<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C.
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
Commission file number 0-27474
American Bancshares, Inc.
(Exact Name of Registrants Specified in its Charter)
Florida 65-0624640
(State or other Jurisdiction (IRS Emloyer Id. No.)
Incorporation or Organization)
4702 Cortez Road West, Bradenton, Florida 34210
(Address of Principal Executive Offices)
(941) 795-3050
(Registrants telephone number including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer has(1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No .
--- ---
Number of shares outstanding of the issuer's Common Stock, par value $1.175 as
of June 30,1998: 4,994,984 shares.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1
-Financial Statements 1-4
-Notes to Consolidated Condensed Financial Statements 5-7
Item 2
-Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-9
Item 3
-Quantitative and Qualitative Disclosure 9
About Market Risk
Part II OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities
(Not applicable) n/a
Item 4 Submission of Matters to a Vote
of Security Holders 10-11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
June 30, December 31, % $
Assets 1998 1997 Change Change
--------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Cash and due from banks 13,484 9,549 41.21 3,935
Federal funds sold 0 5,120 (100.00) (5,120)
Interest bearing deposits in banks 591 3,727 (84.14) (3,136)
Mortgage loans held for sale 82,473 39,588 108.33 42,885
Investment securities, available for sale 54,958 62,898 (12.62) (7,940)
Mortgage-backed securities, available for sale 1,143 5,766 (80.18) (4,623)
Loans (net of allowance for credit losses and
deferred loan fees of $1,486,760 as of
June 30, 1998 and $1,704,529 as of
December 31, 1997) 218,777 213,404 2.52 5,373
Premises and equipment, net 11,570 9,161 26.30 2,409
Other real estate owned, net 409 363 12.67 46
Goodwill 77 80 (3.75) (3)
Other assets 6,794 4,245 60.05 2,549
--------- --------- -------- --------
Total assets 390,276 353,901 10.28 36,375
========= ========= ======== ========
Liabilities and shareholders' equity
Liabilities
Deposits 317,019 302,746 4.71 14,273
Securities sold under agreements to repurchase 29,067 17,528 65.83 11,539
Federal funds purchased and FHLB borrowings 11,000 5,000 120.00 6,000
Other Borrowed Money 3,001 500 500.20 2,501
Other liabilities 3,581 2,048 74.85 1,533
--------- --------- -------- ---------
Total liabilities 363,668 327,822 10.93 35,846
Shareholders' equity
Preferred stock, par value not determined,
5,000,000 shares authorized, 0 shares issued
and outstanding as of June 30, 1998. 0 n/a 0 0
Common stock, $1.175 par value, 20,000,000 shares
authorized, 4,994,984 shares issued and
outstanding as of June 30, 1998 and 4,994,484
as of December 31, 1997 5,870 5,870 0.00 0
Additional paid in capital 15,551 15,547 0.03 4
Accumulated other comprehensive income, net 68 140 (51.43) (72)
Retained earnings 5,119 4,522 13.20 597
--------- --------- --------- --------
Total shareholders' equity 26,608 26,079 2.03 529
--------- --------- --------- --------
Total liabilities and shareholders' equity 390,276 353,901 10.28 36,375
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 1
<PAGE>
American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Month's Ended June 30, % $
1998 1997 Change Change
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans 6,474 4,908 31.91 1,566
Interest on mortgage backed securities, taxable 24 189 (87.30) (165)
Interest on investment securities, taxable 909 823 10.45 86
Interest on investment securities, nontaxable 32 17 88.24 15
Other interest income 43 64 (32.81) (21)
-------- -------- --------- ---------
Total interest income 7,482 6,001 24.68 1,481
Interest expense
Deposits 3,248 2,839 14.41 409
Securities sold under agreements to repurchase 316 148 113.51 168
Federal funds purchased and FHLB advances 110 112 (1.79) (2)
Other borrowed money 1 0 100.00 1
-------- -------- --------- ---------
Total interest expense 3,675 3,099 18.59 576
Net interest income 3,807 2,902 31.19 905
Provision for loan losses 151 355 (57.46) (204)
-------- -------- --------- ---------
Net interest income after loan loss 3,656 2,547 43.54 1,109
Noninterest income
Service charges & fees 454 416 9.13 38
Gain on sale of mortgage loans 44 26 69.23 18
Gain on sale of securities 6 2 200.00 4
Gain on sale of servicing 50 219 (77.17) (169)
Broker loan fees 34 86 (60.47) (52)
Originated mortgage servicing rights 204 32 537.50 172
Merchant fees 205 134 52.99 71
Other income 175 153 14.38 22
-------- -------- --------- --------
Total noninterest income 1,172 1,068 9.74 104
Noninterest expense
Salaries & employee benefits 1,759 1,245 41.29 514
Net occupancy expense 223 154 44.81 69
Furniture and equipment expenses 211 231 (8.66) (20)
Data processing fees 135 122 10.66 13
Legal fees 253 49 416.33 204
Litigation settlement 525 0 100.00 525
Other expense 1,425 960 48.44 465
-------- -------- -------- --------
Total noninterest expense 4,531 2,761 64.11 1,770
Income before income taxes 297 854 (65.22) (557)
Provision for income taxes 104 289 (64.01) (185)
-------- -------- --------- ---------
Net income 193 565 (65.84) (372)
======== ======== ========= =========
Earnings per share (actual $'s)
Basic 0.04 0.11
Diluted 0.04 0.11
Average Number of shares outstanding
Basic 4,994,599 4,994,484
Diluted 5,024,054 5,005,330
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
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American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
Six Months ended June 30, % $
1998 1997 Change Change
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans 12,285 9,361 31.24 2,924
Interest on mortgage backed securities, taxable 122 410 (70.24) (288)
Interest on investment securities, taxable 1,941 1,536 26.37 405
Interest on investment securities, nontaxable 49 33 48.48 16
Other interest income 186 213 (12.68) (27)
--------- --------- -------- --------
Total interest income 14,583 11,553 26.23 3,030
Interest expense
Deposits 6,488 5,519 17.56 969
Securities sold under agreements to repurchase 549 261 110.34 288
Federal funds purchased and FHLB advances 195 197 (1.02) (2)
Other borrowed money 26 0 100.00 26
--------- --------- -------- --------
Total interest expense 7,258 5,977 21.43 1,281
Net interest income 7,325 5,576 31.37 1,749
Provision for loan losses 275 526 (47.72) (251)
--------- --------- -------- --------
Net interest income after loan loss 7,050 5,050 39.60 2,000
Noninterest income
Service charges & fees 875 738 18.56 137
Gain on sale of loans 106 30 253.33 76
Gain on sale of securities 128 4 3,100.00 124
Gain on sale of servicing 72 271 (73.43) (199)
Broker loan fees 88 134 (34.33) (46)
Originated mortgage servicing rights 300 37 710.81 263
Merchant fees 392 257 52.53 135
Other income 315 268 17.54 47
--------- -------- --------- -------
Total noninterest income 2,276 1,739 30.88 537
Noninterest expense
Salaries & employee benefits 3,268 2,454 33.17 814
Net occupancy expense 418 308 35.71 110
Furniture and equipment expenses 451 445 1.35 6
Data processing fees 487 280 73.93 207
Legal fees 875 236 270.76 639
