to contribute, to a multiemployer plan under Subtitle E of
Title IV of ERISA (as defined in ERISA Sections 3(37)(A) and 4001(a)(3)) at any
time since September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Marine Compensation and
Benefit Plan or by any Marine ERISA Affiliate Plan within the 12-month period
ending on the date hereof, and no such notice will be required to be filed as a
result of the transactions contemplated by this Agreement. The PBGC has not
instituted proceedings to terminate any Marine Pension Plan or Marine ERISA
Affiliate Plan and, to Marine's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted. To the knowledge of
Marine, there is no pending investigation or enforcement action by the PBGC, the
Department of Labor (the "DOL") or IRS or any other governmental agency with
respect to any Marine Compensation and Benefit Plan. Under each Marine Pension
Plan and Marine ERISA Affiliate Plan, as of the date of the most recent
actuarial valuation performed prior to the date of this Agreement, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Marine
Pension Plan or Marine ERISA Affiliate Plan), did not exceed the then current
value of the assets of such Marine Pension Plan or Marine ERISA Affiliate Plan
and since such date there has been neither an adverse change in the financial
condition of such Marine Pension Plan or Marine ERISA Affiliate Plan nor any
amendment or other change to such Marine Pension Plan or Marine ERISA Affiliate
Plan that would increase the amount of benefits thereunder which reasonably
could be expected to change such result.
A-20
(iv) All contributions required to be made under the terms
of any Marine Compensation and Benefit Plan or Marine ERISA Affiliate Plan or
any employee benefit arrangements under any collective bargaining agreement to
which Marine or any of its Subsidiaries is a party have been timely made or have
been reflected on Marine's financial statements. Neither any Marine Pension Plan
nor any Marine ERISA Affiliate Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA and all required payments to the PBGC with respect to each Marine
Pension Plan or Marine ERISA Affiliate Plan have been made on or before their
due dates. None of Marine, any of its Subsidiaries or any Marine ERISA Affiliate
(x) has provided, or would reasonably be expected to be required to provide,
security to any Marine Pension Plan or to any Marine ERISA Affiliate Plan
pursuant to Section 401(a)(29) of the Code, and (y) has taken any action, or
omitted to take any action, that has resulted, or would reasonably be expected
to result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Neither Marine nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Marine Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. There has been no communication to
Employees by Marine or any of its Subsidiaries that would reasonably be expected
to promise or guarantee such Employees retiree health or life insurance or other
retiree death benefits on a permanent basis.
(vi) Marine and its Subsidiaries do not maintain any Marine
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Marine Compensation and Benefit
Plan, if applicable, Marine has provided or made available to Old Florida, true
and complete copies of existing: (A) Compensation and Benefit Plan documents and
amendments thereto; (B) trust instruments and insurance contracts; (C) two most
recent Forms 5500 filed with the IRS; (D) most recent actuarial report and
financial statement; (E) the most recent summary plan description; (F) forms
filed with the PBGC within the past year (other than for premium payments); (G)
most recent determination letter issued by the IRS; (H) any Form 5310, Form
5310A, Form 5300, or Form 5330 filed within the past year with the IRS; and (I)
most recent nondiscrimination tests performed under ERISA and the Code
(including 401(k) and 401(m) tests).
(viii) Except as disclosed on Section 5.03(m)(viii) of
Marine's Disclosure Schedule, the consummation of the transactions contemplated
by this Agreement would not, directly or indirectly (including, without
limitation, as a result of any termination of employment prior to or following
the Effective Time) reasonably be expected to (A) entitle any Employee,
Consultant or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Marine Compensation and Benefit Plan or
(C) result in any material increase in benefits payable under any Marine
Compensation and Benefit Plan.
(ix) Except as disclosed on Section 5.03(m)(ix) of Marine's
Disclosure Schedule, neither Marine nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be
A-21
deductible as a result of the limitations under Section 162(m) of the Code and
the regulations issued thereunder.
(x) Except as disclosed on Section 5.03(m)(x) of Marine's
Disclosure Schedule, as a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none of
Old Florida, Marine or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code) of Marine on
a consolidated basis, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(n) Labor Matters. Neither Marine nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Marine or any of its Subsidiaries the subject of a proceeding asserting that it
or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel Marine or any
such Subsidiary to bargain with any labor organization as to wages or conditions
of employment, nor is there any strike or other labor dispute involving it or
any of its Subsidiaries pending or, to Marine's knowledge, threatened, nor is
Marine aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) Takeover Laws. Marine has taken all action required to be taken by
it in order to exempt this Agreement and the transactions contemplated hereby
from, and this Agreement and the transactions contemplated hereby are exempt
from, the requirements of any "moratorium", "control share", "fair price",
"affiliate transaction", "business combination" or other antitakeover laws and
regulations of any state (collectively, "Takeover Laws") applicable to it,
including, without limitation, the State of Florida.
(p) Environmental Matters.
(i) Marine has not caused or permitted, and no claim exists
regarding the environmental condition of the property or the generation,
manufacture, use or handling or the release or presence of, any Hazardous
Material on, in, under or from any properties or facilities currently owned or
leased by Marine or adjacent to any properties so owned or leased, and has
complied in all material respects with, and has kept all records and made all
filings or reports required by, and is otherwise in compliance with all
applicable federal, state and local laws, regulations, orders, permits and
licenses relating to the generation, treatment, manufacture, use handling,
release or presence of any Hazardous Material on, in, under or from any
properties or facilities currently owned or leased by Marine
(ii) Neither Marine nor any of its officers, directors,
employees or agents, in the course of such individual's employment by Marine,
has given advice with respect to, or participated in any respect in, the
management or operation of any entity or concern whose business relates in any
way to the generation, storage, handling, disposal, transfer, production, use or
processing of Hazardous Material, nor has Marine foreclosed on any property on
which
A-22
there is a threatened release of any Hazardous Material, or on which there
has been such a release and full remediation has not been completed, or any
property on which contained (not released) Hazardous Material is or was located.
(iii) Neither Marine, nor any of its officers, directors,
employees, or agents, is aware of, has been told of, or has observed, the
presence of any Hazardous Material on, in, under, or around property on which
Marine holds a legal or security interest, in violation of, or creating a
liability under, federal, state, or local environmental statutes, regulations,
or ordinances.
(iv) The term "HAZARDOUS MATERIAL" means any substance whose
nature, use, manufacture, or effect render it subject to federal, state or local
regulation governing that material's investigation, remediation or removal as a
threat or potential threat to human health or the environment and includes,
without limitation, any substance within the meaning of "hazardous substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601, "hazardous wastes" within the meaning of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6921, any petroleum product,
including any fraction of petroleum, or any asbestos containing materials.
However, the term "HAZARDOUS MATERIAL" shall not include those substances which
are normally and reasonably used in connection with the occupancy or operation
of office buildings (such as cleaning fluids, and supplies normally used in the
day to day operation of business offices).
(q) Marine Tax Matters. (i) All Tax Returns that are required to be
filed by or with respect to Marine and its Subsidiaries have been duly and
timely filed, and all such Tax Returns are true, correct and complete (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have not been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority, and no such examination has been threatened (iv)
except for Tax Returns for fiscal years ended on or after December 31, 1998, the
period for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (v) all deficiencies asserted or assessments
made as a result of such examinations have been paid in full, (vi) no issues
that have been raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in clause (i) are currently
pending, and (vii) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of Marine or its Subsidiaries. Marine has
made or will make available to Old Florida true and correct copies of the United
States federal income Tax Returns filed by Marine and its Subsidiaries for each
of the three most recent fiscal years ended on or before December 31, 2001.
Neither Marine nor any of its Subsidiaries has any liability with respect to
Taxes that accrued on or before the end of the most recent period covered by the
Marine Financial Statements in excess of the amounts accrued with respect
thereto that are reflected in the Marine Financial Statements. As of the date
hereof, neither Marine nor any of its Subsidiaries has any reason to believe
that any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Marine and its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities or are properly holding for such payment
all Taxes required by law to be withheld or collected. There are no Liens for
Taxes upon the assets of Marine or any of its Subsidiaries, other than Liens for
current Taxes not yet due and payable. Neither Marine nor any of its
Subsidiaries has agreed to make, or is required to make, any adjustment under
Section 481(a) of the Code. Neither Marine nor any of its Subsidiaries is a
A-23
party to any agreement, contract, arrangement or plan that has resulted, or
could result, individually or in the aggregate, in the payment of "excess
parachute payments" within the meaning of Section 280G of the Code. Neither
Marine nor any of its Subsidiaries has ever been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, other than an
affiliated group of which Marine is or was the common parent corporation.
(ii) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfer contemplated by this Agreement.
(iii) Marine and its Subsidiaries will not be liable for any
taxes as a result of the transfer contemplated by this Agreement.
(r) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for Marine's own account, or
for the account of one or more of Marine's Subsidiaries or their customers (all
of which are listed on Marine's Disclosure Schedule), were entered into (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of Marine or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither
Marine nor its Subsidiaries, nor to Marine's knowledge any other party thereto,
is in breach of any of its obligations under any such agreement or arrangement.
(s) Books and Records. The books and records of Marine and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, have been maintained in accordance with sound business practices and
there are no material inaccuracies or discrepancies of any kind contained or
reflected therein and they fairly reflect the substance of events and
transactions included therein.
(t) Insurance. Marine's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Marine or its Subsidiaries
and a description of all claims filed against the insurers of Marine and its
Subsidiaries since December 31, 2000. Marine and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the management
of Marine reasonably has determined to be prudent in accordance with industry
practices. All such insurance policies are in full force and effect; Marine and
its Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(u) Marine Disclosure. The representations and warranties contained in
this Section 5.03, the Marine Disclosure Schedule, and the other written
materials furnished by Marine to Old Florida pursuant to this Agreement do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained therein
not misleading in light of the circumstances under which such statements were
made.
A-24
(v) Material Adverse Change. Marine has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since September 30, 2002.
(w) Absence of Undisclosed Liabilities. Neither Marine nor any of its
Subsidiaries has any liability (contingent or otherwise), except as disclosed in
the Marine Financial Statements and except for liabilities and obligations
incurred since the Last Statement Date in the ordinary course of business.
(x) Properties. Marine and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or equitable
interests to all of the properties and assets, real and personal, reflected in
the Marine Financial Statements as being owned by Marine as of September 30,
2002 or acquired after such date, except (i) statutory liens for amounts not yet
due and payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements, encumbrances, liens, charges, defaults or equitable interests, if
any, as do not affect the use of properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties, (iv) dispositions and encumbrances in the ordinary course of
business, and (v) liens on properties acquired in foreclosure or on account of
debts previously contracted. All leases pursuant to which Marine or any of its
Subsidiaries, as lessee, leases real or personal property (except for leases
that have expired by their terms or that Marine or any such Subsidiary has
agreed to terminate since the date hereof) are valid without default thereunder
by the lessee or, to Marine's knowledge, the lessor. All of the assets of Marine
and its Subsidiaries are in good operating condition and repair, ordinary wear
and tear excepted, and are adequate to conduct the business of Marine and its
Subsidiaries as those businesses are presently being conducted.
(y) Loans. Subject to adequate provision having been made specifically
in the allowance for loan losses reflected in the Marine Financial Statements
for any loan that does not meet the following standards, each loan reflected as
an asset in the Marine Financial Statements as of December 31, 2001 and each
balance sheet date subsequent thereto, (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interest which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. Except as Previously Disclosed, the Bank is not a
party to a loan, including any loan guaranty, with any director, executive
officer or 10% shareholder of Marine or any of its Subsidiaries or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. All loans and extensions of credit that have been
made by Bank and that are subject either to Section 22(b) of the Federal Reserve
Act, as amended, or to 12 C.F.R. Section 563.43, comply therewith.
(z) Allowance for Loan Losses. The allowance for loan losses reflected
in the Marine Financial Statements, as of their respective dates, is adequate in
all material respects under the requirements of GAAP.
(aa) Repurchase Agreements. With respect to all agreements pursuant to
which Marine or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if
A-25
any, Marine or such Subsidiary, as the case may be, has a valid, perfected first
lien or security interest in or evidence of ownership in book entry form of the
government securities or other collateral securing the repurchase agreement, and
the value of such collateral equals or exceeds the amount of the debt secured
thereby.
(bb) Deposit Insurance. The deposits of Bank are insured by the FDIC in
accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has paid
all assessments and filed all reports required by the FDIA.
5.04 REPRESENTATIONS AND WARRANTIES OF OLD FLORIDA. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed in a paragraph of its
Disclosure Schedule, if any, corresponding to the relevant paragraph below, Old
Florida hereby represents and warrants to Marine as follows:
(a) Organization, Standing and Authority. Old Florida is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida. Old Florida is duly qualified to do business and is in good
standing in the State of Florida and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Old Florida is registered as a financial holding
company under the BHCA. Old Florida Bank is a state chartered bank duly
organized, validly existing and in good standing under the Florida Statutes. Old
Florida Bank is qualified to do business in Florida and in each other state, if
any, where it does business. Old Florida has delivered to Marine accurate and
complete copies of the Old Florida Articles and Bylaws and Old Florida Bank's
articles of incorporation and bylaws.
(b) Old Florida Stock. (i) As of the date of this Agreement, the
authorized capital stock of Old Florida consists of 5,000,000 shares of Old
Florida Common Stock, of which 1,216,595 shares are outstanding, and 1,000,000
shares of Old Florida Preferred Stock, none of which are outstanding as of the
date of this Agreement. As of the date hereof, except as set forth in its
Disclosure Schedule, Old Florida does not have any Rights issued or outstanding
with respect to Old Florida Common Stock and Old Florida does not have any
commitment to authorize, issue or sell any Old Florida Common Stock, Old Florida
Preferred Stock, or Rights, except pursuant to this Agreement. The outstanding
shares of Old Florida Common Stock have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and were not issued in
violation of any preemptive rights. All Old Florida Common Stock has been issued
in full compliance with all applicable federal and state securities laws.
(ii) The shares of Old Florida Common Stock to be issued in
exchange for shares of Marine Common Stock in the Merger, when issued in
accordance with the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and subject to no preemptive rights.
(c) Subsidiaries. (i)(A) Old Florida has Previously Disclosed a list of
all of its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary, (B) except as Previously Disclosed, Old Florida owns, of record
and beneficially, all the issued and outstanding equity securities of each of
its Subsidiaries, (C) except as Previously Disclosed, no equity securities of
any of its Subsidiaries are or may become required to be issued (other than to
it or its wholly-owned Subsidiaries) by reason of any Right or otherwise, (D)
except as
A-26
Previously Disclosed, there are no contracts, commitments, understandings or
arrangements by which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any equity securities of any such Subsidiaries (other than to
Old Florida or its wholly-owned Subsidiaries), (E) except as Previously
Disclosed, there are no contracts, commitments, understandings, or arrangements
relating to Old Florida's rights to vote or to dispose of such securities and
(F) except as Previously Disclosed, all the equity securities of each Subsidiary
held by Old Florida or its Subsidiaries are fully paid and nonassessable (except
pursuant to Sections 658.82 and 658.83 of the Florida Statutes) and are owned by
Old Florida or its Subsidiaries free and clear of any Liens.