Litigation settlement 525 0 100.00 525
Other expense 2,383 1,667 42.95 716
--------- --------- --------- -------
Total noninterest expense 8,407 5,390 55.97 3,017
Income before income taxes 919 1,399 (34.31) (480)
Provision for income taxes 322 501 (35.73) (179)
--------- --------- --------- -------
Net income 597 898 (33.52) (301)
========== ========= ========= =======
Earnings per share (actual $'s)
Basic 0.12 0.18
Diluted 0.12 0.18
Average Number of shares outstanding
Basic 4,994,542 4,982,325
Diluted 5,023,755 4,999,032
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
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American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Statement of Cashflows
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
Six Months ended June 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income 597 898
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 275 526
Net gain on sale of investment securities (126) (1)
Net gain on sale of loans (106) (30)
Net gain on sale of mortgage servicing rights (72) (271)
Net gain on originated mortgage servicing rights (300) (37)
Net gain on sale of assets 0 (1)
Deferred income taxes 0 (65)
Depreciation 415 331
Proceeds from sales of loans held for sale 23,850 10,693
Net amortization of premiums and accretion of
discounts on investment securities (12) 6
Increase in other liabilities 1,533 213
Increase in other assets (2,220) (866)
--------- ---------
Total adjustments 23,237 10,498
--------- ---------
Net cash provided by operating activities 23,834 11,396
--------- ---------
Cash flows from investing activities:
Loan originations, net of repayments (72,273) (46,919)
Purchases of bank premises and equipment (2,824) (1,382)
Proceeds on sales of assets 0 40
Proceeds from sales and maturities of available
for sale investment securities 34,561 3,854
Purchases of available for sale investment
securities, net of repayments (21,932) (17,709)
--------- ---------
Net cash used in investing activities (62,468) (40,730)
--------- ---------
Cash flows from financing activities:
Net increase in demand deposits,
NOW and savings accounts 19,262 27,370
Net increase (decrease) in time deposits (4,989) 11,150
Net increase in securities sold under
agreements to repurchase 11,539 6,169
Net proceeds from advances (repayments) from
the FHLB and Federal Funds purchased 8,501 (800)
Proceeds from sale of stock 0 425
--------- ---------
Net cash provided by financing activities 34,313 44,314
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,321) (6,406)
Cash and cash equivalents at beginning of period 18,396 23,570
Cash and cash equivalents at end of period 14,075 17,164
========== ==========
Supplemental disclosures:
Interest paid 7,103 5,927
========== ==========
Income taxes paid 665 170
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Holding Company and Subsidiaries Background Information
American Bancshares, Inc. (Company), is a one bank holding company, operated
under the laws of the state of Florida. Its wholly owned banking subsidiary is
American Bank (Bank), a state chartered bank. The Holding Company, a Florida
corporation organized June 30, 1995, is a registered holding company under the
Bank Holding Company Act of 1956, as amended, and on December 1, 1995 became the
bank holding company for the Bank. The Bank was incorporated on December 6, 1988
and opened for business on May 8, 1989. The Bank is a general commercial bank
with all the rights, powers, privileges granted and conferred by the Florida
Banking Code. Although the Holding Company was not formed until June 30,1995 and
did not acquire the Bank until December 1, 1995, the financial statements have
been presented as if the Company had been in existence since the Bank was formed
in 1988 and as if the Bank was its wholly owned subsidiary since that time.
The Company has organized a wholly-owned Florida subsidiary corporation, Freedom
Finance Corporation, ("Finance Company"), pursuant to which it engages in full
service consumer financing. The Finance Company offers consumer-driven products
and services ranging from mortgages to automobile loans, home equity loans and
education financing. The Finance Company has the ability to extend financing to
individuals and entities which may not be able to satisfy the Bank's
underwriting requirements or loan standards. During April 1998 the Bank extended
a $2.4 million line of credit to the Finance Company to support operations. The
Finance Company commenced preliminary operations in late March 1998.
ABI Capital Trust ("ABICT"), a Delaware statutory trust, was created on May
21,1998. The ABICT exists for the exclusive purpose of (i) issuing and selling
Common Securities and Preferred Securities of ABICT (together the "Trust
Securities"), (ii) using the proceeds of the sale of Trust Securities to acquire
Deferrable Interest Debentures ("Junior Subordinated Debentures") issued by the
Company, and (iii) engaging only in those other activities necessary,
convenient, or incidental thereto (such as registering the transfer of Trust
Securities). Accordingly the Junior Subordinated Debentures will be the sole
assets of the ABICT. On July 7,1998 the ABICT issued $15 million of 8.5% Trust
Securities, the Company invested $463,920, in the form of a common stock
purchase, and the ABICT purchased $15,463,920 of 8.5% Junior Subordinated
Debentures from the Company. In connection with the over-allotment option
granted to the underwriter on August 6,1998 the ABICT issued $1,249,420 of 8.5%
Trust Securities, the Company invested an additional $38,650 in the form of a
common stock purchase, and the ABICT purchased $1,288,070 of 8.5% Junior
Subordinated Debentures from the Company. The Company owns all of the Common
Securities of ABICT, the only voting security, and as a result it is a
subsidiary of the Company.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. The results of
operations for the three and six month periods ended June 30, 1998 are not
necessarily indicative of the results expected for the full year.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the Company's December 31,
1997 Form 10-KSB. This quarterly report should be read in conjunction with such
annual report.
Merger - On March 23,1998, the Company completed its merger with Murdock Florida
Bank (Murdock). In connection with the merger the Company issued 924,026 shares
of it's common stock in exchange for all of the outstanding Murdock shares. The
transaction was accounted for as a pooling of interests. Accordingly the
Consolidated Balance Sheet, Income Statement and Statement of Cash Flow include
the results of Murdock on a historical basis
Page 5
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 3. Investments
The Company's investments and mortgage-backed securities are classified as
available for sale and recorded at fair value as required by the provisions of
Statement of Financial Accounting Standards No. 115. Unrealized gains and losses
are reflected as a separate component of shareholders' equity on the
consolidated statement of condition. At June 30, 1998, an unrealized gain, net
of tax, of $68,000 was reflected as an increase of shareholders' equity.
Note 4. Earnings Per Share
Basic earnings per common share is calculated by dividing net income by the
sum of the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, assuming the
exercise of stock options and warrants using the treasury stock method. Such
adjustments to the weighted average number of shares of common stock outstanding
are made only when such adjustments dilute earnings per common share. The
diluted earnings per share is summarized as follows:
<TABLE>
<CAPTION>
Six Months Three Months
ended June 30, ended June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding............ 4,994,542 4,982,325 4,994,599 4,994,484
Weighted average common shares equivalents............ 29,213 16,707 29,455 10,846
--------- --------- --------- ---------
Shares used in diluted earnings per share
calculation......................................... 5,023,755 4,999,032 5,024,054 5,005,330
========= ========= ========= =========
</TABLE>
Note 5. Capital
In December 1995, the Company filed a registration statement on Form SB-2 with
the Securities and Exchange Commission to register for sale 1,250,000 shares of
the Company's common stock (with an additional 187,500 shares subject to the
underwriters' over allotment option) at $6.00 per share pursuant to a firm
commitment underwritten public offering. The SB-2 became effective February 6,
1996, with the sale of 1,250,000 shares of common stock consummated on February
13, 1996. On March 6, 1996, the underwriter elected to exercise the over
allotment, consummating the transaction on March 13, 1996. Of the net proceeds
of approximately $7.5 million, $7.3 million has been contributed as capital to
the Bank. The balance was used for general corporate purposes and working
capital.
In July 1998 and August 1998, the Company issued Junior Subordinated Debentures
totaling approximately $16.8 million. Of the net proceeds of approximately $15.8
million the Company has invested $8.0 million in the Bank, as an additional
capital contribution, and repaid other outstanding indebtedness totaling
approximately $3.0 million. The balance of the funds will be used for general
corporate purposes, including but not limited to (i) making additional capital
contributions to the Bank, (ii) making additional capital contributions to the
Finance Company, (iii) investing in other business opportunities as may present
themselves from time to time, and (iv) working capital.
Page 6
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 6. Comprehensive Income
Effective January 1, 1998 the Company has adopted Financial Accounting Standards
("FAS") No. 130 "Reporting Comprehensive Income," which requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in the financial statements. Prior periods will
be reclassified as required. The Company's total comprehensive earnings are as
follows:
<TABLE>
<CAPTION>
Comprehensive Earnings (unaudited, actual $)
Six months ended
June 30, 1998 June 30, 1997
<S> <C> <C>
Net income (loss) 596,781 897,915
Other comprehensive earnings (losses): 0 0
Unrealized gains (losses) on
securities (72,433) (367,223)
--------- ---------
Comprehensive income 524,348 530,692
</TABLE>
Note 7. Impact of Recently Issued Accounting Standards
FAS No. 131, Disclosures about Segments of an Enterprise and Related
information, is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for reporting information about operating
segments in annual financial statements and interim information is required to
be reported on the basis that it is used internally for evaluating performance
of and allocation of resources to operating segments. The Company has not yet
determined to what extent the standard will impact the disclosures in the
financial statements.
FAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" which is effective for periods beginning after December 15, 1997. This
statement revises employers' disclosures about pension and other postretirement
benefit plans. Because this statement addresses disclosures only, the adoption
will have no material impact on the financial statements.
On June 15, 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1,
2000 for the Company). FAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the adoption
of FAS 133 will not have a significant effect on the Company's results of
operations or its financial position.
Note 8. Litigation
On March 27,1997, James J. Bazata, a former employee of the Bank, filed a claim
in the United States District Court, Tampa Division, alleging that such employee
was discriminated against. It is alleged that this conduct violated his rights
under the Americans with Disabilities Act of 1990. The company believes that the
Bank acted appropriately and that this action was without merit. Pursuant to
negotiations with Mr. Bazata, the Company agreed to settle this lawsuit on July
1,1998, exhibit 10.3 of this form 10-Q is incorporated herein by reference, by
entering into a consulting agreement, exhibit 10.2 of this form 10-Q is
incorporated herein by reference, with Mr. Bazata's corporation for services
through December 31, 2000, and has further agreed to pay Mr. Bazata's legal fees
and costs incurred in connection with the lawsuit. The total payments due
through the end of 2000 under the consulting agreement, and Mr. Bazata's legal
fees and costs, aggregate $525,000. The Company expensed the entire settlement
in the period ending June 30,1998, accruing all amounts due pursuant to the
consulting agreement, legal fees and costs.
Page 7
<PAGE>
PART 1
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
American Bancshares, Inc. and Subsidiaries
General
This discussion contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, such as
statements relating to the financial condition and prospects, results of
operations, plans for future business development activities, capital spending
and financing sources, capital structure, the effects of regulation and
competition, and the business of the Company. Where used in this filing, the
words "anticipate", "believe", "estimate", "expect", "intend", and similar words
and expressions, as they relate to the Company, or the management of the
Company, identify forward-looking statements. Such forward-looking statements
reflect the current views of the Company and are based on information currently
available to the management of the Company and upon current expectations,
estimates, and projections about the Company and its industry, management's
beliefs with respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements as a result of various factors. Potential risks and
uncertainties include, but are not limited to: (i) competitive pressure in the
banking and financial services industries increasing significantly; (ii) changes
in the interest rate environment which reduce margins; (iii) changes in
political conditions or changes occurring in the legislative or regulatory
environment; (iv) general economic conditions, either nationally or regionally,
becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality; (v) changes occurring in business conditions
and inflation; (vi) acquisitions and integration of acquired businesses or
assets; (vii) changes in technology; (viii) changes in monetary and tax
policies, (ix) changes occurring in the securities markets; and (x) other risks
and uncertainties detailed from time to time in the filings of the Company with
the Commission.
Liquidity and Capital Resources
Total assets of the Company increased by 10.28% to $390,276,000 as of June 30,
1998, from $353,901,000 as of December 31, 1997 and 22.6% from $319,222,000 as
of June 30, 1997. The increase in assets from December 31, 1997, was primarily
the result of increases in Cash and Due From Banks of $3,935,000 to $13,484,000,
increases in Net Loans of $48,258,000 to $301,250,000 and premises and equipment
of $2,409,000 to $11,570,000. The increases in assets were funded through
increases in deposits of $14,273,000 to $317,019,000, increases in Securities
Sold Under Agreements to Repurchase of $11,539,000 to $29,067,000 and increases
in borrowings of $8,501,000 to $14,001,000.