(ii) Old Florida does not own beneficially, directly or
indirectly, any equity securities or similar interests of any Person, or any
interest in a partnership or joint venture of any kind, other than its
Subsidiaries.
(iii) Each of Old Florida's Subsidiaries has been duly
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified.
(d) Corporate Power. Each of Old Florida and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Old Florida has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
(e) Corporate Authority; Authorized and Effective Agreement. This
Agreement and the transactions contemplated hereby have been authorized by all
necessary corporate action of Old Florida and the Old Florida Board prior to the
date hereof and no shareholder approval is required on the part of Old Florida.
This Agreement is a valid and legally binding agreement of Old Florida,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors rights or by general equity principles).
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by Old Florida or any of its
Subsidiaries in connection with the execution, delivery or performance by Old
Florida of this Agreement or to consummate the Merger except for (A) the filing
of applications or notices, as applicable, with and the approval of certain
federal and state banking authorities; (B) the filing and declaration of
effectiveness of the Registration Statement; (C) the filing of the articles of
merger with the Florida Department pursuant to the FBCA; (D) such filings as are
required to be made or approvals as are required to be obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of Old Florida Common Stock in the Merger; and (E) receipt of the approvals set
forth in Section 7.01(b). As of the date hereof, Old Florida is not aware of (A)
any reason why the approvals set forth in Section 7.01(b) will not be received
without the imposition of a condition, restriction or requirement of the type
described in Section 7.01(b) or (B) any reason why Regulatory Authority approval
will not be provided for the Bank Merger.
A-27
(ii) Subject to the satisfaction of the requirements referred
to in the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of Old Florida or of any of its Subsidiaries or to which Old
Florida or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Old Florida
Articles or Old Florida Bylaws or similar governing documents of Old Florida or
any of its Subsidiaries, or (C) require any consent or approval under any such
law, rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Statements and Reports, Material Adverse Effect. (i) The
consolidated balance sheets of Old Florida as of December 31, 2001 and 2000 and
the related consolidated statements of income, consolidated statements of cash
flows and consolidated statements of shareholders equity for the three (3) years
in the period ended December 31, 2001, certified by Hacker, Johnson & Smith PA,
accurate and complete copies of which have been furnished by Old Florida to
Marine, the unaudited balance sheets of Old Florida (parent-only) and the Bank
as of September 30, 2002 and the related statements of income and shareholders
equity of Old Florida and the statement of income of the Bank for the nine (9)
months then ended, accurate and complete copies of which have been furnished by
Old Florida to Marine, in the form prepared for Old Florida's internal use, the
Consolidated Report of Condition and Income of Old Florida Bank as of and for
the nine (9) months ended September 30, 2002, and the FR Y-9SP Report for the
six (6) months ended June 30, 2002, and the year ended December 2001, as filed
with the Federal Reserve Bank, accurate and complete copies of which have been
furnished by Old Florida to Marine (collectively the Old Florida Financial
Statements"), have been prepared in accordance with GAAP in effect at the time
as utilized in the Old Florida Financial Statements applied on a consistent
basis, except for the requirements of any Regulatory Authority in reporting such
information, and present fairly in all material respects the consolidated
financial condition of Old Florida or the Bank at the dates, and the
consolidated results of operations and cash flows for the periods stated
therein. In the case of interim fiscal periods, all adjustments, consisting only
of normal recurring items, which management of Old Florida believes necessary
for a fail presentation of such financial information, have been made.
(ii) Since September 30, 2002, Old Florida and it
Subsidiaries have not incurred any material liability not disclosed in Old
Florida's Financial Statements, other than in the ordinary course of business
consistent with past practice.
(iii) Since September 30, 2002, except as disclosed in the Old
Florida Financial Statements, (A) Old Florida and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding matters related to this Agreement and
the transactions contemplated hereby) and (B) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to Old Florida.
A-28
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Old Florida or any of its
Subsidiaries and, to Old Florida's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters.
(i) Neither Old Florida nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter from, any
Regulatory Authority.
(ii) Neither it nor any of its Subsidiaries has been advised
by any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) Compliance with Laws. Each of Old Florida and its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to Old Florida's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received no notification or communication from any
Governmental Authority (A) asserting that Old Florida or any of its Subsidiaries
is not in compliance with any of the statutes, regulations, or ordinances which
such Governmental Authority enforces or (B) threatening to revoke any license,
franchise, permit, or governmental authorization (nor, to Old Florida's
knowledge, do any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults. Except for this Agreement and as
Previously Disclosed, neither Old Florida nor any of its Subsidiaries is a party
to, bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract" within
the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that
restricts or limits in any way the conduct of business by it or any of its
Subsidiaries (including without limitation a non-compete or similar provision)
or (iii) constitutes a power of attorney. Neither Old Florida nor any of its
Subsidiaries, nor any other party to such contracts, is in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected in any way, or under which it or its
respective assets, business, or
A-29
operations receive benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
(l) Brokerage and Finder's Fees. Except for the engagement of Austin
Associates, LLC, no action has been taken by Old Florida that would give rise to
any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement.
(m) Employee Benefit Plans. (i) Section 5.04(m)(i) of Old Florida's
Disclosure Schedule contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including, without limitation, Old
Florida Pension Plans), retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare (including, without limitation, "welfare plans" within the
meaning of Section 3(1) of ERISA), fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements maintained or
contributed to (currently or within the last six years) by (a) Old Florida or
any of its Subsidiaries and in which any Employees, Consultants or Directors of
Old Florida or any of its Subsidiaries participates or to which any such
Employees, Consultants, Officers or Directors either participate or are a party
or (b) any Old Florida ERISA Affiliate (collectively, the "Old Florida
Compensation and Benefit Plans"). Neither Old Florida nor any of its
Subsidiaries has any commitment to create any additional Old Florida
Compensation and Benefit Plan or to modify or change any existing Old Florida
Compensation and Benefit Plan, except as otherwise contemplated by Section
5.01(e) of this Agreement.
(ii) Each Old Florida Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act, or
any regulations or rules promulgated thereunder, and all filings, disclosures
and notices required by ERISA, the Code, the Securities Act, the Exchange Act,
the Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Old Florida Compensation and Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA (an
"Old Florida Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter (including a
determination that the related trust under such Old Florida Compensation and
Benefit Plan is exempt from tax under Section 501(a) of the Code) from the IRS,
and Old Florida is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. There is no material pending or, to
the knowledge of Old Florida, threatened legal action, suit or claim relating to
the Old Florida Compensation and Benefit Plans other than routine claims for
benefits thereunder. Neither Old Florida nor any of its Subsidiaries has engaged
in a transaction, or omitted to take any action, with respect to any Old Florida
Compensation and Benefit Plan that would reasonably be expected to subject Old
Florida or any of its Subsidiaries to a tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975
of the Code that the taxable period of any such transaction expired as of the
date hereof.
(iii) No liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by Old Florida or any of its
Subsidiaries with respect to any ongoing, frozen or
A-30
terminated "single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or any single-employer
plan of any entity (an "Old Florida ERISA Affiliate") which is considered one
employer with Old Florida under Section 4001(a)(14) of ERISA or Section 414(b)
or (c) of the Code (an "Old Florida ERISA Affiliate Plan"). None of Old Florida,
any of its Subsidiaries or any Old Florida ERISA Affiliate has contributed, or
has been obligated to contribute, to a multiemployer plan under Subtitle E of
Title IV of ERISA (as defined in ERISA Sections 3(37)(A) and 4001(a)(3)) at any
time since September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Old Florida Compensation
and Benefit Plan or by any Old Florida ERISA Affiliate Plan within the 12-month
period ending on the date hereof, and no such notice will be required to be
filed as a result of the transactions contemplated by this Agreement. The PBGC
has not instituted proceedings to terminate any Old Florida Pension Plan or Old
Florida ERISA Affiliate Plan and, to Old Florida's knowledge, no condition
exists that presents a material risk that such proceedings will be instituted.
To the knowledge of Old Florida, there is no pending investigation or
enforcement action by the PBGC, the DOL or IRS or any other governmental agency
with respect to any Old Florida Compensation and Benefit Plan. Under each Old
Florida Pension Plan and Old Florida ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to the date of this Agreement,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Old Florida
Pension Plan or Old Florida ERISA Affiliate Plan), did not exceed the then
current value of the assets of such Old Florida Pension Plan or Old Florida
ERISA Affiliate Plan and since such date there has been neither an adverse
change in the financial condition of such Old Florida Pension Plan or Old
Florida ERISA Affiliate Plan nor any amendment or other change to such Old
Florida Pension Plan or Old Florida ERISA Affiliate Plan that would increase the
amount of benefits thereunder which reasonably could be expected to change such
result.
(iv) All contributions required to be made under the terms of
any Old Florida Compensation and Benefit Plan or Old Florida ERISA Affiliate
Plan or any employee benefit arrangements under any collective bargaining
agreement to which Old Florida or any of its Subsidiaries is a party have been
timely made or have been reflected on Old Florida's financial statements.
Neither any Old Florida Pension Plan nor any Old Florida ERISA Affiliate Plan
has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and all required
payments to the PBGC with respect to each Old Florida Pension Plan or Old
Florida ERISA Affiliate Plan have been made on or before their due dates. None
of Old Florida, any of its Subsidiaries or any Old Florida ERISA Affiliate (x)
has provided, or would reasonably be expected to be required to provide,
security to any Old Florida Pension Plan or to any Old Florida ERISA Affiliate
Plan pursuant to Section 401(a)(29) of the Code, and (y) has taken any action,
or omitted to take any action, that has resulted, or would reasonably be
expected to result, in the imposition of a lien under Section 412(n) of the Code
or pursuant to ERISA.
(v) Neither Old Florida nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Old Florida Compensation and Benefit Plan, other than
benefits mandated by Section 4980B of the Code. There has been no communication
to Employees by Old Florida or any of its Subsidiaries that
A-31
would reasonably be expected to promise or guarantee such Employees retiree
health or life insurance or other retiree death benefits on a permanent basis.
(vi) Old Florida and its Subsidiaries do not maintain any
Old Florida Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Old Florida Compensation and
Benefit Plan, if applicable, Old Florida has provided or made available to
Marine, true and complete copies of existing: (A) Old Florida Compensation and
Benefit Plan documents and amendments thereto; (B) trust instruments and
insurance contracts; (C) two most recent Forms 5500 filed with the IRS; (D) most
recent actuarial report and financial statement; (E) the most recent summary
plan description; (F) forms filed with the PBGC within the past year (other than
for premium payments); (G) most recent determination letter issued by the IRS;
(H) any Form 5310, Form 5310A, Form 5300, or Form 5330 filed within the past
year with the IRS; and (I) most recent nondiscrimination tests performed under
ERISA and the Code (including 401(k) and 401(m) tests).
(viii) Except as disclosed on Section 5.03(m)(ix) of Old
Florida's Disclosure Schedule, neither Old Florida nor any of its Subsidiaries
maintains any compensation plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of the
limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(n) Labor Matters. Neither Old Florida nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is Old
Florida or any of its Subsidiaries the subject of a proceeding asserting that it
or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel Old Florida or
any such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to Old Florida's knowledge,
threatened, nor is Old Florida aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(o) Takeover Laws. Old Florida has taken all action required to be
taken by it in order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated hereby are
exempt from, the requirements of any Takeover Laws applicable to Old Florida.
(p) Environmental Matters.
(i) Old Florida has not caused or permitted, and no claim
exists regarding the environmental condition of the property or the generation,
manufacture, use or handling or the release or presence of, any Hazardous
Material on, in, under or from any properties or facilities currently owned or
leased by Old Florida or adjacent to any properties so owned or leased, and has
complied in all material respects with, and has kept all records and made all
filings or reports required by, and is otherwise in compliance with all
applicable federal, state and local laws, regulations, orders, permits and
licenses relating to the generation, treatment, manufacture, use
A-32
handling, release or presence of any Hazardous Material on, in, under or from
any properties or facilities currently owned or leased by Old Florida.
(ii) Neither Old Florida nor any of its officers, directors,
employees or agents, in the course of such individual's employment by Old
Florida, has given advice with respect to, or participated in any respect in,
the management or operation of any entity or transfer, production, use or
processing of Hazardous Material, nor has Old Florida foreclosed on any property
on which there is a threatened release of any Hazardous Material, or on which
there has been such a release and full remediation has not been completed, or
any property on which contained (not released) Hazardous Material is or was
located.
(iii) Neither Old Florida, nor any of its officers, directors,
employees, or agents, is aware of, has been told of, or has observed, the
presence of any Hazardous Material on, in, under, or around property on which
Old Florida holds a legal or security interest, in violation of, or creating a
liability under, federal, state, or local environmental statutes, regulations,
or ordinances.
(q) Old Florida Tax Matters. (i) All Tax Returns that are required to
be filed by or with respect to Old Florida and its Subsidiaries have been duly
and timely filed, and all such Tax Returns are true, correct and complete (ii)
all Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have not been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority, and no such examination has been threatened (iv)
except for Tax Returns for fiscal years ended on or after December 31, 1998, the
period for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (v) all deficiencies asserted or assessments
made as a result of such examinations have been paid in full, (vi) no issues
that have been raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in clause (i) are currently
pending, and (vii) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of Old Florida or its Subsidiaries. Old
Florida has made or will make available to Marine true and correct copies of the
United States federal income Tax Returns filed by Old Florida and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 2001. Neither Old Florida nor any of its Subsidiaries has any
liability with respect to Taxes that accrued on or before the end of the most
recent period covered by the Old Florida Financial Statements in excess of the
amounts accrued with respect thereto that are reflected in the Old Florida
Financial Statements. As of the date hereof, neither Old Florida nor any of its
Subsidiaries has any reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Old Florida and its Subsidiaries have
withheld or collected and paid over to the appropriate governmental authorities
or are properly holding for such payment all Taxes required by law to be
withheld or collected. There are no Liens for Taxes upon the assets of Old
Florida or any of its Subsidiaries, other than Liens for current Taxes not yet
due and payable. Neither Old Florida nor any of its Subsidiaries has agreed to
make, or is required to make, any adjustment under Section 481(a) of the Code.
Neither Old Florida nor any of its Subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted, or could result, individually
or in the aggregate, in the payment of "excess parachute payments" within the
meaning of Section 280G of the Code. Neither Old Florida nor any of its
Subsidiaries has ever been a member of an affiliated group of corporations,
A-33
within the meaning of Section 1504 of the Code, other than an affiliated group
of which Old Florida is or was the common parent corporation.
(r) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for Old Florida's own
account, or for the account of one or more of Old Florida's Subsidiaries or
their customers (all of which are listed on Old Florida's Disclosure Schedule),
were entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of Old Florida or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. Neither Old Florida nor its
Subsidiaries, nor to Old Florida's knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(s) Books and Records. The books and records of Old Florida and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, have been maintained in accordance with sound business practices and
there are no material inaccuracies or discrepancies of any kind contained or
reflected therein and they fairly reflect the substance of events and
transactions included therein.