As of June 30, 1998, the Bank's Tier 1 leverage ratio was 7.36%, Tier 1 to risk
weighted assets was 10.18% and total risk based capital was 11.01%, resulting in
a classification of "Well Capitalized" under FDIC guidelines. The Bank, through
its Asset/Liability Committee, monitors, among other things, the Bank's capital
and liquidity position, making adjustments to deposit, loan, and investment
strategies as necessary. The Bank continues to maintain adequate liquidity
levels with a liquidity ratio at June 30, 1998 of 40.71%. The Bank is a member
of the Federal Home Loan Bank of Atlanta (FHLB). FHLB has approved a line of
credit totaling $50,000,000 collateralized by qualifying mortgages and all of
the Bank's FHLB stock. As of June 30, 1998, advances totaling $11,000,000 were
outstanding. The Bank also maintains Federal Funds Purchased agreements with
several correspondent banks to provide sources of overnight funds. As of June
30, 1998, the Bank had no federal funds purchased. In addition, the Company has
obtained a $5 million Commercial Revolving Line of Credit from Barnett Banks,
N.A., South Florida (now Nationsbank, N.A.). Although this credit facility has
been used in part to fund the construction of the Company's new administrative
offices, the Company also has utilized the credit facility for other general
corporate purposes. At June 30, 1998, $3.00 million was outstanding on the line
of credit. During April 1998, the new administrative office building was
completed and is now occupied. The cost of construction was approximately $2.5
million. In June, 1998 the administrative offices were sold to the Bank, at
cost, to allow the Company to better leverage its capital position.
In July 1998 and August 1998, the Company issued Junior Subordinated Debentures
("Debenture") totaling approximately $16.8 million, at an interest rate of 8.5%.
Of the net proceeds of approximately $15.8 million the Company has invested $8.0
million in the Bank, as an additional capital contribution, and repaid and
cancelled the Commercial Revolving Line of Credit from Barnett Banks, N.A.,
South Florida (now Nationsbank, N.A.). totaling approximately $3.0 million.
Page 8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources (continued)
In July and August, 1998 the Bank also drew down $26 million of it FHLB line of
credit at an interest rate ranging from 5.04% - 5.09%. The average interest rate
on the subordinate debentures and the FHLB advances was 6.57%. The Bank has
invested these funds primarily in FNMA and FHLMC securities, with an average
yield of 6.57
Additionally, on July 15,1998 the Bank acquired a former SouthTrust Bank, N.A.
branch located at 1201 Beneva Rd. South, Sarasota, Florida 34236. The purchase
price was $725,000. No deposits or loans were acquired in the transaction.
Application has been made to various regulatory agencies to request approval to
operate this location as a branch of the Bank. The Bank is currently negotiating
a lease for another branch location in a developing area of Manatee County.
Finally the bank has bid on eight former NationsBank, N.A. locations; four in
Charlotte County, three in Manatee County and one in Sarasota County. There can
be no assurance that the Bank will be able to acquire any or all of these sites.
Various regulatory approvals are needed in order for the Bank to open additional
branch locations. Regulatory approval to operate any of the aforementioned
locations can not be assumed.
Management believes that there are adequate funding sources to meet its future
liquidity needs for the foreseeable future. Primary among these funding sources
are the repayment of principal and interest on loans, the renewal of time
deposits, and the growth in the deposit base. Management does not believe that
the terms and conditions that will be present at the renewal of these funding
sources will significantly impact the Company's operations, due to its
management of the maturities of its assets and liabilities.
Results of Operations
The Company's net income for the quarter ended June 30, 1998 was $193,000 or
$.04 per share, compared to net income of $565,000 or $.11 per share for the
same period for 1997. Earnings per share were affected by settlement of the
Bazata litigation of $525,000 and associated legal fees of $135,000. Net
interest income increased $905,000 to $3,807,000 for the quarter ended June 30,
1998, over the same quarter in 1997, as a result of the increase in interest
earning assets. Non-interest income increased from $1,068,000 for the quarter
ended June 30, 1997 to $1,172,000 for the same period in 1998. The increase in
non-interest income is primarily attributable to increases in originated
mortgage servicing rights ("OMSR's") of $172,000, in service charges on deposits
and fees of $38,000, an increase of $18,000 on the sale of mortgage loans, an
increase of $4,000 in gain on sale of securities, an increase in credit card
merchant services fee income of $71,000 and an increase of $22,000 in other
income partially offset by decreases in gain on sale of servicing of $169,000
and broker loan fees of $52,000.
Total general and administrative expense for the quarter ended June 30, 1998,
increased $1,770,000 over the same period of 1997. This increase resulted
primarily from increases in other operating expenses related to the growth in
the Company's assets, the number of Bank branches, the acquisition of Murdock
Florida Bank, and the start up of the Finance Company and settlement of
outstanding litigation. Specifically, salary expense increased by $514,000, data
processing increased by $13,000. A settlement of outstanding litigation cost
$525,000, associated legal fees accounted for $135,000 of the $204,000 increase
in legal fees. Other expenses increased by $465,000 due to increased advertising
of $93,000; increased check printing charges of $48,000, partially attributable
to the complimentary supply, for Murdock customers, of American Bank checks;
continued asset growth; and the start up costs of the Finance Company.
For the three months ended June 30,1998, net interest income increased $905,000
to $3,807,000, compared to $2,902,000 for the same period in 1997, as a result
of the 23% asset growth. Loan loss expense decreased from $355,000 for the three
month period ended June 30, 1997 to $151,000 for the same period in 1998.
Management uses a procedure on a monthly basis for evaluating the adequacy of
the allowance for loan loss. Based on that review management considers the
allowance sufficient to cover expected loan losses.
PART 1.
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
Page 9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On March 27,1997, James J. Bazata, a former employee of the Bank, filed a claim
in the United States District Court, Tampa Division, alleging that such employee
was discriminated against. It is alleged that this conduct violated his rights
under the Americans with Disabilities Act of 1990. The company believes that the
Bank acted appropriately and that this action was without merit. Pursuant to
negotiations with Mr. Bazata, the Company agreed to settle this lawsuit on July
1,1998, exhibit 10.3 of this form 10-Q is incorporated herein by reference, by
entering into a consulting agreement, exhibit 10.2 of this form 10-Q is
incorporated herein by reference, with Mr. Bazata's corporation for services
through December 31, 2000, and has further agreed to pay Mr. Bazata's legal fees
and costs incurred in connection with the lawsuit. The total payments due
through the end of 2000 under the consulting agreement, and Mr. Bazata's legal
fees and costs, aggregate $525,000. The Company expensed the entire settlement
in the period ending June 30,1998, accruing all amounts due pursuant to the
consulting agreement, legal fees and costs.
Item 2. Changes in Securities
ABI Capital Trust ("ABICT"), a Delaware statutory trust, was created on May
21,1998. On June 4,1998 the Company filed a registration statement on Form S-1
to register Preferred Securities to be offered and sold by ABICT as well as the
Junior Subordinated Debenture and guarantee of the Company underlying such
Preferred Securities. The registration statement was amended on June 19,1998 by
filing Amendment No. 1 to the Form S-1. The S-1 and Amendment No. 1 are
incorporated herein by reference. As of the filing date the ABICT has issued
approximately $16.25 million of 8.5% Trust Securities. The Company has incurred
approximately $971,000 in costs associated with the formation of the ABICT and
issue of the securities. These costs are being amortized over the contractual
life of the securities.
On July 21,1998 the Board of Directors of the Company voted to issue 47,400
stock options pursuant to the "American Bancshares, Inc. and American Bank of
Bradenton Incentive Stock Option Plan of 1996." Of these 5,000 stock options
were issued to Gerald L. Anthony, President and CEO, 20,000 stock options were
issued to senior officers. The remaining 22,400 stock options were issued to
other Bank staff members.
On July 21,1998 the Board of Directors of the Company voted to issue 74,998
stock options pursuant to the "American Bancshares, Inc. Directors'
Non-qualified Stock Option Plan of 1997."
Item 3. Defaults Upon Senior Securities
Not applicable this filing.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders at the
Company's annual meeting on May 22, 1998.
1. To elect twelve persons as Directors.
The following directors, which consisted of all of the existing directors, were
nominated for re-election:
Percentage
For Against Abstain
Gerald L. Anthony 99.62 0.38 0.00
Samuel S. Aidlin 99.04 0.96 0.00
Ronald L. Larson 98.97 1.03 0.00
Timothy I. Miller 99.62 0.38 0.00
Dan E. Molter 99.51 0.49 0.00
Kirk D. Moudy 98.98 1.02 0.00
Lindell Orr 99.60 0.40 0.00
Lynn B. Powell 99.51 0.49 0.00
Walter L. Presha 99.50 0.50 0.00
J. Gary Russ 99.61 0.39 0.00
R. Jay Taylor 99.60 0.40 0.00
Edward D. Wyke 99.51 0.49 0.00
Of the total of 4,994,484 shares of common stock eligible to vote, there were
3,453,604 shares present in person or by proxy and the above named directors
were re-elected with the results for each noted above.
Page 10
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders (continued)
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants for the Corporation for the year ending December 31, 1998.
Of the total of 4,994,484 shares of common stock eligible to vote, there were
3,453,604 shares present in person or by proxy with 3,418,322 votes for, 19,663
votes against, and 16,619 abstaining. Coopers and Lybrand were retained as
independent accountants for the Company.
Item 5. Other Information
1. In February, 1998, the Company entered into an employment agreement with
Brian M. Watterson, Senior Vice President, Chief Financial Officer and Chief
Operations Officer. The employment agreement is filed as exhibit 10.1 of this
Form 10-Q is incorporated herein by reference.
2. The Company recently has organized a wholly-owned Florida subsidiary
corporation, Freedom Finance Corporation, (referred to herein as the Finance
Company), pursuant to which it has begun to engage in full service consumer
financing. The Finance Company commenced preliminary operations at the end of
March 1998.In order to provide the Finance Company with the funds necessary to
commence operations, the Company made a small capital contribution and the Bank
extended a $2.4 million loan to the Finance Company in April 1998. This loan was
made on substantially the same terms and conditions, including interest rates
and collateral on loans, as those prevailing for comparable transactions with
unrelated third parties. It is anticipated that the Finance Company will offer
consumer-driven products and services ranging from mortgages to automobile
loans, home equity loans and education financing. The Finance Company will have
the ability to extend financing to individuals and entities which may not be
able to satisfy the Bank's underwriting requirements or loan standards. However,
the Finance Company is expected to provide such loans on a selective basis to
customers that the Finance Company believes are quality credits. Such customers
will likely consist of individuals or entities which have another banking or
credit relationship with the Company or the Bank.
3. On May 21,1998 ABI Capital Trust, a Delaware Statutory Trust was created. The
Company owns all of the Common Securities of ABICT, it's only voting security.
Accordingly ABICT is a subsidiary of the Company for financial reporting
purposes only. A balance sheet enumerating the financial position of ABI Capital
Trust is presented below.
ABI Capital Trust Balance Sheet
As of August 10,1998
(Unaudited, actual $)
Assets
Cash and due from banks $ 0
Junior Subordinated Debentures 16,751,990
Accrued interest receivable 88,336
-------------
Total assets $ 16,840,326
=============
Liabilities
Trust Preferred Securities $ 16,249,420
Accrued dividends payable 85,686
Other accrued expenses payable 2,650
-------------
Total liabilities 16,337,756
Shareholders' equity
Common stock 502,570
-------------
Total shareholders' equity 502,570
Total liabilities and shareholders' equity $ 16,840,326
=============
Page 11
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits:
4.1-- Form of indenture with respect to the Company's 8.5% Junior
Subordinated Debentures incorporated herein by reference to exhibit
4.1 of the Company's Registration Statement on Form S-1 (Registration
Nos. 333-56095 and 333-56095-01)filing dated June 4,1998 previously
filed with the Commission.
4.2-- Form of Junior Subordinated Debentures incorporated herein by
reference to exhibit 4.1 of the Company's Registration Statement
on Form S-1 (Registration Nos. 333-56095 and 333-56095-01)filing
dated June 4,1998 previously filed with the Commission.
4.3-- Form of Trust Agreement of ABI Capital Trust (including Certificate
of Trust of ABI Capital Trust) incorporated herein by reference to
exhibit 4.3 of the Company's Registration Statement on Form S-1
(Registration Nos. 333-56095 and 333-56095-01) filing dated June 4,
1998 previously filed with the Commission.
4.4-- Form of Amended and Restated Trust Agreement of ABI Capital Trust
incorporated herein by reference to exhibit 4.4 of the Company's
Registration Statement on Form S-1 (Registration Nos. 333-56095
and 333-56095-01) filing dated June 4, 1998 previously filed with the
Commission.