(t) Insurance. Old Florida's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Old Florida or its
Subsidiaries and a description of all claims filed against the insurers of Old
Florida and its Subsidiaries since December 31, 2000. Old Florida and its
Subsidiaries are insured with reputable insurers against such risks and in such
amounts as the management of Old Florida reasonably has determined to be prudent
in accordance with industry practices. All such insurance policies are in full
force and effect; Old Florida and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely fashion.
(u) Old Florida Disclosure. The representations and warranties
contained in this Section 5.04, the Old Florida Disclosure Schedule, and the
other written materials furnished by Old Florida to Marine pursuant to this
Agreement do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained therein not misleading in light of the circumstances under
which such statements were made.
(v) Material Adverse Change. Old Florida has not, on a consolidated
basis, suffered a change in its business, financial condition or results of
operations since September 30, 2002.
(w) Absence of Undisclosed Liabilities. Neither Old Florida nor any of
its Subsidiaries has any liability (contingent or otherwise), except as
disclosed in the Old Florida Financial Statements and except for liabilities and
obligations incurred since the Last Statement Date in the ordinary course of
business.
A-34
(x) Properties. Marine and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or equitable
interests to all of the properties and assets, real and personal, reflected in
the Marine Financial Statements as being owned by Marine as of September 30,
2002 or acquired after such date, except (i) statutory liens for amounts not yet
due and payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements, encumbrances, liens, charges, defaults or equitable interests, if
any, as do not affect the use of properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties, (iv) dispositions and encumbrances in the ordinary course of
business, and (v) liens on properties acquired in foreclosure or on account of
debts previously contracted. All leases pursuant to which Marine or any of its
Subsidiaries, as lessee, leases real or personal property (except for leases
that have expired by their terms or that Marine or any such Subsidiary has
agreed to terminate since the date hereof) are valid without default thereunder
by the lessee or, to Marine's knowledge, the lessor. All of the assets of Marine
and its Subsidiaries are in good operating condition and repair, ordinary wear
and tear excepted, and are adequate to conduct the business of Marine and its
Subsidiaries as those businesses are presently being conducted.
(y) Loans. Subject to adequate provision having been made specifically
in the allowance for loan losses reflected in the Marine Financial Statements
for any loan that does not meet the following standards, each loan reflected as
an asset in the Marine Financial Statements as of December 31, 2001 and each
balance sheet date subsequent thereto, (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interest which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. Except as Previously Disclosed, the Bank is not a
party to a loan, including any loan guaranty, with any director, executive
officer or 10% shareholder of Marine or any of its Subsidiaries or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. All loans and extensions of credit that have been
made by Bank and that are subject either to Section 22(b) of the Federal Reserve
Act, as amended, or to 12 C.F.R. Section 563.43, comply therewith.
(z) Allowance for Loan Losses. The allowance for loan losses reflected
in the Marine Financial Statements, as of their respective dates, is adequate in
all material respects under the requirements of GAAP.
(aa) Repurchase Agreements. With respect to all agreements pursuant to
which Marine or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, Marine or such Subsidiary, as the case may be, has
a valid, perfected first lien or security interest in or evidence of ownership
in book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(bb) Deposit Insurance. The deposits of Bank are insured by the FDIC in
accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has paid
all assessments and filed all reports required by the FDIA.
A-35
ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each of Marine and Old Florida agrees to use their reasonable
best efforts in good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or desirable, or advisable
under applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 CARRY ON BUSINESS IN NORMAL MANNER. From the date of this
Agreement to the Effective Date, Marine shall carry on its business in
substantially the same manner as heretofore and, without the written consent of
Old Florida, Marine shall not (a) do any of the things which it represents and
warrants herein have not been done since September 30, 2002 or the date hereof,
as the case may be, except as necessary to carry out this Agreement on the part
of Marine; (b) engage in any transaction which would be inconsistent with any
other representation or warranty of Marine set forth herein or which would cause
a breach of any such representation or warranty if made at or immediately
following such transaction; or (c) engage in any lending activities other than
in the ordinary course of business. Not less than twenty-four (24) hours prior
thereto, Marine shall send to Old Florida via facsimile transmission a copy of
all loan presentations to be made to Marine's Board and all other proposals for
loans in excess of $ 500,000 to enable one of Old Florida's senior loan officers
to review, comment and make reasonable recommendations to Marine with respect to
such loan presentations within twenty-four (24) hours of receipt of such
materials. Marine shall consult with Old Florida prior to (x) hiring any
full-time officer and (y) purchasing any investment securities in an amount
exceeding $ 1,000,000 per transaction. Marine will use its reasonable best
efforts to keep its business organizations intact, to keep available the
services of present employees, and to preserve the goodwill of customers,
suppliers, and others having business relations with them.
6.03 SHAREHOLDER APPROVAL. Marine agrees to take, in accordance with
applicable law and the Marine Articles and Marine Bylaws, all action necessary
to convene an appropriate meeting of its shareholders to consider and vote upon
the adoption of this Agreement and any other matters required to be approved or
adopted by Marine's shareholders for consummation of the Merger (including any
adjournment or postponement, the "Marine Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The Marine Board shall
recommend that its shareholders adopt this Agreement at the Marine Meeting
unless otherwise necessary under the applicable fiduciary duties of the Marine
Board, as determined by the Marine Board in good faith after consultation with
and based upon advice of its legal counsel.
6.04 REGISTRATION STATEMENT. (a) Old Florida agrees to prepare pursuant
to all applicable laws, rules and regulations a registration statement on Form
S-4 (the "Registration Statement") to be filed by Old Florida with the SEC in
connection with the issuance of Old Florida Common Stock in the Merger
(including the proxy statement and prospectus and other proxy solicitation
materials of Marine constituting a part thereof (the "Proxy Statement") and all
related documents). Marine agrees to cooperate, and to cause its Subsidiaries to
cooperate, with
A-36
Old Florida, its counsel and its accountants, in preparation of the Registration
Statement and the Proxy Statement; and provided that Marine and its Subsidiaries
have cooperated as required above, Old Florida agrees to file the Proxy
Statement and the Registration Statement (together, the "Proxy/Prospectus") with
the SEC as promptly as reasonably practicable. Each of Marine and Old Florida
agrees to use all reasonable efforts to cause the Proxy/Prospectus to be
declared effective under the Securities Act as promptly as reasonably
practicable after filing thereof. Old Florida also agrees to use all reasonable
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement. Marine agrees to
furnish to Old Florida all information concerning Marine, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of Marine and Old Florida agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to the Marine shareholders and at the time of the Marine Meeting, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or any statement which, in the light of the
circumstances under which such statement is made, will be false or misleading
with respect to any material fact, or which will omit to state any material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. Each of Marine and Old Florida
further agrees that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the statements in the Proxy
Statement to be false or misleading with respect to any material fact, or to
omit to state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Proxy Statement.
(c) Old Florida agrees to advise Marine, promptly after Old Florida
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of Old Florida Stock for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
6.05 PRESS RELEASES. Each of Marine and Old Florida agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation.
6.06 ACCESS; INFORMATION. (a) Each of Marine and Old Florida agrees
that upon reasonable notice and subject to applicable laws relating to the
exchange of information, it shall afford the other party and the other party's
officers, employees, counsel, accountants and other authorized representatives,
such access during normal business hours throughout the period prior
A-37
to the Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and to
such other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a copy of each
material report, schedule and other document filed by it pursuant to federal or
state securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.06 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 6.06 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(i) was already known to such party, (ii) becomes available to such party from
other sources not bound by a confidentiality obligation, (iii) is disclosed with
the prior written approval of the party to which such information pertains or
(iv) is or becomes readily ascertainable from published information or other
sources. In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto to be returned to the
party which furnished the same. No investigation by either party of the business
and affairs of the other shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, Marine shall promptly furnish Old Florida with copies of all monthly and
other interim financial statements produced in the ordinary course of business
as the same shall become available.
6.07 ACQUISITION PROPOSALS. (a) Marine agrees that it shall not, and
shall cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Marine Acquisition Proposal, subject to the extent that the
Marine Board determines in good faith, after consultations with independent
legal counsel that it is required by its fiduciary duties to do so. It shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Old Florida with respect to any of the foregoing and shall use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to a Marine Acquisition Proposal. Marine shall promptly (within 24
hours) advise Old Florida following the receipt by Marine of any Marine
Acquisition Proposal and the substance thereof (including the identity of the
person making such Marine Acquisition Proposal), and advise Old Florida of any
material developments with respect to such Marine Acquisition Proposal
immediately upon the occurrence thereof.
(b) Old Florida agrees that it shall not, and shall cause its
Subsidiaries and its and its Subsidiaries' officers, directors, agents, advisors
and affiliates not to, solicit or encourage inquiries or proposals with respect
to, or engage in any negotiations concerning, or provide any
A-38
confidential information to, or have any discussions with, any person relating
to, any Old Florida Acquisition Proposal, subject to the extent that the Old
Florida Board determines in good faith, after consultations with independent
legal counsel that it is required by its fiduciary duties to do so. It shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Marine with respect to any of the foregoing and shall use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to an Old Florida Acquisition Proposal. Old Florida shall promptly
(within 24 hours) advise Marine following the receipt by Old Florida of any Old
Florida Acquisition Proposal and the substance thereof (including the identity
of the person making such Old Florida Acquisition Proposal), and advise Marine
of any material developments with respect to such Old Florida Acquisition
Proposal immediately upon the occurrence thereof.
6.08 AFFILIATE AGREEMENTS. In the Marine Disclosure Schedule and not
later than the 15th day prior to the mailing of the Proxy Statement, Marine
shall deliver to Old Florida a schedule of each person that is or is reasonably
likely to be, as of the date of the Marine Meeting, deemed to be an "affiliate"
of Marine (each, a "Marine Affiliate") as that term is used in Rule 145 under
the Securities Act. Marine shall use its reasonable best efforts to cause each
person who may be deemed to be a Marine Affiliate (who has not executed and
delivered to Old Florida concurrently with the execution of this Agreement) to
execute and deliver to Marine on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit A.
6.09 TAKEOVER LAWS. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.10. REGULATORY APPLICATIONS. Old Florida and Marine and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to timely effect all filings and to obtain
all permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of Old Florida and Marine shall have the right to review
in advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to, and shall be provided in advance so as to reasonably exercise
its right to review in advance, all material written information submitted to
any third party or any Governmental Authority in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
material matters relating to completion of the transactions contemplated hereby.
6.11. COOPERATION WITH FILINGS. Each party agrees, upon request, to
furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders
A-39
and such other matters as may be reasonably necessary or advisable in connection
with any filing, notice or application made by or on behalf of such other party
or any of its Subsidiaries to any third party or Governmental Authority.
6.12 INDEMNIFICATION. (a) Following the Effective Date, Old Florida
shall indemnify, defend and hold harmless the present directors, officers and
employees of Marine and its Subsidiaries (each, an "Indemnified Party") against
all costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that Marine is permitted to indemnify (and advance expenses to) its
directors, officers, and employees under the laws of the State of Florida, the
Marine Articles and the Marine Bylaws as in effect on the date hereof; provided
that any determination required to be made with respect to whether an officer's,
director's or employee's conduct complies with the standards set forth under
Florida law, the Marine Articles and the Marine Bylaws shall be made by
independent counsel (which shall not be counsel that provides material services
to Old Florida) selected by Old Florida and reasonably acceptable to such
officer, director or employee.
(b) For a period of three years from the Effective Time, Old Florida
shall use its reasonable best efforts to provide that portion of director's and
officer's liability insurance that serves to reimburse the present and former
officers and directors of Marine or any of its Subsidiaries (determined as of
the Effective Time) with respect to claims against such directors and officers
arising from facts or events which occurred before the Effective Time, on terms
no less favorable than those in effect on the date hereof; provided, however,
that Old Florida may substitute therefor policies providing at least comparable
coverage containing terms and conditions no less favorable than those in effect
on the date hereof; provided, however that in no event shall Old Florida be
required to expend more than 200 percent of the current amount expended by
Marine (the "Insurance Amount") to maintain or procure such directors and
officers insurance coverage; provided, further that if Old Florida is unable to
maintain or obtain the insurance called for by this Section 6.12(b), Old Florida
shall use its reasonable best efforts to obtain as much comparable insurance as
is available for the Insurance Amount; and provided, further, that officers and
directors of Marine or any Subsidiary may be required to make application and
provide customary representations and warranties to Old Florida's insurance
carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.13(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Old Florida thereof;
provided that the failure so to notify shall not affect the obligations of Old
Florida under Section 6.12(a) unless and to the extent that Old Florida is
actually prejudiced as a result of such failure.
(d) If Old Florida or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of Old Florida shall
assume the obligations set forth in this Section 6.12.
A-40
6.13 EMPLOYEES; EMPLOYEE BENEFITS; DIRECTORS (a) As soon as
administratively practicable after the Effective Time, Old Florida shall take
all reasonable action so that employees of Marine and the Marine Subsidiaries
shall be entitled to participate in the Old Florida Compensation and Benefit
Plans of general applicability to the same extent as similarly situated
employees of Old Florida and its Subsidiaries (it being understood that
inclusion of the employees of the Marine and its Subsidiaries in the Old Florida
Compensation and Benefit Plans may occur at different times with respect to
different plans). For purposes of determining eligibility to participate in, the
vesting of benefits and for all other purposes (but not for accrual of pension
benefits) under the Old Florida Compensation and Benefit Plans, Old Florida and
the Old Florida Compensation and Benefit Plans shall recognize years of service
with Marine, any Marine Subsidiary or any predecessor thereof or entity acquired
by Marine or a Marine Subsidiary as such service is recognized by and reflected
on the records of Marine and the Marine Compensation and Benefit Plans. Old
Florida and the Old Florida Compensation and Benefit Plans shall provide
employees of Marine and Marine Subsidiaries with full credit for copayment,
deductible amounts and out-of-pocket maximums under any Marine Compensation and
Benefit Plans paid by such employees prior to the Effective Time and shall not
apply any preexisting condition, waiting period or other similar limitations to
such employees, except to the extent that any of the same is applicable to
employees of Old Florida and its Subsidiaries.
(b) All employees of Marine or a Marine Subsidiary as of the Effective
Time shall become employees of Old Florida or an Old Florida Subsidiary as of
the Effective Time, provided that Old Florida or the Old Florida Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of Marine or any
Marine Subsidiary a right to continuing employment with Old Florida or an Old
Florida Subsidiary after the Effective Time.
(c) Following the Effective Time, Old Florida shall, and shall cause
its appropriate Subsidiaries to, honor in accordance with their terms the
employment agreements and change-in-control agreements which have been
Previously Disclosed by Marine to Old Florida as of the date hereof.
(d) Except as otherwise provided herein, nothing in this Section 6.13
shall be interpreted as preventing Old Florida or its Subsidiaries from
amending, modifying or terminating any of the Marine Compensation and Benefit
Plans, and any contracts, arrangements, commitments or understandings of Marine
or its Subsidiaries, in accordance with their terms and applicable law.
(e) Promptly following the Effective Time Old Florida shall, at a
meeting of its directors (or pursuant to written consents), take those actions
necessary to cause Pierce T. Neese and William L. McDaniel, Jr. who are
directors of Marine, to become directors of Old Florida and Old Florida Bank.
6.14 NOTIFICATION OF CERTAIN MATTERS. Each of Marine and Old Florida
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
A-41
6.15 MARINE STOCK OPTIONS; MARINE WARRANTS. (a) At and as of the
Effective Time, Old Florida shall assume each and every outstanding option to
purchase shares of Marine Common Stock ("Marine Stock Option") and each and
every outstanding warrant to purchase shares of Marine Common Stock ("Marine
Warrant") and all obligations of Marine under the Marine Bancshares, Inc. 1998
Stock Option Plan. Each and every Marine Stock Option and Marine Warrant so
assumed by Old Florida under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Marine Stock Option
Plans and agreements applicable to the Marine Warrants (the "Marine Warrant
Agreements") and in the other documents governing such Marine Stock Option and
Marine Warrant immediately prior to the Effective Time, except that: (i) such
Marine Stock Option or Marine Warrant shall be exercisable for that number of
whole shares of Old Florida Common Stock equal to the product of (A) the number
of shares of Marine Common Stock that were purchasable under such Marine Stock
Option or Marine Warrant immediately prior to the Effective Time multiplied by
(B) the Exchange Ratio, rounded down to the nearest whole number of shares of
Old Florida Common Stock; and (ii) the per share exercise price for the shares
of Old Florida Common Stock issuable upon exercise of such Marine Stock Option
or Marine Warrant shall be equal to the quotient determined by dividing (A) the
exercise price per share of Marine Common Stock at which such Marine Stock
Option or Marine Warrant was exercisable immediately prior to the Effective Time
by (B) the Exchange Ratio. Following the Effective Time, Old Florida shall issue
to each holder of an outstanding Marine Stock Option and Marine Warrant a
document evidencing the assumption of such Marine Stock Option and Marine
Warrant by Old Florida pursuant to this Section 6.16.
(b) Old Florida shall comply with the terms of the Marine Stock Option
Plans and Marine Warrant Agreements.
(c) At or prior to the Effective Time, Old Florida shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Old Florida Common Stock for delivery upon exercise of Marine Stock Options
and Marine Warrants assumed by it in accordance with this Section 6.16.
6.16 TAX TREATMENT. Each of Old Florida and Marine agrees not to take
any actions subsequent to the date of this Agreement that would adversely affect
the ability to treat the Merger as a tax-free reorganization under Section
368(a) of the Code, and each of Old Florida and Marine agrees to take such
action as may be reasonably required, if such action may be reasonably taken, to
reverse the impact of any past actions which would adversely impact the ability
of Old Florida or Marine (as the case may be) to treat the Merger as a tax-free
reorganization under Section 368(a) of the Code.
6.17 NO BREACHES OF REPRESENTATIONS AND WARRANTIES. Between the date of
this Agreement and the Effective Time, without the written consent of the other
party, each of Old Florida and Marine will not do any act or suffer any omission
of any nature whatsoever which would cause any of the representations or
warranties made in Article V of this Agreement to become untrue or incorrect in
any material respect.
6.18 CONSENTS. Each of Old Florida and Marine shall use its best
efforts to obtain any required consents to the transactions contemplated by this
Agreement.
A-42
6.19 INSURANCE COVERAGE. Marine shall cause the policies of insurance
listed in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Effective Date.
6.20 CORRECTION OF INFORMATION. Each of Old Florida and Marine shall
promptly correct and supplement any information furnished under this Agreement
so that such information shall be correct and complete in all material respects
at all times, and shall include all facts necessary to make such information
correct and complete in all material respects at all times.
6.21 SUPPLEMENTAL ASSURANCES. (a) On the date the Registration
Statement becomes effective and on the Effective Date, Marine shall deliver to
Old Florida a certificate signed by its principal executive officer and its
principal financial officer to the effect, to such officers' knowledge, that the
information contained in the Registration Statement relating to the business and
financial condition and affairs of Marine, does not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(b) On the date the Registration Statement becomes effective and on the
Effective Date, Old Florida shall deliver to Marine a certificate signed by its
chief executive officer and its chief financial officer to the effect, to such
officers' knowledge, that the Registration Statement (other than the information
contained therein relating to the business and financial condition and affairs
of Marine) does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
6.22 MERGER OF MARINE NATIONAL BANK AND OLD FLORIDA BANK. Marine shall
cooperate with Old Florida between the date of this Agreement and the Effective
Time to take or cause to be taken all actions necessary or desirable, including
the filing of any regulatory applications, so that the merger of the Bank with
and into Old Florida Bank (the "Bank Merger") will occur substantially
concurrent with, or as soon as practicable after, the Effective Time, or at such
later time as Old Florida determines in its sole discretion. A copy of the
Agreement of Merger of the Bank with and into Old Florida Bank is attached
hereto as Exhibit B.
6.23 MARINE AND OLD FLORIDA BALANCE SHEETS. Within fifteen (15) days
after the calendar month end immediately following the later to occur of the
Marine Shareholder Approval and the receipt of all Regulatory Approvals, Marine
and Old Florida each shall deliver to the other a consolidated balance sheet of
Marine and its Subsidiaries, or Old Florida and its Subsidiaries, as the case
may be, as of the most recent month end, prepared in accordance with GAAP, such
accounting principles having been consistently applied.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of Old Florida and Marine to consummate the Merger
is subject to the
A-43
fulfillment or written waiver by Old Florida and Marine prior to the Effective
Time of each of the following conditions:
(a) Shareholder Approval. This Agreement (including the Plan of Merger)
shall have been duly adopted by the requisite vote of the shareholders of Marine
(the "Marine Shareholder Approval"), and notice of intent to exercise
dissenter's rights under the Statute shall not have been given by the holders of
more than twenty percent of the shares of Marine Stock entitled to vote on the
Merger.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals or statute, rule, or
order shall contain any conditions, restrictions or requirements which Old
Florida or Marine reasonably determines would either before or after the
Effective Time (i) have a Material Adverse Effect on Old Florida and its
Subsidiaries taken as a whole after giving effect to the consummation of the
Merger; or (ii) prevent Old Florida from realizing the major portion of the
economic benefits of the Merger and the transactions contemplated thereby that
Old Florida or Marine currently anticipates obtaining (the "Regulatory
Approvals").
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced threatened, commenced a
proceeding with respect to or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
prohibiting or delaying consummation of the transactions contemplated by this
Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) Blue Sky Approvals. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of Old Florida Common Stock to be issued in the
Merger shall have been received and be in full force and effect.
7.02 CONDITIONS TO OBLIGATION OF MARINE. The obligation of Marine to
consummate the Merger is also subject to the fulfillment or written waiver by
Marine prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Old Florida set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of a specific date shall be true and
correct as of such date), and Marine shall have received a certificate, dated
the Effective Date, signed on behalf of Old Florida by the Chief Executive
Officer and the Chief Financial Officer of Old Florida to such effect.
A-44
(b) Performance of Obligations of Old Florida. Old Florida shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Marine shall have
received a certificate, dated the Effective Date, signed on behalf of Old
Florida by the Chief Executive Officer and the Chief Financial Officer of Old
Florida to such effect.
(c) Tax Opinion. Marine shall have received an opinion of Werner &
Blank, LLC, counsel to Old Florida, dated the Effective Date, to the effect
that, on the basis of facts, representations and assumptions set forth in such
opinion, (i) the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (ii) no gain or loss will be recognized by
shareholders of Marine who receive shares of Old Florida Common Stock in
exchange for shares of Marine Common Stock, and cash in lieu of fractional share
interests, other than the gain or loss to be recognized as to cash received in
lieu of fractional share interests. In rendering its opinion, counsel to Old
Florida will require and rely upon representations contained in letters from
Marine and Old Florida.
(d) Opinion of Old Florida's Counsel. Marine shall have received an
opinion of Werner & Blank, LLC, counsel to Old Florida, dated the Effective
Date, to the effect that, on the basis of the facts, representations and
assumptions set forth in the opinion, (i) Old Florida is a corporation duly
organized and in good standing under the laws of the State of Florida, (ii) this
Agreement has been duly executed by Old Florida and constitutes the binding
obligation of Old Florida, enforceable in accordance with its terms against Old
Florida, except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) and by an implied covenant of good faith and fair dealing
and (iii) that the Old Florida Common Stock to be issued as Merger
Consideration, when issued, shall be duly authorized, fully paid and
non-assessable, and (iv) that, assuming Marine Shareholder Approval, upon the
filing of the articles of merger with the Florida Department, the Merger shall
become effective.
7.03 CONDITIONS TO OBLIGATION OF OLD FLORIDA. The obligation of Old
Florida to consummate the Merger is also subject to the fulfillment or written
waiver by Old Florida prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Marine set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of a specific date shall be true and
correct as of such date) and Old Florida shall have received a certificate,
dated the Effective Date, signed on behalf of Marine by the Chief Executive
Officer and the Chief Financial Officer of Marine to such effect.
(b) Performance of Obligations of Marine. Marine shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and Old Florida shall have
received a certificate, dated the Effective Date, signed on behalf of Marine by
the Chief Executive Officer and the Chief Financial Officer of Marine to such
effect.
A-45
(c) Opinion of Marine's Counsel. Old Florida shall have received an
opinion of Kilpatrick Stockton LLP, counsel to Marine, dated the Effective Date,
to the effect that, on the basis of the facts, representations and assumptions
set forth in the opinion, (i) Marine is a corporation duly organized and in good
standing under the laws of the State of Florida, (ii) this Agreement has been
duly executed by Marine and constitutes a binding obligation on Marine,
enforceable in accordance with its terms against Marine, except as the same may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law) and by
an implied covenant of good faith and fair dealing and (iii) that, assuming
Marine Shareholder Approval, upon the filing of the articles of merger with the
Florida Department, the Merger shall become effective.
(d) Affiliate Agreements. Old Florida shall have received the
agreements referred to in Section 6.08 from each Marine Affiliate.
(e) Articles of Merger. Old Florida shall have received from Marine
articles of merger duly executed by Marine in accordance with Section 607.1105
of the FBCA and in appropriate form for filing with the Florida Department.
(f) Corporate Resolutions. Old Florida shall have received from Marine
copies of resolutions adopted by the directors and shareholders of Marine
approving and adopting this Agreement and authorizing the consummation of the
transactions described herein accompanied by a certificate of the secretary or
assistant secretary of Marine dated as of the Effective Date and certifying (a)
the date and manner of adoption of each such resolution; and (2) that each such
resolution is in full force and effect, without amendment, as of the Effective
Date.
(g) Marine Shareholders' Equity. Old Florida shall have received the
Marine balance sheet referred to in Section 6.23 and the Marine Shareholders'
Equity shall not be less than $6,750,000 as of the calendar month end
immediately following the later to occur of the Marine Shareholder Approval and
the receipt of all Regulatory Approvals.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Old Florida and Marine, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
A-46
(b) Breach. At any time prior to the Effective Time, by Old Florida or
Marine, in the event of either: (i) a breach by the other party of any
representation or warranty contained herein (subject to the standard set forth
in Section 5.02), or (ii) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of such
breach, provided that such breach would be reasonably likely, individually or in
the aggregate with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by Old Florida or
Marine, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated by
September 30, 2003, except to the extent that the failure of the Merger then to
be consummated arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 8.01(c).
(d) No Approval. By Marine or Old Florida, in the event (i) the
approval of any Governmental Authority required for consummation of the Merger
and the other transactions contemplated by this Agreement shall have been denied
by final nonappealable action of such Governmental Authority; (ii) the Marine
shareholders fail to adopt this Agreement at the Marine Meeting; or (iii) any of
the closing conditions have not been met as required by Article VII hereof.
8.02 EFFECT OF TERMINATION AND ABANDONMENT; ENFORCEMENT OF AGREEMENT.
In the event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as set
forth in Section 9.01, (ii) that termination will not relieve a breaching party
from liability for any willful breach of this Agreement giving rise to such
termination, and (iii) the Stock Option Agreement shall terminate in accordance
with its terms and shall be unaffected by the termination of this Agreement,
except in accordance with the terms of the Stock Option Agreement.
Notwithstanding anything contained herein to the contrary, the parties hereto
agree that irreparable damage will occur in the event that a party breaches any
of its obligations, duties, covenants and agreements contained herein. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches or threatened breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled by law or in equity.
ARTICLE IX
MISCELLANEOUS
9.01 SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.12, 6.13 and 6.15 and this Article IX which shall survive the
Effective Time) or the termination of this Agreement if this Agreement is
terminated prior to the Effective Time (other than Sections 6.04(b), 6.05,
6.06(b), 8.02, the representations and warranties of Marine in Article V as they
relate to the Stock Option Agreement, and this Article IX which shall survive
such termination).
A-47
9.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the Marine Meeting, this Agreement may not be amended if it would violate the
FBCA or the federal securities laws.
9.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Florida applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law are applicable).
9.05 EXPENSES. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except that printing and mailing expenses shall be shared equally between Marine
and Old Florida. All fees to be paid to Regulatory Authorities and the SEC in
connection with the transactions contemplated by this Agreement shall be borne
by Old Florida.
9.06 NOTICES. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Marine, to:
Marine Bancshares, Inc.
c/o Pierce T. Neese, Chairman
8770 Main Street
Woodstock, Georgia 30188
Telecopy: (239) 593-6330
With a copy to:
Kilpatrick Stockton LLP
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309
Attn: Richard R. Cheatham, Esq.
Telecopy: (404) 815-6555
A-48
If to Old Florida, to:
Old Florida Bankshares, Inc.
6321 Daniels Parkway
Fort Myers, Florida 33912
Attn: Larry W. Johnson
President and Chief Executive Officer
Telecopy: (941) 561-6223
With a copy to:
Werner & Blank, LLC
7205 West Central Avenue
Toledo, Ohio 43617
Attn: E. L. Herbert, Esq.
Telecopy: (419) 841-8380
9.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and this Agreement supersedes any and all other
oral or written agreements heretofore made. The Disclosure Schedules shall be
deemed to be a part of this Agreement and shall not be amended without the prior
written consent of the other party hereto. Nothing in this Agreement, whether
express or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.08 INTERPRETATION; EFFECT. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
9.09 WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
A-49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
OLD FLORIDA BANKSHARES, INC.
By: /s/ Larry W. Johnson
--------------------------------------
Name: Larry W. Johnson
Title: President and Chief Executive
Officer
MARINE BANCSHARES, INC.
By: /s/ Pierce T. Neese
--------------------------------------
Name: Pierce T. Neese
Title: Chairman
A-50
EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
Old Florida Bankshares, Inc.
6321 Daniels Parkway
Fort Myers, Florida 33912
Attention: Larry W. Johnson, President and Chief Executive Officer
Gentlemen:
In connection with the proposed business combination in which Marine Bancshares,
Inc. ("Marine") will be merged with and into Old Florida Bankshares, Inc. ("Old
Florida"), in consideration of the exchange of common shares, $.01 par value per
share ("Old Florida common shares"), of Old Florida for common stock, $.01 par
value per share, of Marine, the undersigned hereby represents and agrees that he
or she will not (a) offer, sell or transfer any Old Florida common shares
(including any securities which may be paid as a dividend or otherwise
distributed thereon) to be so received pursuant to the business combination; or
(b) offer, sell or transfer any Old Florida common shares received pursuant to
the exercise of stock options or stock warrants; except that the undersigned may
offer, sell or transfer such Old Florida common shares: (i) pursuant to a
then-current effective registration under the Securities Act of 1933 ("1933
Act"); (ii) in a transaction permitted by the Securities and Exchange
Commission's Rule 145; or (iii) in a transaction which, in the opinion of
counsel satisfactory to Old Florida, is not required to be registered under the
1933 Act.
The undersigned acknowledges that the above agreements are supported by valid
consideration.