4.5-- Form of 8.5% Preferred Securities of ABI Capital Trust incorporated
herein by reference to exhibit 4.4 of the Company's Registration
Statement on Form S-1 (Registration Nos. 333-56095 and 333-56095-01)
filing dated June 4, 1998 previously filed with the Commission.
4.6-- Form of Guarantee Agreement incorporated herein by reference to
exhibit 4.6 of the Company's Registration Statement on Form S-1
(Registration Nos. 333-56095 and 333-56095-01) filing dated June 4,
1998 previously filed with the Commission.
10.1-- Employment Agreement dated February 1, 1998 by and between Brian M.
Watterson and American Bank is incorporated herein by reference to
exhibit 10.1 of the Company's 10-Q filing dated May 15,1998
previously filed with the Commission.
10.2-- Consulting Agreement dated July 1,1998 by and between James J. Bazata
Consulting, Inc. and American Bank.
10.3-- Bazata V. American Bank Confidential Settlement Agreement dated July
1,1998 by and between James J. Bazata, his heirs, executors,
administrators and assigns and American Bank and the Bank releasees.
(b) Reports on Form 8-K
On April 6, 1998, the Company filed a report on Form 8-K announcing the
consummation of the merger by and between American Bank and Murdock Florida
Bank, which Form 8-K provided for the extension under Item 7(a)(4) thereof for
furnishing certain financial statements.
On May 21, 1998, the Company filed a report on Form 8-K/A providing certain
financial statements relating to the consummation of the merger by and between
American Bank and Murdock Florida Bank.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Gerald L. Anthony
-----------------------------------
Gerald L. Anthony, President and
Chief Executive Officer
Date: August 14, 1998
-------------------
/s/ Brian M. Watterson
-----------------------------------
Brian M. Watterson
Senior Vice President and
Chief Financial Officer
Date: August 14, 1998
-------------------
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA FROM THE COMPANY'S
GENERAL LEDGER AND BOARD OF DIRECTORS FINANCIAL REPORT PACKAGE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Mar-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 13,484
<INT-BEARING-DEPOSITS> 591
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,101
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 303,524
<ALLOWANCE> (2,274)
<TOTAL-ASSETS> 390,276
<DEPOSITS> 317,019
<SHORT-TERM> 14,001
<LIABILITIES-OTHER> 32,648
<LONG-TERM> 0
0
0
<COMMON> 5,870
<OTHER-SE> 20,738
<TOTAL-LIABILITIES-AND-EQUITY> 390,276
<INTEREST-LOAN> 12,285
<INTEREST-INVEST> 2,112
<INTEREST-OTHER> 186
<INTEREST-TOTAL> 14,583
<INTEREST-DEPOSIT> 6,488
<INTEREST-EXPENSE> 7,258
<INTEREST-INCOME-NET> 7,325
<LOAN-LOSSES> 275
<SECURITIES-GAINS> 128
<EXPENSE-OTHER> 8,407
<INCOME-PRETAX> 919
<INCOME-PRE-EXTRAORDINARY> 597
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 597
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 8.47
<LOANS-NON> 926
<LOANS-PAST> 107
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,628
<ALLOWANCE-OPEN> 2,332
<CHARGE-OFFS> 386
<RECOVERIES> 44
<ALLOWANCE-CLOSE> 2,264
<ALLOWANCE-DOMESTIC> 2,264
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
CONSULTING AGREEMENT
THIS AGREEMENT is between James J. Bazata Consulting, Inc., a Florida
corporation, hereinafter referred to as "the Consulting Company," and American
Bank, hereinafter referred to as "the Bank."
1. Retention of Consulting Company. The Bank hereby retains the
Consulting Company, and the Consulting Company hereby agrees to render
consulting services to the Bank.
2. Consulting Company's Services. The Consulting Company
agrees to provide the Bank with consultation and advice, on request.
3. Term of Agreement. The term of this Agreement shall run from the
date of its execution by the parties until December 31, 2000.
4. Consulting Company Fee. The Consulting Company shall
be paid the following non-refundable retainers for all services rendered by the
Consulting Company:
a. First Payment. The Consulting Company's first payment shall
be $50,000.00. This payment shall be made by the Bank to the Consulting Company
within 30 days of execution of this Agreement by the Consulting Company.
b. Second Payment. The Consulting Company's second payment
shall be $125,000. This payment shall be paid to the Consulting Company on or
before January 10, 1999.
c. Third Payment. The Consulting Company's third payment shall
be $125,000. This payment shall be paid to the Consulting Company on or before
January 10, 2000.
d. Penalty for Late Payments. If payment is not made within
thirty days as agreed, interest shall be due on the unpaid balance at a rate of
eighteen percent (18%) per year. If there is a collection action, the prevailing
party in such suit shall be entitled to an award of a reasonable attorney's fee
and costs of action.
e. Payments in the Event of Death of Mr. Bazata. The
non-refundable retainer payments shall be made to the Consulting Company
notwithstanding the death of Mr. Bazata, as set forth in the preceding schedule.
5. Arbitration. The parties agree that all disputes concerning alleged
breaches of the Consulting Agreement made by the parties shall be decided by
arbitration in accordance with the Rules of the American Arbitration
Association, and with the assistance of the American Arbitration Association. In
such an arbitration, the arbitrator shall be authorized to award any legal or
equitable remedies available at law. The prevailing party in an arbitration
brought pursuant to this Agreement shall be entitled to an award of a reasonable
attorney's fee and costs of action. Any arbitration award may be enforced in
court as provided by law.
6. Execution. There shall be two duplicate originals of this Agreement,
one for each party.
FOR THE CONSULTING COMPANY: FOR THE BANK:
- ------------------------- -------------------------
James J. Bazata Gerald A. Anthony
President President
James J. Bazata Consulting, Inc. American Bank
- ------------------------- -------------------------
Date Date
-1-
BAZATA V. AMERICAN BANK
CONFIDENTIAL SETTLEMENT AGREEMENT
This Confidential Settlement Agreement, hereinafter referred to as "the
Agreement," is made by and between JAMES J. BAZATA, hereinafter referred to as
"Bazata," on the one hand, and AMERICAN BANK, hereinafter referred to as "the
Bank," on the other hand.
WHEREAS, Bazata was formerly employed by the Bank in various management
positions; and
WHEREAS, in October, 1995, Bazata suffered a stroke, and he alleges
that after this stroke, the Bank discriminated against him because it wrongly
regarded him as disabled from work; and
WHEREAS, Bazata retained counsel to assist him in matters relating to
his desire to return to work at the Bank, and alleged disability discrimination
against him, and he further alleges that the Bank retaliated against him because
of his retention of counsel;
WHEREAS, Bazata's employment with the Bank was involuntarily terminated
on or about July 9, 1996; and
WHEREAS, following his discharge, Bazata filed charges with the Equal
Employment Opportunity Commission alleging disability discrimination and
unlawful retaliation against the Bank under the Americans with Disabilities Act
("ADA"); and
WHEREAS, Bazata filed a lawsuit against the Bank in the United States
District Court for the Middle District of Florida, Tampa Division, Case No.