Very truly yours,
- ---------------------------
Signature
- ---------------------------
Name
A-51
EXHIBIT B
TO AGREEMENT AND PLAN OF MERGER
AGREEMENT OF MERGER OF OLD FLORIDA BANK
AND MARINE NATIONAL BANK
This Agreement of Merger (the "Bank Agreement of Merger") is entered
into as of _____________ ____, 2003, between Old Florida Bank, a Florida banking
corporation ("Bank" or "Resulting Bank") and Marine National Bank ("Marine"), a
nationally chartered banking association. This Bank Agreement of Merger is being
entered into pursuant to an Agreement and Plan of Merger (the "Agreement") dated
as of December 31, 2002, between Old Florida Bankshares, Inc., a Florida
corporation ("Old Florida") and Marine Bancshares, Inc., a Florida corporation
("Marine Bancshares"). Bank and Marine are sometimes referred to herein as the
"Constituent Corporations". Pursuant to the terms of the Agreement, Marine
Bancshares will be merged with and into Old Florida.
The Constituent Corporations do hereby agree, for the purpose of
prescribing the terms and conditions of the merger of Marine with and into Bank
(the "Bank Merger"), as follows:
1. The Parties.
(a) Bank is a Florida banking corporation and has 1,216,595
shares of its capital stock outstanding, all of which are owned of record and
beneficially by Old Florida. Attached as Exhibit A hereto is a listing of each
office and branch of the Bank.
(b) Marine is a national bank and has 900,000 shares of its
capital stock outstanding, all of which are owned of record and beneficially by
Marine Bancshares. Attached as Exhibit B hereto is a listing of each office and
branch of Marine.
2. The Bank Merger. Marine shall be merged with and into Bank.
3. Regulatory Approval and Effective Date. The Bank Merger is
contingent upon both the prior approval of the Federal Deposit Insurance
Corporation under the Bank Merger Act and the prior approval of the Bank
Agreement of Merger by the Florida Department of Financial Services (the
"Department"), and is also subject to the approval of the sole stockholders of
each of the Constituent Corporations. The Bank Merger shall become effective
upon the date of issuance of the certificate of merger by the Department (the
"Bank Effective Date").
4. Cancellation of Marine Shares. Upon the Bank Merger, the outstanding
shares of capital stock of Marine are cancelled and no shares of Bank or other
securities or consideration shall be issued in exchange therefor.
A-52
5. Bank Shares. Upon the Bank Merger, the outstanding shares of capital
stock of Bank shall remain outstanding and are not affected by the Bank Merger.
The pro forma capital structure of the Resulting Bank is attached hereto as
Exhibit C.
6. Articles of Incorporation. The Articles of Incorporation of Bank, as
in effect immediately prior to the Bank Effective Date, shall be the Articles of
Incorporation of the Resulting Bank. A copy of the Articles of Incorporation of
the Resulting Bank is attached hereto as Exhibit D.
7. Board of Directors. Upon the Bank Merger, the membership of the
Board of Directors of Bank shall remain the same, subject to the addition to the
Board of Directors of the Bank of Pierce T. Neese and William L. McDaniel, Jr.,
who are currently directors of Marine. The names and respective addresses of
each director that will serve until the next meeting of the stockholders at
which directors are to be elected are provided as Exhibit E hereto.
8. Executive Officers. The names and respective addresses of each
executive officer of the Resulting Bank are provided as Exhibit F hereto.
9. Corporate Existence. Upon the Bank Merger, the separate existence of
Marine ceases and Bank shall succeed, without other transfer, to all the rights
and property of Marine and shall be subject to all the debts and liabilities
thereof in the same manner as if Bank had itself incurred them. All rights of
creditors and all liens upon the property of each corporation shall be preserved
unimpaired, provided that such liens upon property of Marine shall be limited to
the property affected thereby immediately prior to the time the Bank Merger is
effective.
10. Further Assurances. After the Bank Merger becomes effective,
Marine, through the persons who were its officers immediately prior to the Bank
Merger, shall execute or cause to be executed such further assignments,
assurances or other documents as may be necessary or desirable to confirm title
to properties, assets and rights in Bank.
11. Bylaws. The Bylaws of Bank, as in effect immediately prior to the
Bank Effective Date, shall be the Bylaws of the Resulting Bank.
12. Location of Offices. Upon the Bank Effective Date, all offices
(including authorized but unopened offices) of Marine shall be combined with
those of Bank. All branches of Marine shall be maintained as separate branches
of Bank. Attached as Exhibit G hereto is a listing of each main and branch
office that will be operated by the Resulting Bank.
13. Agreements. This Bank Agreement of Merger and the Agreement are
intended to be construed together in order to effectuate their purposes.
14. Termination Provision. This Bank Agreement of Merger shall be
terminated and the Bank Merger abandoned at any time prior to the Bank Effective
Date and whether before or after approval of this Bank Agreement of Merger by
mutual agreement of the Board of Directors or shareholders of either of the
respective Constituent Corporations or in the event that the Agreement is
terminated in accordance with its terms.
A-53
15. Counterparts. This Bank Agreement of Merger may be executed in one
or more counterparts.
16. Exhibits. Each of the Exhibits attached to this Bank Agreement of
Merger is fully incorporated herein.
17. Trust Powers. The Resulting Bank will not have trust powers.
IN WITNESS WHEREOF, Bank and Marine have caused this Bank Agreement of Merger to
be executed on their behalf by their officers pursuant to the approval and
authority duly given by resolutions of their respective Boards of Directors, all
as of the date set forth above.
OLD FLORIDA BANK
By:
-----------------------------------
Name: Larry W. Johnson
Title: President and Chief Executive
Officer
MARINE NATIONAL BANK
By:
-----------------------------------
Name: Pierce T. Neese
Title: Chairman
A-54
EXHIBIT INDEX
Exhibit A. Pre-Merger List of the Main and Branch Offices of Old
Florida Bank
Exhibit B. Pre-Merger List of the Main and Branch Offices of Marine
National Bank
Exhibit C. Pro Forma Capital Structure of Old Florida Bank
Exhibit D. Articles of Incorporation of Old Florida Bank
Exhibit E. Name and Address of Each Member of the Board of Directors of
Old Florida Bank
Exhibit F. Name and Address of Each Executive Officer of Old Florida Bank
Exhibit G. Post-Merger List of the Main and Branch Offices of Old
Florida Bank
A-55
EXHIBIT A. PRE-MERGER LIST OF THE MAIN AND BRANCH OFFICES OF OLD FLORIDA BANK
Main Office
6321 Daniels Parkway
Fort Myers, FL 33912
Bonita Springs Branch
24201 Walden Center Drive
Bonita Springs, FL 34134
A-56
EXHIBIT B. PRE-MERGER LIST OF THE MAIN AND BRANCH OFFICES OF MARINE NATIONAL
BANK
Main Office
2325 Vanderbilt Beach Rd.
Naples, Florida 34109
A-57
EXHIBIT C. PRO FORMA CAPITAL STRUCTURE OF OLD FLORIDA BANK
1. Number of shares of each class of capital stock
2. The par value of each share of each class of capital stock
3. Limitations, rights, preferences, or other special terms, if any, of each
class of capital stock
4. Capital Surplus
5. Retained Earnings or Undivided Profits
A-58
EXHIBIT D. ARTICLES OF INCORPORATION OF OLD FLORIDA BANK
A-59
EXHIBIT E. NAME AND ADDRESS OF EACH MEMBER OF THE BOARD OF DIRECTORS OF OLD
FLORIDA BANK
Larry W. Johnson
6041 Tidewater Island Circle
Fort Myers, FL 33908
Nicholas J. Panicaro
2924 SW 3rd Place
Cape Coral, Florida 33914
Frank Galeana
13323 Rosewood Lane
Naples, FL 34119
Karl L. Johnson
2142 W. Lakeview Blvd.
N. Fort Myers, FL 33903
Charles (Chris) Bundschu, III
15301 Orange River Rd.
Fort Myers, FL 33905
Joseph E. D'Jamoos
7575 Pelican Bay Blvd.
Naples, FL 34108
Elmo J. Hurst
27281 Ibis Cove Ct.
Bonita Springs, FL 34134
William L. McDaniel, Jr.
561 Logan Blvd. N.
Naples, FL 34119
Pierce T. Neese
592 Beachwalk Circle
Naples, FL 34108
A-60
EXHIBIT F. NAME AND ADDRESS OF EACH EXECUTIVE OFFICER OF OLD FLORIDA BANK
Larry W. Johnson
President & CEO
6041 Tidewater Island Circle
Fort Myers, FL 33908
Nicholas J. Panicaro
Executive Vice President and CFO
2924 SW 3rd Place
Cape Coral, Florida 33914
A-61
EXHIBIT G. POST-MERGER LIST OF THE MAIN AND BRANCH OFFICES OF OLD FLORIDA BANK
Main Office
6321 Daniels Parkway
Fort Myers, FL 33912
Naples Branch
2325 Vanderbilt Beach Rd.
Naples, FL 34109
Bonita Springs Branch
24201 Walden Center Drive
Bonita Springs, FL 34134
A-62
APPENDIX B
OPTION AGREEMENT
OPTION AGREEMENT, dated as of December 31, 2002 (the "Agreement"), by
and between Old Florida Bankshares, Inc., a Florida corporation ("Old Florida"),
and Marine Bancshares, Inc., a Florida corporation ("Marine").
WHEREAS, Old Florida and Marine have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"; capitalized
terms not defined herein shall have the meanings set forth in the Merger
Agreement), providing for among other things, the merger of Marine with and into
Old Florida with Old Florida as the surviving corporation; and,
WHEREAS, as a condition and inducement to Old Florida's willingness to
enter into the Merger Agreement, Old Florida has requested that Marine agree,
and Marine has agreed, to grant Old Florida the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein, and in
the Merger Agreement, Old Florida and Marine agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Marine hereby irrevocably grants an option (the "Option") to Old Florida
to purchase an aggregate of 218,500 authorized but unissued shares of Marine
Common Stock, $.01 par value per share (the "Common Stock"), at a per share
price of $ 8.00 (the "Option Price").
2. Exercise of Option. Subject to the provisions of this Section 2 and
of Section 14(a) of this Agreement, this Option may be exercised by Old Florida
or any transferee as set forth in Section 5 of this Agreement, in whole or in
part, at any time, or from time to time in any of the following circumstances:
(a) any entity, person, or group (other than Old Florida),
within the meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended
(the "Exchange Act") (any of the foregoing hereinafter in this Section 2, a
"Person"), shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to, a tender offer
or exchange offer to purchase any shares of Common Stock such that, upon
consummation of such offer, such Person would own or control ten percent (10%)
or more of the then outstanding Common Stock;
(b) Marine or any subsidiary of Marine shall have
authorized, recommended, proposed, or publicly announced an intention to
authorize, recommend or propose, or entered into, an agreement with any Person
(other than Old Florida) to (i) effect a merger, consolidation or similar
transaction involving Marine or any of its subsidiaries, (ii) sell, lease, or
otherwise
B-1
dispose of assets of Marine or its subsidiaries representing ten percent (10%)
or more of the consolidated assets of Marine and its subsidiaries, or (iii)
issue, sell, or otherwise dispose of (including by way of merger, consolidation,
share exchange, or any similar transaction) securities representing ten percent
(10%) or more of the voting power of Marine or any of its subsidiaries (any of
the foregoing an "Acquisition Transaction");
(c) any Person (other than Old Florida) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act) or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, ten percent (10%) or more
of the then outstanding Common Stock provided, however, that a Person shall not
be deemed the "beneficial owner" of, or to "beneficially own," Common Stock
under this subparagraph (c) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (i) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and Regulations under the
Exchange Act, and (ii) is not also then reportable by such Person on Schedule
13D or Schedule 13G under the Exchange Act (or any comparable or successor
report); or
(d) the holders of Common Stock shall not have approved the
Merger Agreement at the meeting of such stockholders held for the purpose of
voting on the Merger Agreement, such meeting shall not have been held or shall
have been cancelled prior to termination of the Merger Agreement or Marine's
Board of Directors shall have withdrawn or modified in a manner adverse to Old
Florida the unanimous recommendation of Marine's Board of Directors with respect
to the Merger Agreement, in each case after any Person (other than Old Florida)
shall have (i) publicly announced a proposal, or publicly disclosed an intention
to make a proposal, to engage in an Acquisition Transaction, or (ii) filed an
application (or given a notice), whether in draft or final form, under the Bank
Holding Company Act of 1956, as amended, or the Change in Bank Control Act of
1978 for approval to engage in an Acquisition Transaction.
Notwithstanding the foregoing, the Option may not be exercised
if either (A) any applicable and required governmental approvals have not been
obtained with respect to such exercise or if such exercise would violate any
applicable regulatory restrictions, or (B) at the time of exercise Old Florida
is failing in any material respect to perform or observe its covenants or
conditions under the Merger Agreement unless the reason for such failure is that
Marine is failing to perform or observe its covenants or conditions under the
Merger Agreement.
3. Notice, Time, and Place of Exercise. Each time that Old Florida or
any transferee wishes to exercise any portion of the Option, Old Florida or such
transferee shall give written notice of its intention to exercise the Option
specifying the number of shares as to which the Option is being exercised
("Option Shares") and the place and date for the closing of the exercise (which
date shall be not later than ten (10) business days from the date such notice is
mailed). If any law, regulation, or other restriction will not permit such
exercise to be consummated during such ten-day period, the date for the closing
of such exercise shall be within five (5) days following the cessation of such
restriction on consummation.
B-2
4. Payment and Delivery of Certificate(s). At any closing for an
exercise of the Option or any portion thereof, (a) Old Florida and Marine will
each deliver to the other certificates of their respective chief executive
officers as to the accuracy, as of the closing date, of their respective
representations and warranties hereunder, (b) Old Florida or the transferees
will pay the aggregate purchase price for the shares of Common Stock to be
purchased by delivery of a certified or bank cashier's check in immediately
available funds payable to the order of Marine, and (c) Marine will deliver to
Old Florida or the transferees a certificate or certificates representing the
shares so purchased.
5. Transferability of the Option and Option Shares. Prior to the time
the Option, or a portion thereof, becomes exercisable pursuant to the provisions
of Section 2 of this Agreement, neither the Option nor any portion thereof shall
be transferable. Upon the occurrence of any of the events or circumstances set
forth in Sections 2(a) through 2(d) above, the Option or any portion thereof or
any of the Option Shares may be freely transferred by Old Florida. For purposes
of this Agreement, a merger or consolidation of Old Florida (whether or not Old
Florida is the surviving entity) or an acquisition of Old Florida shall not be
deemed a transfer.