96-671-CIV-T-24A, hereinafter referred to as Case No. 96-671-CIV-T-24A; and
WHEREAS, the parties conducted a mediation on April 22, 1998, in Tampa,
Florida, with Cary Singletary, Esquire, serving as mediator, and at that
mediation entered into a settlement agreement relating to all of Bazata's claims
and potential claims, and signing, as evidence of this settlement agreement, a
handwritten term sheet for the settlement, with the understanding that more
formal settlement documents would be prepared at a later date; and
ACCORDINGLY, this Agreement will settle and compromise all of Bazata's
claims, including those alleged in Case No. 96-671-CIV-T-24A, as well as any
claims that the Bank might have against Bazata;
NOW, KNOW ALL BY THESE PRESENTS, that in consideration of the mutual
covenants to be performed by each of the parties hereto, the parties expressly,
knowingly, and voluntarily agree as follows:
1. Bank's Retention of J. J. Bazata Consulting, Inc. as Consultant. The
Bank agrees to retain James J. Bazata Consulting, Inc. as a consultant for the
Bank through December 31, 2000. The terms of this consulting arrangement shall
be set forth in a separate agreement between James J. Bazata Consulting, Inc.
and the Bank (this agreement shall hereinafter be referred to as "the Consulting
Agreement"). If for any reason the Consulting Agreement is terminated by the
Bank prior to January 10, 2000, payments to be made under the Consulting
Agreement will be made pursuant to this Agreement.
2. Payment of Bazata's Attorneys' Fees and Legal Costs. The Bank agrees
to pay Bazata's attorneys in Case No. 96-671-CIV-T-24A the sum of TWO HUNDRED
AND TWENTY FIVE THOUSAND U.S. DOLLARS ($225,000.00) for their work in
representing Bazata in his litigation against the Bank, and for legal costs and
expenses incurred during the course of their representation. Payment shall be by
Bank check(s) payable to Abel, Band, Russell, Collier, Pitchford & Gordon,
Chartered. This payment shall be made within thirty (30) days of the date the
four duplicate originals of this Agreement, signed by Bazata, his counsel, his
wife, and his adult children, and the two duplicate originals of the Consulting
Agreement, signed by Bazata, are all delivered to the offices of the Bank's
counsel for execution of the Agreement by the Bank signatories. If payment is
not made within thirty days as agreed, interest shall be due on the unpaid
balance at a rate of eighteen percent (18%) per year. If there is a collection
action, the prevailing party in such suit shall be entitled to an award of a
reasonable attorney's fee and costs of action.
<PAGE>
3. Dismissal of Case No. 97-671-CIV-T-24A With Prejudice. Because the
Mediator filed a mediation report following the mediation on April 22, 1998, the
United States District Court for the Middle District of Florida, Tampa Division,
has already entered an Order, dated April 29, 1998, dismissing the lawsuit
without prejudice to the right of any party to re-open the action within sixty
(60) days, for good cause. That Order provided that the parties could also
submit a stipulated form of final judgment. The parties agree that the Court's
record should be clear that Case No. 97-671-CIV-T-24A has been dismissed with
prejudice, since that is in fact their intent and agreement, and accordingly
their counsel are directed, through execution of this Agreement by the parties,
to file such papers as may be required to record the dismissal of Case No.
97-671-CIV-T-24A with prejudice, including but not limited to the Stipulation of
Dismissal with Prejudice attached as Exhibit "A" to this Agreement. It is
expressly agreed and understood that this Agreement is conditioned upon and made
subject to the dismissal of Case No. 97-671-CIV-T-24A with prejudice. If for any
reason the dismissal with prejudice of that action is not consummated, or is
subsequently vacated, then the Bank shall have the sole discretion to deem this
Agreement and the Consulting Agreement null and void ab initio, except for the
provisions of this paragraph, and if the Bank exercises that discretion Bazata
and his counsel shall immediately return to the Bank all monies paid pursuant to
this Agreement, and pursuant to the Consulting Agreement.
4. Bazata's Wiaver of Future Employment. Bazata waives any and all
rights to future employment with the Bank, and with any corporations affiliated
with or related to the Bank, specifically including American Bancshares, Inc.,
and Freedom Finance Company, that he has now, or might have in the future, known
and unknown. Bazata agrees that he will not apply in the future for employment
with the Bank or with any of its related or affiliated corporations, and if he
does apply for re-employment in breach of this Agreement, the Bank, or the
affiliated or related corporation, as the case may be, shall be under no
obligation to process that application, but can simply advise him that his
application for employment is denied pursuant to this settlement.
5. Confidentiality Commitments. Except as permitted herein, Bazata
agrees to keep strictly confidential, and promises not to disclose, either
directly or indirectly, to any legal or natural person, the terms and conditions
of the settlement between the parties, and the terms and conditions of this
Agreement and the Consulting Agreement. It will be permissible for Bazata to
disclose the terms and conditions of the settlement, and of this Agreement, and
the Consulting Agreement, to his attorneys, his tax advisors, his wife, his
adult children (with the exception of Jerry Bazata), the IRS, the United States
District Court for the Middle District of Florida, and if required to do so by
Court Order. Bazata's wife and adult children shall sign this Agreement as
evidence of their own promises to respect and adhere to this confidentiality
commitment of their husband and father. If Bazata wishes to disclose this
Agreement to his tax advisors or bankers, he shall first obtain their agreement
to maintain the terms of the settlement in complete confidence. Provided,
however, that although Bazata is obligated to keep the terms of this settlement
in confidence, he and his wife and his adult children may inform private
citizens, who make inquiry regarding resolution of his lawsuit against the Bank,
Case No. 97-671-CIV-T-24A, that it has been "settled," and that the terms of the
settlement are "confidential," without in any way revealing the terms of the
settlement. Similarly, Bazata's counsel may inform others that the case has been
settled. Neither Bazata, nor his wife, children, counsel, tax advisors nor
bankers shall make any statement to media or press respresentatives regarding
either the fact or terms of the settlement or of this Agreement or of the
Consulting Agreement. Further provided, that in the event that an officer,
director or employee of the Bank makes a material misrepresentation to a third
party concerning the terms of the settlement, Bazata shall be permitted to make
a corrective statement to that third party after his counsel first discloses the
misrepresentation to the Bank's counsel and after the parties engage in good
faith discussions relating to the misrepresentation, and in the event Bazata is
dissatisfied with any resolution proposed by the Bank.
<PAGE>
6. Bazata's General Release. In consideration of the promises made by
the Bank in this Agreement, Bazata, on his own behalf, and on behalf of his
relatives and heirs, executors, administrators, assigns, and attorneys,
irrevocably and unconditionally releases, waives and forever discharges the
Bank, the President of the Bank, Gerald L. Anthony, the members of the Board of
Directors of the Bank, the Bank's employees, insurance carriers, attorneys, and
consultants, including Bill Thompson and any of Thompson's business entities,
and any of the Bank's affiliated or related corporations, including American
Bancshares, Inc. and Freedom Finance Company, and all legal and natural persons
acting by, through, under or in concert with any of them (hereinafter
collectively "the Bank releasees"), of and from any and all claims, actions,
causes of action, suits, debts, charges, complaints, liabilities, obligatons,
promises, agreements, controversies, damages, and expenses (including attorney's
fees and costs), of any nature whatsoever, known or unknown, in law or equity
that he ever had, or now has, including, without limitation of the foregoing
general release, (a) any claims against the Bank releasees arising from any
alleged violation of the ADA, the FMLA, the Florida Civil Rights Act, COBRA,
ERISA, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, as well as any claims based on any other employment
discrimination laws, (b) any claim for any kind of insurance benefits under the
Bank's insurance policies, and (c) any claims against the Bank releasees based
on any other constitutional, statutory, common law, or regulatory grounds. This
release does not waive, release, or discharge any claim based on a future breach
of this Agreement or of the Consulting Agreement.
7. The Bank's General Release. In consideration of the promises made by
Bazata in this Agreement, the Bank irrevocably and unconditionally releases,
waives and forever discharges Bazata, his attorneys, and all legal or natural
persons acting by, through, under, or in concert with him, of and from any and
all claims, actions, causes of action, suits, debts, charges, complaints,
liabilities, obligations, promises, agreements, controversies, damages, and
expenses (including attorney's fees and costs), of any nature whatsoever, known
or unknown, in law or equity, that it ever had, or now has, including any claims
against Bazata based on any constitutional, statutory, common law, or regulatory
grounds. This release does not waive, release, or discharge any claim based on a
future breach of this Agreement or of the Consulting Agreement.
8. Non-Admission. It is understood and agreed that the execution of
this Agreement, and the Consulting Agreement, by the Bank, does not constitute
an admission by the Bank that it has violated any law, statute, rule, regulation
or ordinance of the United States or of the State of Florida, or of any local
governmental entity, with respect to Bazata or in any other matter. The Bank
expressly denies any liability; this settlement represents the compromise of
disputed claims.
9. Bazata's Understanding of this Agreement. Bazata acknowledges that
he has been represented by counsel, Michael Taaffe, Esq., and Stuart Young,
Esq., throughout the period this settlment was negotiated, that he consulted
numerous times with his counsel about the advisability of settlement and the
terms of this settlement, that he has reviewed the terms of this settlement with
his counsel, and that his decision to enter into this settlement is based on the
advice of his counsel. Bazata further acknowledges that he has read this
Agreement and understands it. He agrees that he has been given a reasonable
period of time within which to consider this Agreement, and the Consulting
Agreement, as well as to consider the terms of the settlement, and acknowledges
that he is executing the Agreement on a voluntary basis. Bazata agrees that he
is aware that this Agreement releases all claims he may have, whether known or
unknown, against the Bank and the Bank releasees, as well as any future right of
re-employment with the Bank or with any corporations affiliated with or related
to the Bank. Bazata and his attorneys, agree, represent and warrant that he has
the mental capacity to enter into this settlement, notwithstanding the effects
of his stroke in October, 1995.
10. Materiality of All Conditions and Obligations. The parties agree
that all of the conditions and obligations in this Agreement are material and
that the non-occurence or breach of any such condition or obligation by any
party is not allowed and shall result in the non-breaching party or parties
being entitled to assert any and all rights they may have in law or equity.
11. Arbitration. The parties agree that all disputes concerning alleged
breaches of the Agreement made by the parties shall be decided by arbitration in
accordance with the Rules of the American Arbitration Association, and with the
assistance of the American Arbitration Association. In such an arbitration, the
arbitrator shall be authorized to award any legal or equitable remedies
available at law. The prevailing party in an arbitration brought pursuant to
this Agreement shall be entitled to an award of a reasonable attorney's fee and
costs of action. Any arbitration award may be enforced in court as provided by
law.
<PAGE>
11. Governing Law. This Agreement shall be governed in accordance with
the laws of the State of Florida to the extent that state law, rather than
federal common law, is applicable.
12. Execution. There shall be four duplicate originals of this
Agreement, one for each party, and one for the counsel for each party. The Bank
signatories will execute both the duplicate originals of the Agreement and the
duplicate originals of the Consulting Agreement promptly following delivery of
same to the offices of the Bank's counsel.
13. Other Agreements. The parties hereto agree that the this Agreement
and the Consulting Agreement are the only agreements between the parties, with
the exception of a handwritten term sheet drafted and signed after the
mediation, which this Agreement, and the Consulting Agreement, state in more
formal language, and that there are no other agreements, oral or written,
between them relating to any matters covered by this Agreement or the Consulting
Agreement, or relating to any other matter whatsoever.
FOR BAZATA: FOR THE BANK:
- --------------------------- ----------------------------
James J. Bazata, on behalf Gerald A. Anthony, on behalf
of himself, his heirs, of American Bank and the
executors, administrators Bank releasees
and assigns
- --------------------------- ----------------------------
Date Date
The following three signatories agree to the confidentiality commitments set
forth in paragraph 5 of this Agreement:
- -------------------- ---------------------------
Mrs. James J. Bazata James J. Bazata
- -------------------- ---------------------------
Date Date
- --------------------
Jill A. Bratcher
- --------------------
Date
ADDITIONAL SIGNATORIES
ADDITIONAL BAZATA SIGNATORIES: ADDITIONAL BANK SIGNATORIES:
- ---------------------- ----------------------
Michael Taaffe, Esq. Gary Russ
Plaintiff's Counsel Chairman of the Board
- ---------------------- ----------------------
Date Date
- ---------------------- ----------------------
Stuart Young, Esq. John McAdams, Esq.
Plaintiff's counsel Bank Counsel
- ---------------------- ----------------------
Date Date