6. Representations, Warranties, and Covenants of Marine. Marine hereby
represents, warrants, and covenants to Old Florida as follows:
(a) Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of Marine, has been duly executed
by a duly authorized officer of Marine, and constitutes a valid and binding
obligation of Marine. No shareholder approval by Marine shareholders is required
by applicable law or otherwise prior to the exercise of the Option in whole or
in part.
(b) Option Shares. Marine has taken all necessary corporate
and other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof to such time as the obligation to deliver shares
hereunder terminates will have reserved for issuance, at the closing(s) upon
exercise of the Option, or any portion thereof, the Option Shares (subject to
adjustment, as provided in Section 8 below), all of which, upon issuance
pursuant hereto shall be duly and validly issued, fully paid, and nonassessable,
and shall be delivered free and clear of all claims, liens, encumbrances, and
security interests, including any preemptive right of any of the shareholders of
Marine.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the charter documents or bylaws of Marine or any
agreement, instrument, judgment, decree, law, rule, or order applicable to
Marine or any Subsidiary of Marine or to which Marine or any such Subsidiary is
a party.
(d) Notification of Record Date. At any time from and after
the date of this Agreement until such time as the Option is no longer
exercisable, Marine shall give Old Florida or any transferee fifteen (15) days
prior written notice before setting the record date for determining the holders
of record of the Common Stock entitled to vote on any matter, to
B-3
receive any dividend or distribution, or to participate in any rights offering
or other matters, or to receive any other benefit or right, with respect to the
Common Stock.
7. Representations, Warranties, and Covenants of Old Florida. Old
Florida hereby represents, warrants, and covenants to Marine as follows:
(a) Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of Old Florida, has been duly
executed by a duly authorized officer of Old Florida, and constitutes a valid
and binding obligation of Old Florida.
(b) Transfers of Common Stock. No shares of Common Stock
acquired upon exercise of the Option will be transferred except in a transaction
registered or exempt from registration under any applicable securities laws.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the charter documents or bylaws of Old Florida or any
agreement, instrument, judgment, decree, law, rule, or order applicable to Old
Florida or any Subsidiary of Old Florida or to which Old Florida or any such
Subsidiary is a party.
8. Adjustment Upon Changes in Capitalization. In the event of any
change in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the number and
kind of shares or securities subject to the Option and the purchase price per
share of Common Stock shall be appropriately adjusted. If prior to the
termination or exercise of the Option, Marine shall be acquired by another
party, consolidate with or merge into another corporation or liquidate, Old
Florida or any transferee shall thereafter receive upon exercise of the Option
the securities or properties to which a holder of the number of shares of Common
Stock then deliverable upon the exercise thereof would have been entitled upon
such acquisition, consolidation, merger, or liquidation, and Marine shall take
such steps in connection with such acquisition, consolidation, merger, or
liquidation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be practicable, in
relation to any securities or property thereafter deliverable upon exercise of
the Option.
9. Registration Under Applicable Securities Laws. Upon the written
request of Old Florida or any transferee Marine agrees (a) to use its best
efforts to effect a registration for Old Florida and any transferees under the
Securities Act of 1933 (the "Securities Act"), if applicable, any other
applicable federal law or regulation and any applicable state securities laws
covering any part or all of the Option Shares owned by Old Florida or any
transferee, no later than 120 days after Old Florida or any transferee requests
such registration, and (b) to include any part or all of the Option Shares in
any registration filed by Marine under the Securities Act and any other
applicable federal law or regulation and in any related applicable state
securities laws registrations or applications in which such inclusion is
appropriate under applicable rules and regulations of the Securities and
Exchange Commission, unless, in the written opinion of securities law counsel to
Marine, addressed to Old Florida or any transferee, (i) Old Florida would be
able to dispose of all of the Option Shares owned by it pursuant to
B-4
Rule 144 or Rule 144A under the Securities Act within three (3) months of such
opinion, or (ii) registration is not otherwise required for the sale and
distribution of such Option Shares. The registration effected under this Section
9 shall be effected at Marine's expense except for any underwriting commissions,
fees, and disbursements of Old Florida's counsel and other experts and filing
fees attributable to Option Shares, provided that such fees and expenses to be
paid by Marine shall not exceed $100,000 (with the excess above $100,000, if
any, to be paid by Old Florida or any transferee). In connection with
registration under this Section 9, the parties agree to indemnify each other in
the customary manner, and, in the case of an organized secondary or primary
underwritten offering, Marine agrees to indemnify Old Florida or any transferee
and the underwriters, and Old Florida or any transferee agrees to indemnify
Marine and the underwriters, in the manner and to such extent as is customary in
such secondary or primary underwritten offerings. In the event of any demand for
registration pursuant to clause (a) above, Marine may delay the filing of such
registration statement for a period of up to one hundred twenty (120) days if,
in the good faith. judgment of Marine's Board of Directors, such delay is
necessary in order to avoid interference with a planned material transaction
involving Marine or Marine is in possession of material information that it
deems advisable in good faith not to disclose in a registration statement. With
respect to any registration pursuant to clause (b) above, if such registration
relates to a firm commitment underwriting of securities to be sold by Marine,
Marine may decline to include all or any portion of the Option Shares owned by
Old Florida or any transferee if the inclusion of such shares would, in the
judgment of the managing underwriter in such underwriting, materially interfere
therewith, and, further, nothing herein shall prevent Marine from abandoning or
delaying at any time any registration pursuant to clause (b) above.
10. Non-Assignability. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and the successors of each of the
undersigned. This Agreement and any right hereunder shall not be assignable by
either party except that Old Florida may transfer the Option, the Option Shares,
or any portion thereof in accordance with Section 5. A merger or consolidation
of Old Florida (whether or not Old Florida is the surviving entity) or an
acquisition of Old Florida shall not be deemed an assignment or transfer.
11. Regulatory Restrictions. Marine shall use its best efforts to
obtain or to cooperate with Old Florida or any transferee in obtaining all
necessary regulatory consents, approvals, waivers, or other action (whether
regulatory, corporate, or other) to permit the acquisition of any or all Option
Shares by Old Florida or any transferee.
12. Remedies. Marine agrees that if for any reason Old Florida or any
transferee shall have exercised its rights under this Agreement and Marine shall
have failed to issue the Option Shares to be issued upon such exercise or to
perform its other obligations under this Agreement, unless such action would
violate any applicable law or regulation by which Marine is bound, then Old
Florida or any transferee shall be entitled to specific performance and
injunctive and other equitable relief. Old Florida agrees that if it shall fail
to perform any of its obligations under this Agreement, then Marine shall be
entitled to specific performance and injunctive and other equitable relief. This
provision is without prejudice to any other rights that Marine or Old Florida or
any transferee may have against the other party for any failure to perform its
obligations under this Agreement.
B-5
13. No Rights as Stockholder. This Option, prior to the exercise
hereof, shall not entitle the holder hereof to any rights as a stockholder of
Marine at law or in equity; specifically this Option shall not entitle the
holder to vote on any matter presented to the stockholders of Marine or to any
notice of any meetings of stockholders or any other proceedings of Marine.
14. Miscellaneous.
(a) Termination. This Agreement and the Option, to the extent
not previously exercised, shall terminate upon the earliest of (i) September 30,
2003; (ii) the mutual agreement of the parties hereto; (iii) thirty-one (31)
days after the date on which any application for regulatory approval for the
Merger shall have been denied; provided, however, that if prior to the
expiration of such thirty-one (31) day period Marine or Old Florida is engaged
in litigation or an appeal procedure relating to an attempt to obtain approval
of the Merger, this Agreement will not terminate until the earlier of (A)
September 30, 2003 or (B) thirty-one (31) days after the completion of such
litigation and appeal procedure; (iv) the ninetieth (90) day following the
termination of the Merger Agreement for any reason other than noncompliance or
default by Old Florida with respect to its conditions or obligations thereunder;
or, (v) the date of termination of the Merger Agreement if such termination is
due to a noncompliance or default by Old Florida with respect to its conditions
or obligations thereunder; provided, however, that if the Option has been
exercised, in whole or in part, prior to the termination of this Agreement, then
such exercise shall close pursuant to Section 4 hereof even though such closing
date is after the termination of this Agreement; and, provided further, that if
the Option is sold prior to the termination of this Agreement, such Option may
be exercised by the transferee at any time within thirty-one (31) days after the
date of termination even though such exercise or the closing of such exercise
occurs after the termination of this Agreement.
(b) Amendments. This Agreement may not be modified, amended,
altered, or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) Severability of Terms. Any provision of this Agreement
that is invalid, illegal, or unenforceable shall be ineffective only to the
extent of such invalidity, illegality, or unenforceability without affecting in
any way the remaining provisions hereof or rendering any other provisions of
this Agreement invalid, illegal, or unenforceable. Without limiting the
generality of the foregoing, if the right of Old Florida or any transferee to
exercise the Option in full for the total number of shares of Common Stock or
other securities or property issuable upon the exercise of the Option is limited
by applicable law, or otherwise, Old Florida or any transferee may,
nevertheless, exercise the Option to the fullest extent permissible.
(d) Attorneys' Fees. If any legal action or any arbitration
upon mutual agreement is brought for the enforcement of this Agreement or
because of an alleged dispute, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs and expenses incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
B-6
(e) Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery, by telecopier, or by
registered or certified mail, postage prepaid, return receipt requested, to the
respective parties as follows:
If to Marine:
Marine Bancshares, Inc.
c/o Pierce T. Neese, Chairman
8770 Main Street
Woodstock, Georgia 30188
Telecopy: (239) 593-6330
With copies to:
Kilpatrick Stockton LLP
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309
Attn: Richard R. Cheatham, Esq.
Telecopy: (404) 815-6555
If to Old Florida:
Old Florida Bankshares, Inc.
6321 Daniels Parkway
Fort Myers, Florida 33912
Attn: Larry W. Johnson
President and
Chief Executive Officer
Telecopy: (941) 561-6223
With a copy to:
Werner & Blank, LLC
7205 West Central Avenue
Toledo, Ohio 43617
Attn: E. L. Herbert, Esq.
Telecopy: (419) 841-8380
B-7
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(f) Governing Law. This Agreement and the Option, in all respects,
including all matters of construction, validity, and performance, are governed
by the internal laws of the State of Florida without giving effect to the
principles of conflicts of law thereof. This Agreement is being delivered in
Fort Myers, Florida.
(g) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(h) Effects of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
Dated as of the day and year first written above.
OLD FLORIDA BANKSHARES, INC. MARINE BANCSHARES, INC.
By: /s/ Larry W. Johnson By: /s/ Pierce T. Neese
----------------------------------------- ----------------------------
Larry W. Johnson Pierce T. Neese
Title: President and Chief Executive Officer Title: Chairman
B-8
APPENDIX C
SHAREHOLDER AGREEMENT
This Shareholder Agreement (the "Agreement") dated as of December 31,
2002, is made by and among Old Florida Bankshares, Inc., a Florida corporation
("Old Florida"), the undersigned shareholders (the "Shareholders") of Marine
Bancshares, Inc., a Florida corporation ("Marine"), and Marine.
WHEREAS, the Shareholders are the record and beneficial owners, or the
beneficial owners, and have the power to vote or to direct the vote of the
respective number of shares of Marine's common stock, $.01 par value per share
("Marine Common Stock"), set forth opposite their respective names on Schedule
A; and,
WHEREAS, the Shareholders desire that Marine and Old Florida enter into
an Agreement and Plan of Merger (the "Merger Agreement") with respect to the
merger of Marine into Old Florida (the "Merger"); and,
WHEREAS, in addition to obligating themselves to each other, the
Shareholders are executing this Agreement as an inducement to Old Florida to
enter into and execute the Merger Agreement.
NOW THEREFORE, in consideration of the execution and delivery by Old
Florida of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein the parties agree as follows:
1. At any meeting of Marine shareholders called to vote upon the Merger
and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which such vote or other approval of the Merger and the
Merger Agreement is sought, and subject to the provisions of Section 4 hereof,
the Shareholders severally shall vote (or cause to be voted) the shares of
Marine Common Stock set forth opposite their respective names in Schedule A
hereto in favor of the Merger and the Merger Agreement.
2. At any meeting of Marine shareholders or at any adjournment thereof
or in any other circumstances upon which their vote or approval is sought,
subject to the provisions of Section 4 hereof, the Shareholders shall severally
vote (or cause to be voted) such shares of Marine Common Stock against any
proposal or transaction which would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
3. During the period commencing on the date of this Agreement and ending on the
earlier of either (a) the date that the Merger Agreement terminates in
accordance with its terms or (b) the Effective Time of the Merger (as such term
is defined in the Merger Agreement), each Shareholder shall not transfer (which
term shall include, without limitation, for the purposes of
C-1
this Agreement any sale, gift or pledge) any or all of such Shareholder's shares
of Marine Common Stock or any interest therein, except pursuant to the Merger.
Except as permitted by the Merger Agreement, during such period the Shareholders
shall not engage or cooperate in any discussion or negotiations with any person
or entity other than Old Florida, or make or solicit any offers, with respect to
the transfer of any or all of the shares of Marine Common Stock or the
acquisition (by merger, tender offer or otherwise) of Marine or all or
substantially all of its stock, business or assets, unless, based on the advice
of counsel, such Shareholder determines in good faith that such action would
violate his or her duties to Marine shareholders imposed by law or would violate
his or her continuing fiduciary duty to the shareholders of Marine.
4. Each of the Shareholders agrees that during the period referred to
in Section 3 above, unless, based on the written advice of counsel, such
Shareholder determines in good faith that such action would violate his or her
duties to shareholders imposed by law or would violate his or her continuing
fiduciary duty to the shareholders of Marine (a) to cooperate with and assist
Old Florida and Marine to obtain all regulatory approvals required to complete
the Merger and the merger of Marine National Bank and Old Florida Bank (b) to
use his or her best efforts to the extent permitted by law, to cause Marine (i)
to perform its obligations under the Merger Agreement and (ii) to recommend
approval of the Merger and the Merger Agreement and the principal terms thereto
to the shareholders of Marine, and (c) to recommend to the Board of Directors
and shareholders of Marine the approval of the Merger and the Merger Agreement.
5. Each of the Shareholders severally represents and warrants to Old
Florida that such Shareholder is the beneficial and record owner of, or the
beneficial owner of, and has power and authority to dispose of, and the
unrestricted right to vote, the number of shares of Marine Common Stock set
forth opposite such Shareholder's name in Schedule A hereto.
6. The Shareholders hereby severally agree that if the shareholders of
Marine vote to approve the Merger and the Merger Agreement, the Shareholder's
shares of Marine Common Stock will, pursuant to the terms of the Merger
Agreement, be exchanged for the consideration provided in the Merger Agreement.
The Shareholders hereby waive any rights of appraisal, or rights to dissent from
the Merger, that they may have.
7. The Shareholders hereby severally agree to provide the affiliate
letters contemplated by Section 6.08 of the Merger Agreement upon request to do
so by Marine.
8. Marine represents and warrants to each of Old Florida and the
Shareholders that it has the corporate power and authority to enter into this
Agreement.
9. Each of the Shareholders severally agrees that this Agreement and
the obligations hereunder shall attach to the shares of Marine Common Stock and
shall be binding upon any person or entity to whom legal or beneficial ownership
of the shares of Marine Common Stock shall pass, whether by operation of law or
otherwise, including without limitation their respective heirs, guardian,
administrator or successor. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of Marine affecting the Marine Common Stock, or acquisition of
additional shares of Marine Common Stock by any of the Shareholders, the number
of shares listed in Schedule A beside the name of each Shareholder shall be
adjusted appropriately and this Agreement and the obligations
C-2
hereunder shall attach to any additional shares of Marine Common Stock or other
securities issued to or acquired by the Shareholders.
10. Each Shareholder hereby agrees to tender to Marine any and all
certificates representing the shares of Marine Common Stock and Marine, upon
tender of such shares, will inscribe upon those certificates the following
legend: "The shares of Common Stock, $.01 par value per share, of Marine
represented by this certificate are subject to a Shareholder Agreement dated
December 31, 2002. Copies of such Shareholder Agreement may be obtained at the
principal executive offices of Marine Bancshares, Inc."
11. No person executing this Agreement who is or becomes during the
term hereof a director of Marine makes any agreement or understanding herein in
his or her capacity as such director. The parties sign solely in their
capacities as owners or holders of the power to vote shares of Marine Common
Stock.
12. Each of the provisions of this Agreement is subject to compliance
with applicable regulatory conditions.
13. This Agreement may be executed in two or more counterparts, each of
which shall be considered an original but all of which together shall constitute
the same instrument.
14. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if so given) by delivery, by telecopier, or by registered or
certified mail, postage prepaid, return receipt requested, to the respective
parties as follows:
If to the Shareholders, at the addresses appearing below their respective
signatures at the end of this Agreement, with a copy, if any, to the person and
at the address shown below their respective signatures at the end of this
Agreement.
If to Marine, to:
Marine Bancshares, Inc.
c/o Pierce T. Neese, Chairman
8770 Main Street
Woodstock, Georgia 30188
Telecopy: (239) 593-6330
With a copy to:
Kilpatrick Stockton LLP
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309
Attn: Richard R. Cheatham, Esq.
Telecopy: (404) 815-6555
C-3
If to Old Florida, to:
Old Florida Bankshares, Inc.
6321 Daniels Parkway
Fort Myers, Florida 33912
Attn: Larry W. Johnson
President and Chief Executive Officer
Telecopy: (941) 561-6223
With a copy to:
Werner & Blank, LLC
7205 West Central Avenue
Toledo, Ohio 43617
Attn: E. L. Herbert, Esq.
Telecopy: (419) 841-8380
or to such other address as any of the foregoing parties may have furnished to
the others in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
15. This Agreement is intended as an exclusive statement of the terms
of the agreement among the parties with respect to its subject matter,
supersedes all prior agreements with respect thereto, and cannot be changed or
terminated except by written instrument executed by the party or parties against
whom enforcement thereof is sought and shall be governed by and construed in
accordance with the substantive laws of the State of Florida without giving
effect to the principles of conflicts of law thereof.
Executed as of the date first written above.
OLD FLORIDA BANKSHARES, INC.
By: /s/ Larry W. Johnson
---------------------------------
Name: Larry W. Johnson
Title: President and Chief
Executive Officer
MARINE BANCSHARES, INC.
By: /s/ Pierce T. Neese
---------------------------------
Name: Pierce T. Neese
Title: Chairman
C-4
SHAREHOLDERS
/s/ Pierce T. Neese
- -------------------------------
Signature
Pierce T. Neese
- -------------------------------
Print Name
Address: 8770 Main Street
-------------------------------------
Woodstock, Georgia 30188
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-5
SHAREHOLDERS
/s/ Earl T. Hodges
- -------------------------------
Signature
Earl T. Hodges
- -------------------------------
Print Name
Address:
-------------------------------------
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-6
SHAREHOLDERS
/s/ Donald T. Keeter
- -------------------------------
Signature
Donald T. Keeter
- -------------------------------
Print Name
Address:
-------------------------------------
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-7
SHAREHOLDERS
/s/ Donald W. Ketterhagen, M.D.
- --------------------------------
Signature
Donald W. Ketterhagen, M.D.
- -------------------------------
Print Name
Address:
-------------------------------------
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-8
SHAREHOLDERS
/s/ William L. McDaniel, Jr.
- -------------------------------
Signature
William L. McDaniel, Jr.
- -------------------------------
Print Name
Address:
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-9
SHAREHOLDERS
/s/ John R. Hurley
- -------------------------------
Signature
John R. Hurley
- -------------------------------
Print Name
Address:
-------------------------------------
-------------------------------------
Number of Shares:
----------------------------
With a copy, if any, to :
------------------------------
------------------------------
------------------------------
C-10
SCHEDULE A
SHAREHOLDERS
Shareholder Number of Shares
----------- ----------------
Pierce T. Neese
- ----------------------------------- --------------------------------
Earl T. Hodges
- ----------------------------------- --------------------------------
Donald T. Keeter
- ----------------------------------- --------------------------------
Donald W. Ketterhagen, M.D.
- ----------------------------------- --------------------------------
William L. McDaniel, Jr.
- ----------------------------------- --------------------------------
John R. Hurley
- ----------------------------------- --------------------------------
C-11
APPENDIX D
(TSJ&A LETTERHEAD)
March 6, 2003
Board of Directors
Marine Bancshares, Inc.
P.O. Box 110699
Naples, Florida 34108
Dear Directors:
T. Stephen Johnson & Associates, Inc., Alpharetta, Georgia ("TSJ&A") has been
asked to render an opinion as to the fairness from a financial point of view of
the consideration to be received by the shareholders of Marine Bancshares, Inc
("Marine") in connection with the proposed merger of Marine with and into Old
Florida Bancshares, Inc. ("Old Florida"), pursuant to an Agreement and Plan of
Merger dated as of December 31, 2002 (the "Merger Agreement"). The Merger
Agreement states that Marine shareholders will receive .62 shares of Old Florida
common stock for each share of Marine common stock they own. This exchange ratio
equates to a true book-to-book merger as of December 31, 2002.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of southeastern
financial institutions involved in mergers, it has developed an expertise in
fairness opinions related to the securities of southeastern financial
institutions. Marine retained TSJ&A to serve as financial advisor to provide a
fairness opinion for which compensation will be received.
In performing its analysis, TSJ&A relied upon and assumed without independent
verification, the accuracy and completeness of all information provided to it.
TSJ&A has not performed any independent appraisal or evaluation of the assets of
Marine or of Old Florida or any of its subsidiaries. As such, TSJ&A does not
express an opinion as to the fair market value of Marine. The opinion of
financial fairness expressed herein is necessarily based on market, economic and
other relevant considerations as they exist and can be evaluated as of February
28, 2003.
In arriving at its opinion, TSJ&A reviewed and analyzed audited and unaudited
financial information regarding Marine and Old Florida, the merger, and the
Merger Agreement, as well as publicly available information and actual
comparable transactions.
D-1
Board of Directors
March 6, 2003
Page 2
The merger consideration to be received by Marine Shareholders is based on an
exchange ratio of .62 shares of Old Florida for each share of Marine owned. This
exchange ratio is set to a book-to-book exchange as of December 31, 2002. This
exchange ratio is not subject to change due to changes in the book value of
either company prior to closing, except in the event that Old Florida changes
the number of shares outstanding prior to the effective date of the merger.
TSJ&A reviewed the Merger as of February 28, 2003, for the purpose of
determining purchase premiums that could be used in comparing the Merger with
other announced transactions. TSJ&A reviewed the purchase premiums paid in
transactions that were announced since January 1, 2002 involving selling
institutions with that have reported a net loss for each of the last three
years. A listing of these transactions is included with the Fairness Opinion. On
average, the comparable transactions reported an announced deal price to book
value of 1.064 times, a purchase as a percent of assets of 7.36 percent and a
purchase price as a percent of deposits of 8.86 percent. Median figures of the
comparable transactions reported an announced deal price to book value of 1.0816
times, a purchase as a percent of assets of 4.45 percent and a purchase price as
a percent of deposits of 4.95 percent. The Merger ranks well within the range of
the comparable transactions.
TSJ&A reviewed the financial results for Old Florida and also developed a
combined balance sheet and income statement as of December 31, 2002 of the two
companies. Old Florida has a history of positive earnings and on a combined
basis the two companies would have reported a net loss of only $.03 per share
for the year. Based on this review, TSJ&A determined the Marine shareholders
would have a better chance of future success combined with Old Florida rather
than remaining independent.
Therefore, in consideration of the above, it is the opinion of TSJ&A that, based
on the structure of the Merger and the analyses that have been performed, the
consideration to be received by the shareholders of Marine is fair from a
financial point of view.
Sincerely,
/s/ T. Stephen Johnson & Associates, Inc.
T. Stephen Johnson & Associates, Inc.
D-2
PRICE/ PRICE/ PRICE/
BOOK TANGIBLE LTM
BOOK EARNINGS
BUYER/ TARGET TARGET CITY ANNOUNCE (%) (%) (x)
- ----------------------------------------------------------------------------------------------------------------------------------
2002 ACQUISITION OF BANKS WITH NO EARNINGS DURING THE LAST THREE YEARS
Old Florida Bankshares, Inc./ Marine
Bancshares Inc. (as publicly reported) Naples FL 12/31/2002 126.81 126.81 NM
CBS Banc-Corporation/ Community Financial Services Bolivar TN 12/17/2002 70.82 70.82 NM
Synergy Finl Group Inc. (MHC)/ First Bank of
Central Jersey North Brunswick NJ 10/11/2002 69.15 69.15 NM
NASB Financial Inc./ CBES Bancorp Inc. Excelsior Springs MO 09/05/2002 108.16 108.16 NM
Adbanc Inc./ VBI Inc. Colorado Springs CO 07/15/2002 186.44 186.44 NM
Legacy Bank of Harrisburg/ Northern State Bank Towanda PA 07/10/2002 144.67 145.25 NM
Beresford Bancorporation, Inc./ First American SB,
FSB Omaha NE 05/20/2002 32.10 32.10 NM
Garfield Acquisition Corp./ Findlay Savings Bank Cincinnati OH 05/03/2002 150.00 150.00 NM
First Federal Finl Bncp Inc./ Lincoln S&LA Ironton OH 04/25/2002 85.14 85.14 NM
Berkshire Financial Holdings/ USABancShares.com Inc. Philadelphia PA 03/11/2002 111.11 113.21 NM
Average (1) 106.40 106.70 NM
Median (1) 108.16 108.16 NM
Old Florida Bankshares, Inc./ Marine Bancshares Inc. Naples FL Actual 100.00 100.00 NM
PRICE/
PRICE/ DEPOSIT EQUITY/
ASSETS S NET INCOME ASSETS
BUYER/ TARGET (%) (%) RECENT 2001 2000 (%)
- -----------------------------------------------------------------------------------------------------------------------------
2002 ACQUISITION OF BANKS WITH NO EARNINGS DURING
THE LAST THREE YEARS
Old Florida Bankshares, Inc./ Marine
Bancshares Inc. (as publicly reported) 14.18 17.59 -60 -333 -1,579 10.57
CBS Banc-Corporation/ Community Financial Services 3.48 3.76 -397 -1,906 -83 6.91
Synergy Finl Group Inc. (MHC)/ First Bank of
Central Jersey 3.56 3.78 -346 -1,722 -264 5.15
NASB Financial Inc./ CBES Bancorp Inc. 13.64 17.54 -598 -954 -217 12.55
Adbanc Inc./ VBI Inc. 10.32 13.96 -234 -1,299 -756 5.54
Legacy Bank of Harrisburg/ Northern State Bank 16.66 19.55 -115 -1,343 -1,477 11.52
Beresford Bancorporation, Inc./ First American SB,
FSB 1.80 2.56 -293 -644 -805 5.62
Garfield Acquisition Corp./ Findlay Savings Bank 11.15 12.16 -92 -393 -938 7.43
First Federal Finl Bncp Inc./ Lincoln S&LA 4.45 4.95 -22 -53 -169 5.23
Berkshire Financial Holdings/ USABancShares.com Inc. 1.21 1.46 -5,449 -9,665 -2,490 1.06
7.36 8.86 6.78
4.45 4.95 5.62
Old Florida Bankshares, Inc./ Marine Bancshares Inc. 11.15 13.98 11.15
(1) Does not include reported Old Florida/Marine Numbers
D-3
APPENDIX E
FLORIDA BUSINESS CORPORATION ACT
PROVISIONS OF FLORIDA BUSINESS CORPORATION ACT
RELATING TO DISSENTERS' RIGHTS
607.1301 Dissenter's Rights, Definitions. The following definitions apply to
ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value
of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date
on which the corporation received written consents without a meeting
from the requisite number of shareholders in order to authorize the
action, or, in the case of a merger pursuant to s. 607.1104, the day
prior to the date on which a copy of the plan of merger was mailed to
each shareholder of record of the subsidiary corporation.
607.1302 Right of Shareholders to Dissent.
(1) Any shareholder has the right to dissent from, and obtain payment
of the fair value of his or her shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation
is a party:
1. If the shareholder is entitled to vote on the
merger, or
2. If the corporation is a subsidiary that is merged
with its parent under s. .1104, and the shareholders
would have been entitled to vote on action taken,
except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation, other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but
not including a sale pursuant to court order or a sale for
cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a
control-share acquisition;
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which
will be acquired, if the shareholder is entitled to vote on
the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such
amendment would adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights
attached to any of his or her shares;
2. Altering or abolishing the voting rights
pertaining to any of his or her shares, except as
such rights may be affected by the voting rights of
new shares then being authorized of any existing or
new class or series of shares;
E-1
3. Effecting an exchange, cancellation, or
reclassification of any of his or her shares, when
such exchange, cancellation, or reclassification
would alter or abolish the shareholder's voting
rights or alter his or her percentage of equity in
the corporation, or effecting a reduction or
cancellation of accrued dividends or other arrearages
in respect to such shares;
4. Reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or
abolishing any provision relating to any sinking fund
for the redemption or purchase of any of his or her
shares, or making any of his or her shares subject to
redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part,
dividends of any of the shareholder's preferred
shares which had theretofore been cumulative:
6. Reducing the stated dividend preference of any of
the shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on
any of his or her preferred shares upon voluntary or
involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder
is entitled to dissent and obtain payment for his or her
shares;
(2) A shareholder dissenting from any amendment specified in paragraph
(i)(e) has the right to dissent only as to those of his or her shares
which are adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered
in his or her name. In that event, the shareholder's rights shall be
determined as if the shares as to which he or she has dissented and his
or her other shares were registered in the names of different
shareholders;
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share
exchange or a proposed sale or exchange of property, to the holders of
shares of any class or series which, on the record date fixed to
determine the shareholders entitled to vote at the meeting of
shareholders at which such action is to be acted upon or to consent to
any such action without a meeting, were either registered on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or held of record by not fewer than 2,000
shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her
shares under this section may not challenge the corporate action
creating his or her entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
607.1320 Procedure for Exercise of Dissenters' Rights.
(l) (a) If a proposed corporate action creating dissenters' rights
under s. 607.1302 is submitted to a vote at a shareholders'
meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights and be
accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320.
A shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is
taken written notice of the shareholder's intent to
demand payment for his or her shares if the proposed
action is effectuated, and
2. Not vote his or her shares in favor of the
proposed action. A proxy or vote against the proposed
action does not constitute such a notice of intent to
demand payment.
E-2
(b) If proposed corporate action creating dissenters' rights
under s. 607.1302 is effectuated by written consent without a
meeting, the corporation shall deliver a copy of ss. 607.1301,
607.1302, and 607.1320 to each shareholder simultaneously with
any request for his or her written consent or, if such a
request is not made, within 10 days after the date the
corporation received written consents without a meeting from
the requisite number of shareholders necessary to authorize
the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent
or adoption of the plan of merger, as the case may be, to each
shareholder who filed a notice of intent to demand payment for his or
her shares pursuant to paragraph (1)(a) or, in the case of action
authorized by written consent, to each shareholder, excepting any who
voted for, or consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a
notice of such election, stating his or her name and address, the
number, classes, and series of shares as to which he or she dissents,
and a demand for payment of the fair value of his or her shares. Any
shareholder failing to file such election to dissent within the period
set forth shall be bound by the terms of the proposed corporate action.
Any shareholder filing an election to dissent shall deposit his or her
certificates for certificated shares with the corporation
simultaneously with the filing of the election to dissent. The
corporation may restrict the transfer of uncertificated shares from the
date the shareholder's election to dissent is filed with the
corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and
shall not be entitled to vote or to exercise any other rights of a
shareholder. A notice of election may be withdrawn in writing by the
shareholder at any time before an offer is made by the corporation, as
provided in subsection (5), to pay for his or her shares. After such
offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to
be paid the fair value of his or her shares shall cease, and the
shareholder shall be reinstated to have all his or her rights as a
shareholder as of the filing of his or her notice of election,
including any intervening preemptive rights and the right to payment of
any intervening dividend or other distribution or, if any such rights
have expired or any such dividend or distribution other than in cash
has been completed, in lieu thereof, at the election of the
corporation, the fair value thereof in cash as determined by the board
as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the
interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or
the shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value
by a court has been made or filed within the time provided in
this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this
section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within
10 days after such corporate action is effected, whichever is later
(but in no case later than 90 days from the shareholders' authorization
date), the corporation shall make a written offer to each dissenting
shareholder who has made demand as provided in this section to pay an
amount the corporation estimates to be the fair value for such shares.
If the corporate action has not been consummated before the expiration
of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action.
Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which
the dissenting shareholder holds, as of the latest available
date and not more than 12 months prior to the making of such
offer; and
E-3
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if
the corporation was not in existence throughout such 12-month
period, for the portion thereof during which it was in
existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his or her shares shall be made within 90
days after the making of such offer or the consummation of the proposed
action, whichever is later. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such shares.
(7) If the corporation falls to make such offer within the period
specified there for in subsection (5) or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within
the period of 30 days thereafter, then the corporation, within 30 days
after receipt of written demand from any dissenting shareholder given
within 60 days after the date on which such corporate action was
effected, shall, or at its election at any time within such period of
60 days may, file an action in any court of competent jurisdiction in
the county in this state where the registered office of the corporation
is located requesting that the fair value of such shares be determined.
The court shall also determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination,
is entitled to receive payment for his or her shares. If the
corporation fails to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the corporation. All
dissenting shareholders (whether or not residents of this state), other
than shareholders who have agreed with the corporation as to the value
of their shares, shall be made parties to the proceeding as an action
against their shares. The corporation shall serve a copy of the initial
pleading in such proceeding upon each dissenting shareholder who is a
resident of this state in the manner provided by law for the service of
a summons and complaint and upon each nonresident dissenting
shareholder either by registered or certified mail and publication or
in such other manner as is permitted by law. The jurisdiction of the
court is plenary and exclusive. All shareholders who are proper parties
to the proceeding are entitled to judgment against the corporation for
the amount of the fair value of their shares. The court may, if it so
elects, appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of
their appointment or an amendment thereof. The corporation shall pay
each dissenting shareholder the amount found to be due him or her
within 10 days after final determination of the proceedings. Upon
payment of the judgment, the dissenting shareholder shall cease to have
any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or
any part of such costs and expenses may be apportioned and assessed as
the court deems equitable against any or all of the dissenting
shareholders who are parties to the proceeding, to whom the corporation
has made an offer to pay for the shares, if the court finds that the
action of such shareholders in failing to accept such offer was
arbitrary, vexatious, or not in good faith. Such expenses shall include
reasonable compensation for, and reasonable expenses of, the
appraisers, but shall exclude the fees and expenses of counsel for, and
experts employed by, any party. If the fair value of the shares, as
determined, materially exceeds the amount which the corporation offered
to pay therefor or if no offer was made, the court in its discretion
may award to any shareholder who is a party to the proceeding such sum
as the court determines to be reasonable compensation to any attorney
or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor,
as provided in this section, may be held and disposed of by such
corporation as authorized but unissued shares of the corporation,
except that, in the case of a merger, they may be held and disposed of
as the plan of merger otherwise provides. The shares of the surviving
corporation into which the shares of such dissenting shareholders would
have been converted had they assented to the merger shall have the
status of authorized but unissued shares of the surviving corporation.
E-4
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act ("FBCA") provides that Florida
corporations may indemnify an individual made a party to any threatened,
pending, or completed action, suit or proceeding whether civil, criminal,
administrative or investigative, because the individual is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employer or agent of another
corporation, trust if the person: (i) acted in good faith and (ii) believed his
conduct was in the corporation's best interest or was not opposed to the
corporation's best interest and with respect to any criminal proceeding, if he
had no reasonable cause to believe his conduct was unlawful. Certain additional
limitations apply to the right to indemnification when the lawsuit is brought by
or in the name of the corporation.
The FBCA further provides that a corporation shall indemnify an
individual who was successful on the merits or otherwise in the defense of any
proceeding to which the director, officer, employee or agent was a party because
the individual was or is a director, officer, employee or agent of the
corporation, for reasonable expenses incurred by the director in connection with
the proceeding. The FBCA also provides that a corporation may purchase and
maintain insurance on behalf of the individual who is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
liability asserted against or incurred by the individual in that capacity or
arising from the individual's status as a director, officer, employee, or agent,
regardless of whether the corporation would have the power to indemnify the
person for such liability under the FBCA.
Article VI of the Registrant's Bylaws provides that the Registrant has
the power to indemnify its directors and officers under certain circumstances,
consistent with the provisions of the FBCA.
The Registrant has purchased a standard directors' and officers'
liability insurance policy which, subject to any limitations set forth in the
policy, indemnifies the Registrant's directors and officers for damages that
they become legally obligated to pay as a result of any negligent act, error or
omission committed while serving in their official capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1 Agreement and Plan of Merger, dated as of December 31, 2002, by and
between Old Florida and Marine (included in Appendix A to the proxy
statement/prospectus and incorporated by reference herein)
2.2 Option Agreement, dated as of December 31, 2002, between Old Florida
and Marine (included in Appendix B to the proxy statement/prospectus
and incorporated by reference herein)
2.3 Shareholder Agreement, dated as of December 31, 2002, among Old
Florida, Marine and certain directors of Marine (included in Appendix C
to the proxy statement/prospectus and incorporated by reference herein)
*3.1 Articles of Incorporation of Old Florida as filed with the Florida
Department of State
II-1
*3.2 Bylaws of Old Florida
+5 Opinion of Werner & Blank, LLC, counsel to Old Florida, as to the
legality of the securities being issued
+8 Opinion of Werner & Blank, LLC, counsel to Old Florida, as to tax
matters
*10.1 Lease Agreement dated December 21, 1998, between Old Florida Bank and
Colony Corporate Centre, Inc., together with Option Term and Addendum
to Lease Agreement
*10.2 Old Florida Bank Directors' Stock Option Plan
*10.3 Assumption of Directors' Stock Option Plan, dated July 1, 2001, between
Old Florida and Old Florida Bank
*10.4 Form of Directors' Stock Option Agreement used under Old Florida Bank
Directors' Stock Option Plan
*10.5 Old Florida Bank Officers' and Employees' Stock Option Plan
*10.6 Assumption of Officers' and Employees' Stock Option Plan, dated July 1,
2001, between Old Florida and Old Florida Bank
*10.7 Form of Incentive Stock Option Agreement used under Old Florida Bank
Officers' and Employees' Stock Option Plan
*10.8 Employment Agreement, dated as of January 17, 2000, between Old Florida
Bank and Larry W. Johnson
*10.9 Employment Agreement, dated as of January 17, 2000, between Old Florida
Bank and Nicholas J. Panicaro
*10.10 Engagement letter, dated October 3, 2002, between Old Florida and
Austin Associates, LLC
*10.11 Agreement and Plan of Share Exchange among Old Florida Bank and Old
Florida Bankshares, Inc. dated as of March 12, 2001
*21 Subsidiaries of Old Florida
+23.1 Consent of Werner & Blank, LLC with respect to its opinion relating to
the legality of the securities being issued (included in Exhibit 5)
+23.2 Consent of Werner & Blank, LLC with respect to its tax opinion
(included in Exhibit 8)
+23.3 Consent of Hacker, Johnson & Smith PA (with respect to Old Florida)
+23.4 Consent of Porter Keadle Moore, LLP (with respect to Marine)
+23.5 Consent of T. Stephen Johnson & Associates, Inc., financial advisor to
Marine
*24 Power of Attorney of Directors of Old Florida authorizing the signing
of their names to this Registration Statement and any and all
amendments to this Registration Statement and other documents submitted
in connection herewith
II-2
+99.1 Form of Proxy to be used in connection with Special Meeting of
Shareholders of Marine
99.2 Form of Letter to be Sent to Shareholders of Marine (set forth
following the cover page of this Registration Statement)
99.3 Form of Notice of Special Meeting of Shareholders of Marine (set forth
following the form of letter to be sent to shareholders of Marine in
this Registration Statement)
99.4 Fairness Opinion of T. Stephen Johnson & Associates, Inc. (included in
Appendix D to the proxy statement/prospectus and incorporated by
reference herein)
- ---------------
* Previously filed on March 18, 2003
+ Filed herewith
(b) FINANCIAL STATEMENT SCHEDULES.
Schedules are omitted because they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.
ITEM 22. UNDERTAKINGS.
(A) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(B) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event
II-3
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(C) The undersigned small business issuer hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in the documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Myers, State of Florida, on April 30, 2003.
OLD FLORIDA BANKSHARES, INC.
By: /s/ Larry W. Johnson
-------------------------------
Larry W. Johnson
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement on Form S-4 has been signed by the
following persons in the capacities indicated below on the April 30, 2003.
NAME TITLE
* Chairman of the Board and Director
- ------------------------------------
Frank Galeana
/s/ Larry W. Johnson President, Chief Executive Officer
- ------------------------------------ and Director (Principal Executive
Larry W. Johnson Officer)
/s/ Nicholas J. Panicaro Executive Vice President and Chief
- ------------------------------------- Financial Officer and Director
Nicholas J. Panicaro (Principal Financial Officer and
Principal Accounting Officer)
* Director
- ------------------------------------
Charles Bundschu, III
II-4
* Director
- ------------------------------------
Joseph E. D'Jamoos
* Director
- ------------------------------------
Elmo J. Hurst
* Director
- ------------------------------------
Karl L. Johnson
- ---------------------
*By Larry W. Johnson pursuant to Power of Attorney executed by the directors and
executive officers listed above, which Power of Attorney has been filed with the
Securities and Exchange Commission.
/s/ Larry W. Johnson
- -------------------------------------
Larry W. Johnson
President and Chief Executive Officer
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1 Agreement and Plan of Merger, dated as of December 31, 2002, by and
between Old Florida and Marine (included in Appendix A to the proxy
statement/prospectus and incorporated by reference herein)
2.2 Option Agreement, dated as of December 31, 2002, between Old Florida
and Marine (included in Appendix B to the proxy statement/prospectus
and incorporated by reference herein)
2.3 Shareholder Agreement, dated as of December 31, 2002, among Old
Florida, Marine and certain directors of Marine (included in Appendix C
to the proxy statement/prospectus and incorporated by reference herein)
*3.1 Articles of Incorporation of Old Florida as filed with the Florida
Department of State
*3.2 Bylaws of Old Florida
+5 Opinion of Werner & Blank, LLC, counsel to Old Florida, as to the
legality of the securities being issued
+8 Opinion of Werner & Blank, LLC, counsel to Old Florida, as to tax
matters
*10.1 Lease Agreement dated December 21, 1998, between Old Florida Bank and
Colony Corporate Centre, Inc., together with Option Term and Addendum
to Lease Agreement
*10.2 Old Florida Bank Directors' Stock Option Plan
*10.3 Assumption of Directors' Stock Option Plan, dated July 1, 2001, between
Old Florida and Old Florida Bank
*10.4 Form of Directors' Stock Option Agreement used under Old Florida Bank
Directors' Stock Option Plan
*10.5 Old Florida Bank Officers' and Employees' Stock Option Plan
*10.6 Assumption of Officers' and Employees' Stock Option Plan, dated July 1,
2001, between Old Florida and Old Florida Bank
*10.7 Form of Incentive Stock Option Agreement used under Old Florida Bank
Officers' and Employees' Stock Option Plan
*10.8 Employment Agreement, dated as of January 17, 2000, between Old Florida
Bank and Larry W. Johnson
*10.9 Employment Agreement, dated as of January 17, 2000, between Old Florida
Bank and Nicholas J. Panicaro
*10.10 Engagement letter, dated October 3, 2002, between Old Florida and
Austin Associates, LLC
*10.11 Agreement and Plan of Share Exchange among Old Florida Bank and Old
Florida Bankshares, Inc. dated as of March 12, 2001
*21 Subsidiaries of Old Florida
+23.1 Consent of Werner & Blank, LLC with respect to its opinion relating to
the legality of the securities being issued (included in Exhibit 5)
+23.2 Consent of Werner & Blank, LLC with respect to its tax opinion
(included in Exhibit 8)
+23.3 Consent of Hacker, Johnson & Smith PA (with respect to Old Florida)
+23.4 Consent of Porter Keadle Moore, LLP (with respect to Marine)
+23.5 Consent of T. Stephen Johnson & Associates, Inc. ,financial advisor to
Marine
*24 Power of Attorney of Directors of Old Florida authorizing the signing
of their names to this Registration Statement and any and all
amendments to this Registration Statement and other documents submitted
in connection herewith
+99.1 Form of Proxy to be used in connection with Special Meeting of
Shareholders of Marine
99.2 Form of Letter to be Sent to Shareholders of Marine (set forth
following the cover page of this Registration Statement)
99.3 Form of Notice of Special Meeting of Shareholders of Marine (set forth
following the form of letter to be sent to shareholders of Marine in
this Registration Statement)
99.4 Fairness Opinion of T. Stephen Johnson & Associates, Inc. (included in
Appendix D to the proxy statement/prospectus and incorporated by
reference herein)
- --------------------
* Previously filed on March 18, 2003
+ Filed herewith